Lowering Health Care Costs for All Americans: An Examination of the Prescription Drug Supply Chain
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House Energy and Commerce Subcommittee on Health U.S. House of Representatives
Follow its sittingsSpeaker 2
For example, 4 million seniors take Eliquis for blood clots, and thanks to the IRA, Medicare secured a 56% discount off list price. Next up are certain popular GLP-one drugs, which will be discounted 71% in 2027. Other high-cost therapies will be discounted as much as 85%, all thanks to congressional Democrats, and we're just getting started. But meanwhile, the biggest drug companies are making backroom deals with the Trump administration in response to extortionate and, frankly, illegal tariff threats. Unlike the Inflation Reduction Act, which created clear and predictable mechanisms for negotiating drug prices and capping out-of-pocket costs, the public has no idea what backroom agreements are between drugmakers and the White House.
I think that we would all be very interested in learning more about the president's deals with the drug companies. Frankly, if they're worth the paper they're written on, they need to be made public. But we're here today to talk about affordability. So, if the majority were being honest with itself about affordability, we would do two things right away, and it would help. Number one, bring back the ACA enhanced premium tax credits.
That would be the easiest way to lower health care costs for millions of Americans on a short-term basis, including Ethan Allen, or I'm sorry, Ellen Allen, who this committee heard from in our last hearing. Number two, here it comes, repeal HR one, what I call the Republicans' big bad bill. HR one included a provision to exclude certain high cost drugs from Medicare drug price negotiations, which will cost the American public $8,800,000,000. That means persistently high prices for the American people of drugs that have been on the market for years. This bill also set up 15,000,000 people to lose their health insurance. Now, that will make health care unaffordable for those 15,000,000 people, but it also impacts everybody else.
Why? Because just because someone is uninsured doesn't mean they don't get sick. Uninsured people end up going to the emergency rooms, which is one of the most, probably the most expensive settings of care. And when they can't pay, since the majority took away their health insurance, the costs increase for everybody, and are passed down to people with private insurance. And also, HR1 will add $443,000,000,000 to hospitals' uncompensated care costs through 2034.
That's a huge cost that's going to be borne by people in every single one of our congressional districts. I think we can all agree that it's cheaper to prevent than to treat, and treat early rather than treat late. So why did we pass legislation that doctors, hospitals, policy experts, and most importantly, patients all agree is going to make healthcare more expensive? Meanwhile, the majority has turned a blind eye to grant cancellations, political interference, and instability at the agencies that are the backbone of America's biomedicine ecosystem, which has become the envy of the world. As we talk about the pharmaceutical supply chain today, let's remember where every treatment and cure starts, as a research project seeking to understand biology.
The GLP-1 drugs that I talked about earlier started out that way. They wouldn't have been discovered without our basic research infrastructure. They came out of research, it might sound ridiculous, a study of monster venom. That's what helps lead to drugs that cure millions of people. We need to embrace that type of research.
We can't allow it to be stifled. There's a lot to unpack here, and I'm looking forward to the hearing. I yield back.
Speaker 1
10 lady yields back. I now recognize the chair of the full committee, Chairman Guthrie of Kentucky, for his five-minute opening statement.
Speaker 3
Thank you, chairman Griffith, for holding this hearing and to recommend Dougette. This is similar to a hearing we held, when you chaired O and I, and I was of the supply chain hearing. So, hopefully, we'll get some of the good answers that we got then today and, hopefully, some improvements. But we're here to talk about the US drug subscription, drug supply chain. And from the discovery of a molecule due to the dispensing of a drug, the prescription drug supply chain is a complicated web of financial and logistical transactions.
In 2017, the committee held a very similar drug supply chain hearing, which led to Congress passing and President Trump signing into law the most consequential and comprehensive PBM reform legislation in history just last week. Those policies will improve prescription drug affordability for all Americans. Historic PBM reform is just the beginning. More needs to be done throughout the drug supply chain to improve affordability for all Americans. Since our hearing in 2017, that prescription drug supply chain has evolved in many ways. We have seen significant vertical integration, not just among the largest PBMs, but also on part of the wholesalers who now own and operate provider groups, pharmacy services, administrative organizations, GPOs, pharmacies, and white label manufacturers. We've also seen shifts in pharmaceutical contracting and revenue generation from PBMs accruing a major portion of their profits in fees charged to payers and manufacturers, to payers working with broker consultants and often demanding rebate guarantees as part of their pharmaceutical benefit management contracts, which may impact behavior incentives up and down the supply chain.
We have also seen major changes in federal policy. The Democrats' Inflation Reduction Act has destabilized the marketplace to a degree that the Biden administration had to divert billions of taxpayer dollars just to temporarily keep the market afloat. On the other hand, just last week, President Trump launched TrumpRx, a new platform designed to help patients find the lowest possible direct-to-consumer cash price for some of the most common medicines Americans shop for outside of their insurance. I look forward to examining all of these issues across each of the prescription supply chain and learning more about what more we can do to make the health care system more affordable for patients across the country. Thank you to all of our witnesses for being here.
We look forward to a discussion and, hopefully, getting to some answers in the next few hours. And I thank you for being here, and I will yield back.
Speaker 1
Gentleman yields back. Now recognize the ranking member of the full committee, the gentleman from New Jersey, Mister Pallone, for his five minutes for an opening statement.
Speaker 4
Thank you, Chairman Grove. Once again, the health subcommittee is meeting today to examine health care affordability, while Republicans sit by and refuse to address one key way to lower health care costs, and that's extending the Affordable Care Act, its enhanced premium tax credit to lower monthly health insurance premiums for millions of Americans. The truth is Republicans are holding this hearing because they have no real plan to lower health costs or improve the quality of care. They spent the last year creating a health crisis, taking health care coverage away from 15,000,000 people, raising costs for millions more, and slashing a trillion dollars in health funding and their big, ugly bill. Their signature bill will not only result in massive benefit cuts, higher prices for patients, and hospitals closing their doors, but will also increase drug prices for seniors.
Hidden in the fine print of the big elderly bill was a new loophole to allow massive block... Blockbuster drugs such as Keytruda avoid Medicare price negotiations. This was a $9,000,000,000 Republican handout to the pharmaceutical industry tucked away in the big, ugly bill. Make no mistake, Republicans knew what they were doing when they prioritized big pharma's profits over patients. Patients who will be forced to pay higher prices for life-saving drugs for years to come.
And instead of working together to lower costs, it appears that Republicans' goal for today's hearing is to allow different players in the pharmaceutical drug supply chain to point blame at each other, while this committee does nothing to actually help lower health care costs for everyday Americans. It's also worth noting that Republicans denied Democrats' request to include a witness who could represent a patient's perspective, ignoring the one-in-seven Americans who have been forced to cut their pills in half or skip doses of their medication due to the costs in the last year. And that's a shame, certainly. Republicans have also stood by and allowed the Trump administration to undermine our nation's health agencies charged with protecting Americans. Time and again, Republicans have done nothing to stop Trump and Robert F. Kennedy Junior's attacks on lifesaving medical research and innovation, putting new cures and treatments out of reach for millions of people.
They've sat back and watched as billions of dollars in scientific research funding have been cut, frozen, or terminated, and they've allowed RFK junior's quack science to run rampant, decimating people's trust in vaccines. So now we're facing the worst measles epidemic in three decades on President Trump's watch. This committee should be doing important bipartisan oversight of the growing measles crisis and the federal government's response. But shockingly, the new head of CDC says that rising cases are, quote, just the cost of doing business. Kids getting sick from preventable diseases, hospitalized, and even dying is just, quote, the cost of doing business under the Trump administration.
Undoubtedly, these devastating actions will negatively impact health care access and affordability in our nation's public health for decades to come, long after the Trump administration has gone. So if we want to address prescription drug affordability, we should build on the successes of the Inflation Reduction Act. It took democrats more than 20 years to finally beat back big pharma and republicans to empower Medicare to negotiate lower prices for America's seniors. As of January 1, seniors have access to these lower negotiated prices. This year alone, seniors are expected to save about 1,500,000,000 in out-of-pocket expenses, and not one Republican supported this law.
And if Republicans are really interested in making prescription drugs more affordable, they would support my legislation to extend negotiated prices to everyone with private health care coverage. The Lowering Drug Costs for American Families Act also caps out-of-pocket costs for prescription drugs for more Americans and further prevents unfair price hikes for drugs already on the market. And these are real solutions and stand in sharp contrast to the secret deals that the Trump administration is making with the pharmaceutical industry that do nothing to lower costs. Democrats stand ready to continue our efforts to lower drug prices and deliver savings to the American people, and I would urge my Republican colleagues to join us. With that, Mr. Chairman, I yield back.
Thank you.
Speaker 1
Gentlemen, yields back. We now conclude with members' opening statements. The chair would like to remind members that pursuant to committee rules, all members' opening statements will be made a part of the record. We wanna thank our witnesses for taking their time to testify before the subcommittee today. Although it is not the practice of this subcommittee to swear in witnesses, I would remind our witnesses that knowingly and willfully making material false statements to the legislative branch is against the law under title 18, section 1001 of The United States code.
You will have an opportunity to give an opening statement, followed by questions from members. Our witnesses today are Laurie Riley, chief operating officer with Pharma, John Crowley, president and CEO of Biotechnic Innovation Organization, John Murphy, president and CEO of Association for Accessible Medicines, David Marin, president and CEO of Pharmaceutical Care Management Association, Chip Davis Junior, president and CEO of Health Care Distribution Alliance, Angie Bolivar, president and CEO of Health Care Supply Chain Association, James Galfin, president and CEO of the ERISA Industry Committee, James Hoy, chief executive officer, National Community Pharmacy Association, and Rachel Sachs, professor of law, Washington University in Saint Louis. Per the committee custom, each witness will have the opportunity, and I underscore that today, for a five-minute opening statement followed by a round of questions from members. You may have noticed that several of us, in our opening statements, did not use our whole five minutes. So if you've already said what you need to say, because we have nine witnesses, which is the most I think I've ever seen since I've been on the committee, but it was necessary to try to get the full picture.
So if you don't use your whole five minutes, nobody's going to be upset with you. Just saying. The light on the timer in front of you will turn from green to yellow when you have one minute left. I now recognize Miss Laurie Riley for five minutes to give her opening statement. Are you live?
Speaker 5
Thank you. Chairman Griffith, ranking member Gohmert, and members of the subcommittee, thank you for having me here today. I wanna highlight three important points from my written testimony. First, the US has a unique ecosystem that provides patients and workers many benefits. We lead the world in medical discovery in The United States, and as a result, American patients get access to our medicines first before anyone else in the world.
While other countries wait often three years on average to get medicines, patients in the U. S. Get them months after the FDA approval. Over the last 10 years, our members invested $850,000,000,000 in research and development, supporting our economy and over 5,000,000 jobs in the United States. I would say one of the most underappreciated aspects of our system in the United States is our unique intellectual property system that balances innovation and lower costs.
Just think about the last time you were in a hospital or a doctor's office. It probably looked the same as it did 10 years ago. But our industry looks radically different today than it did ten years ago, because we've brought over 500 new medicines to market in that time. But the share of health care spending devoted to prescription drugs remains at 14% today, the same as it was 10 years ago and the same as it is projected to be in the next 10 years. And the reason for that is that we have this unique system that balances innovation with lower costs.
A first in class medicine that gets approved today for the market can expect to face competition from another branded medicine in less than two years. That same medicine will face generic competition on average in 13 years. In the U. S. Today, 90% of all prescriptions written are for generic medicines, at an average cost of under $7 per prescription.
We use more generic medicines than anywhere else in the world, and they happen to be cheaper here, too. As a result of our high use of generic medicines, our Medicare and Medicaid programs pay 18% less for all medicines relative to our OECD peers. However, the unique challenges we face in our system are in part because we have a convoluted supply chain that exists in our system, that does not lower costs oftentimes for patients and actually puts hurdles in the way of patients being able to access their medicine. America's the only country in the world where half of every dollar goes to someone other than the company that invented or manufactured the medicine. PBMs get one out of four every $4 of a brand medicine that's sold today.
That's a $170,000,000,000 a year going to a Fortune 10 company that did not invent the medicine. I commend lawmakers for taking the important first steps that you did in passing PBM reform, but more remains to be done. We need to address the perverse incentives in the system that are caused by vertical integration and consolidation. Today, just three companies control 80% of all prescriptions, and today they're steadily acquiring pharmacies and providers, and paying those entities more than the ones they're not affiliated with. As a result, independent pharmacies and providers are going out of business.
It's hard to know the true size of this problem because, candidly, they've invented yet another way to stay out of sight. They've added another level of complexity by offshore GPOs that are out of sight of employers and taxpayers, and are driving up costs and making it harder for patients to get the medicines they need. The burden of this system, unfortunately, falls squarely on patients today. Over 1,400 medicines are excluded from the top three PBM formularies. A patient in Medicare Part D who is prescribed a new brand medicine can expect to have that medicine's coverage denied half of the time.
In the case of the commercial insured patient, they can expect to have it denied 70% of the time. I would be remiss to not mention the 340B program, which is the fastest growing federal drug program that exists. Oftentimes, I hear this program being described as a complicated one, but it's really not all that complicated. Half of all hospitals in this country get access to the 340B program, which entitles them to buy medicines at a significant discount, on average, 57%. They're then allowed to mark up those medicines as high as 1000 percent or more and charge taxpayers and employers whatever they want for those medicines.
This program has grown considerably and is now an $81,000,000,000 profit center for PBMs, private equity, and not-for-profit hospitals. And I would encourage this committee to look further into this program. We have challenges that need to be solved in our system, but I would ask the committee to do so in a way that doesn't sacrifice medical innovation. Today, China is nipping at our heels. They want to be the next center for medical innovation and progress in our country.
Today, phase one trials are done 50% faster and 40% cheaper in China. They are 30% of global clinical trial spots. In the next few years, could surpass the US if we do not do things to ensure that we remain the global leader in medical innovation. The way to win this race is to ensure that the US is the best place to invest in and manufacture new medicines, and to protect what's working in the system and reform the parts of the system that are adding costs and not adding value to patients, and to reject items like price controls, which will harm innovation and put us further behind. Thank you very much.
Speaker 7
Great. Thank you, Chairman Griffith, ranking member, and distinguished members of the subcommittee, and thanks for the opportunity to appear on behalf of the Biotechnology Innovation Organization. Bio is our nation's leading advocacy organization for biotechnology companies. We represent more than 1,000 biotech companies in America in all 50 states. These are the men and women whose expertise and entrepreneurship are at the heart and soul of creating newer and better medicines, the modern miracles that extend, enhance, and save human life.
Developing cutting-edge biotechnologies only a generation ago seemed impossible. My family and I know what it was like back then. For our family more than 25 years ago, our two youngest children, Megan and Patrick, were diagnosed with a rare form of muscular dystrophy known as Pompe disease. That's what led me more than a quarter of a century ago to become a biotech entrepreneur. The medicine that we eventually did develop was born from the genius of American scientists, business people, and it was approved here in the United States first by the US FDA.
It gave my children and many others a chance at life. Groundbreaking medical innovation can save lives, but more and more we keep getting in our own way with a system that is inefficient, overly complex, and fraught with middlemen. It's complicated at times also by government policies that harm, rather than advance, newer and better medicines for the American people. At the heart of America's innovation ecosystem are our small and midsized biotech companies, which together originate more than 70% of all new medicines, and which continue to lead the world. But maintaining and advancing America's lead in biotech is not a foregone conclusion.
We must continue to find ways to reform and modernize the US FDA to reduce the complexity and redundancies of our clinical trial system, to embrace actions that will reduce costs and improve both affordability and the health of all Americans. And we must remember that the United States already is the most favored nation when it comes to developing groundbreaking new medicines that transform the standard of care for patients. The codification of MFN policies risks importing socialized medicine and harming much of what makes American biotech innovation exceptional, while failing to address the real drivers of the affordability crisis in our country. The most sensible and patient-centered approach to lowering health care costs starts with simplifying our system. The United States is the only country in the world where 50% of every dollar spent on medicines goes to middlemen, mostly to the PBMs.
Wealthy hospital systems regularly mark up the price of medicines. Health insurers limit patient access to medicine. Today, it's as if a physician writes a prescription for their patient, and it's simply a recommendation to an insurance company. More and more, the insurance company model is to delay and deny. For too many Americans, though, delay and denial equal suffering and death.
Something must be done. Originating out of this committee more than a decade ago was the legislation that became law known as the twenty-first century cures act. We believe that now is the time for a twenty-first century access and affordability. Making great Americans alone, making great medicines alone is simply not enough. We need to ensure that every American has access to these biotech miracles and that no one ever goes a day without the medicines they need.
The time is now. We are no longer living on the cusp of a golden age of medicine. We are living in the golden age of medicine. We have now the biotechnologies and the ability to alleviate an enormous amount of human suffering. Let's work together to simplify the system and allow American biotechnology innovation to deliver medical miracles to the world.
Thank you.
Speaker 1
Jim Yieldsbach now recognize Mister Murphy, Mister John Murphy, for his five-minute opening.
Speaker 8
Chairman Griffith, ranking member, to get members of the subcommittee. Thank you for the opportunity to testify today about this critical issue. The Association for Accessible Medicines represents the generic and biosimilar medicines industry that Americans rely on every day. Generics and biosimilars are the single largest driver of prescription drug affordability in the United States. In 2024 alone, they generated $467,000,000,000 in savings for patients in the health care system.
Those savings flow across Medicare, Medicaid, private insurance, and directly to patients managing chronic and complex conditions. Yet, despite that success, the full affordability potential of generics and biosimilars is being suppressed by market distortions and outdated policies. Congress has a real opportunity to unlock even greater savings simply by allowing these markets to function as intended. For instance, generic medicines, while accounting for almost 90% of prescriptions filled in the United States, unfortunately, only represent 12% of total drug spending. This is down from 27% just a decade ago.
In fact, generics right now are the only sector of the prescription drug market where total spending has declined over the past decade, even as volume has increased. Meanwhile, overall drug spending continues to rise because costs are increasingly concentrated in a small number of high-priced brand and specialty medicines. In 2023, spending on just two brand medicines, Ozempic and Humira, exceeded total spending on more than 1,000 generic medicines combined in The United States. That imbalance should concern anyone focused on affordability. For manufacturers, this relentless price compression has real consequences.
Generic drugs launch at lower prices than ever before, and continue falling well below historic norms. At the same time, fixed costs, regulatory burdens, and supply chain risks continue to rise. When margins collapse, manufacturers exit, redundancy disappears, and shortages become likely. Biosimilars face an additional challenge. Despite clear evidence of safety and effectiveness, the United States continues to lag Europe and Canada in biosimilar uptake and patient access.
In too many cases, patients cannot reach lower-cost alternatives for many reasons. Brand patent games, formulary decisions, rebate structures, and reimbursement policies that favor high-priced medicines over lower-priced biosimilars. This is not a failure of science or manufacturing. It is a failure of policy. There are four areas where Congress can act.
First, with regulatory barriers. FDA should be clearly empowered by Congress to streamline outdated requirements that delay competition, including eliminating unnecessary clinical studies for biosimilars and aligning US policy with global standards by deeming biosimilars interchangeable upon approval. Second, patent abuse. Brand manufacturers increasingly deploy patent thickets to block competition long after true innovation has been rewarded. Congress can curb these tactics by strengthening patent review processes, streamlining patent litigation, and protecting legitimate tools like skinny labeling that were built into the congressional legislation establishing these markets years ago.
Third, we have misaligned incentives in Medicare, Medicaid, and PBM practices. Today, higher-priced drugs often win preferred placement because rebates and fees reward list price, not the lowest net cost to plans or to patients. That hurts patients and taxpayers, and keeps lower cost generics and biosimilars off pharmacy shelves. And fourth, supply chain sustainability. Inadequate reimbursement, especially in Medicare Part B and Medicaid, is pushing some generics towards chronic shortages.
Without predictable and adequate payment, manufacturers cannot sustain a reliable supply. If these issues go unaddressed, the result will be fewer competitors, more shortages, higher costs, and reduced access for patients. Generic and biosimilar medicines are not a theoretical solution. They are already doing the work. Protecting the future requires deliberate policy choices that restore competition, reward affordability, and keep patients first.
Thank you, and I look forward to your questions.
Speaker 1
Thank you, gentlemen. Yields back now. Recognize Mister Marin for his five minutes.
Speaker 9
Good morning, Chairman Griffith, ranking member Toomey. Members of the subcommittee, thank you for having me here today. My name's Dave Moran. I'm president and CEO of the PCMA. It's a role I've been in for all of three weeks now.
I appreciate you wasting no time in having me come in. I actually am pleased to be here today, to have the chance to talk about the critical role PBMs play to make health care more affordable, accessible, and safe, and the ways our companies are evolving to respond to the market, to patients, and to policymakers. I'm also pleased that we have the full drug supply chain here today. Each of us has a job to do, getting people the medications they need to ensure affordability. Before going any further, though, Mister Chairman, I'd like to acknowledge that as an association, we have failed you.
We have not done a good enough job articulating PBM's value to you. We have not been the partner you need. We're gonna change that. But I also have to say in just a few short days, it's become clear to me we have allowed other sectors, including some here today, to misrepresent us, often wildly so, and cloud the facts for policymakers and the public. Some have spent millions of dollars to convince you that the ones who make drugs cheaper, PBMs, are the problem.
It's a remarkable achievement, really, and I tip my cap to my pharma friends. A masterclass in persuasion that should be taught in lobbyist school. But there's also, pardon me, mister chairman, a lot of bunk out there, and it's my job to clear it up. My commitment to you today is that we will work with this committee to answer your questions, be a better partner, and help advance solutions that will make it easier and more affordable for your constituents to get the medications they need. Our companies are already doing so.
They've increased transparency, increased reimbursement for independent pharmacies, created new models that align incentives, and maximize savings for employers and for patients. Their evolution continues. The PBM industry today is not the one of ten, five, or even two years ago. Remember, no one has to hire a PBM. They do so because medicines can be extraordinarily expensive, often breathtakingly so, and they need someone to help hold down those costs.
PBMs do a lot. They use their leverage to drive discounts. They administer the drug benefit to patients. They promote patient safety, guarding against potentially harmful drug interactions, and supporting drug adherence. This stuff is hard.
Here are some facts. Prescription drugs are more affordable for patients because of the work PBMs do. We saved more than $300,000,000,000 for the 289,000,000 people we served last year. Generic drugs are more often filled because of the work PBM do. Taxpayers save money because of the work PBMs do.
Independent pharmacies are reimbursed at a higher rate than the big chain ones. Employers have transparency because we are accountable to them. Yes. Drug prices are still too high. Without PBMs, they would be much higher.
Congress just approved far-reaching legislation that impacts our industry. Transparency requirements, full rebate pass-through, delinking. It won't surprise the committee that we believe these mandates were both unnecessary and potentially harmful to our shared goal of affordability. But now we hope to move forward with you, to focus on the issues at the core of our affordability challenges, to demonstrate the value of the improvements PBMs are already making. And yes, to address the root causes of high drug prices.
Not only do drug companies enjoy extraordinary government protections from competition, they then game the system over and over again to further prevent competition and block generics from reaching patients. And the massive drug wholesalers and PSAOs really are one and the same. They wield enormous power over the prices of generic drugs and what pharmacies pay for medicines, with essentially no oversight. We hope the committee can broaden its inquiry into these and other parts of the supply chain. Competition has to be at the core of our affordability mission.
When there's competition, prices come down, and the promise of pharmaceutical innovation can actually be enjoyed by the people who need it. Mister chairman, thank you for having me. I look forward to working with the committee.
Speaker 10
Chairman Griffith, ranking member, and distinguished members of the subcommittee.
Speaker 10
Okay. Chairman Griffith, ranking member, and distinguished members of the subcommittee. Good morning. My name is Chip Davis. I am the president and CEO of the Healthcare Distribution Alliance.
And on behalf of our members, I want to thank you for the opportunity to share the pharmaceutical distribution sector's perspective in this important hearing. Distributors are the backbone of the pharmaceutical supply chain, handling approximately 96% of all medicines that move through the supply chain and are dispensed to the United States. Our members are in a very unique position. They work each day to connect approximately 1,400 manufacturers with over 450,000 distinct sites of care delivery, making distributors unique and unlike anyone else in this supply chain. Our members use their logistics expertise to take physical possession of medicine, to take legal title of medicine, and the liability and the security risks that come with it to deliver 10.5 million products daily across The United States.
They do this all while maintaining the lowest margins in the supply chain. All of our members, 36 distributors total, are headquartered here in the United States, and all operate here in the United States. And they support more than 300,000 American jobs and contribute almost $32,000,000,000 annually to the US economy. Distributors, while arguably not as visible at times as front-end manufacturers or frontline providers, are critical to our nation's health care system. Their operating model creates efficiencies by streamlining the functions to move product from manufacturer to providers and, ultimately, most importantly, to the patients.
As this committee seeks to further examine the prescription drug supply chain, it is important to note that while distributors do not decide what a medicine a physician prescribes or a pharmacist dispenses, or what a manufacturer charges list price known as WACC, or what a patient pays for at the pharmacy counter. Our members do work diligently every day to ensure that the right medicine at the right dose is available at the point of care at the right time. Over time, distributors have eliminated the need for manufacturers to build and maintain their own internal capacity for distribution to each of those hundreds of thousands of points of care I referenced on a daily basis. In fact, the efficiencies that distributors bring to the supply chain in the health care system save approximately $78,000,000,000 annually here in the United States. Our members take very seriously their role to maintain a safe, secure, and highly regulated pharmaceutical supply chain.
This end-to-end system, again partnering upstream and downstream, is designed with patient protections in mind and to avoid the risk of counterfeit, stolen, or contaminated drugs. For many years, there has been a policy focus on increasing affordability for patients. Congress has enacted numerous proposals intended to lower patient costs, but to the credit of this committee, there is still more work to be done. As we engage here today, we agree that there's an opportunity for reform and improvements designed to benefit patients and ease provider burdens while, simultaneously, hopefully, not having the unintentional impact of disrupting the efficiency, the security, and the reliability of medicines as they move their way through the pharmaceutical supply chain to the point of care, and, again, most importantly, to the patient. In the end, the health care distribution system is designed to deliver products to the providers that rely on them so that they can treat their patients.
HDA and the distribution sector stand ready to continue to meet this challenge, recognizing the importance to millions of Americans who depend on medicines for their well-being every day. Thank you for your time. I look forward to your questions.
Speaker 11
Alright. Is that on? Okay. Excellent. Chairman Guthrie, Ranking Member Pologne, Chairman Griffith, Ranking Member DeGuet, and distinguished members of the subcommittee.
Thank you for the opportunity to discuss the important role of traditional healthcare group purchasing organizations in lowering costs in the pharmaceutical supply chain. The Healthcare Supply Chain Association and our member GPOs appreciate your focus on improving health care affordability, and we look forward to continuing to work with Congress and all stakeholders on this important issue. Today, I would like to highlight two points. First, the significant cost savings that traditional healthcare GPOs deliver for providers and patients. And second, the distinct role that GPOs play compared to other entities in the healthcare supply chain.
The traditional healthcare GPOs that I represent serve as the sourcing and contracting partners to American hospitals, long-term care facilities, surgery centers, clinics, and other healthcare providers. Initially formed in the early 1900s, traditional healthcare GPOs are kind of co-op, combining purchasing volume on behalf of providers, driving competition among suppliers, and reducing health care costs. GPOs help secure access to medical products for their provider members under fair and affordable terms, driving billions in savings for patients, providers, Medicare, Medicaid, and taxpayers. One analysis found that GPOs deliver annual provider savings of 12 to 18% of their total supply purchases. GPO services enable providers and physicians to focus on their core mission, providing first-class patient care.
GPOs contract for a broad range of healthcare products and services including drugs, but also medical devices, surgical equipment, cybersecurity, hospital food, and PPE. Hospitals and other providers also rely on GPOs for services well beyond supply contracting and procurement, including supply chain analytics, emergency preparedness and disaster response, risk management, and compliance, among others. GPOs are particularly important for small and rural providers. These facilities face persistent financial pressures that threaten their ability to stay open. Small and rural providers often lack purchasing power, transactional experience, and personnel.
To counter this, GPOs help them access affordable prices and favorable terms on essential supplies, on par with their larger healthcare counterparts. Traditional healthcare GPO contracts are completely voluntary for both providers and suppliers. No provider is required to join a GPO. Providers have flexibility to purchase outside the GPO contract. And most providers belong to multiple GPOs.
Similarly, no supplier is required to contract with the GPO, and many choose to sell their products directly to providers. GPOs take a comprehensive approach to sourcing and contracting that not only considers the competitive price offered by suppliers, but also the quality, reliability, and stability of supply. GPOs recognize and reward quality while encouraging a healthy market, which generally includes multiple manufacturers. GPOs also work to expand the overall number of manufacturers, including encouraging new suppliers to enter the market. Now I've spoken to who the GPOs are.
I would now like to take an opportunity to touch on who we are not. As many in the room have noted, traditional healthcare GPOs are not PBM-owned rebate aggregator GPOs, also known as rebate GPOs. Traditional healthcare GPOs have a different role, a different business model, and we serve different settings in the healthcare supply chain. PBM owned rebate GPOs work primarily in the retail prescription market with health insurance companies and plan sponsors, aggregating rebates earned on purchases by the PBMs themselves. The FTC recently acknowledged the distinction between traditional healthcare GPOs that I represent and PBM rebate aggregators, noting that, quote, PBMs refer to these entities as group purchasing organizations, though they do not perform traditional GPO functions.
In contrast, the traditional healthcare GPOs that I represent are U. S.-based and serve American hospitals and providers, not retail pharmacies and pharmacy chains. Thus, we do not participate as part of the Medicare Part D program. Traditional healthcare GPOs are fully transparent with their provider members, do not take possession of product, and are focused on getting an appropriate and fair net price. GPOs predominantly source medications used in site-of-care settings and negotiate point-of-sale price reductions.
Any post-sale rebates earned on member purchases are passed through entirely to the providers that earn them. Flexibility for providers and suppliers is integral to the GPO business model, and actual pharmaceutical purchases are made by the providers, not by GPOs. In all these ways, the interests of GPOs are entirely aligned with their healthcare provider members. Thank you again for the opportunity to provide our perspective to the subcommittee. We look forward to working with you to ensure that patients and providers have affordable access to medications, and I'm happy to answer any questions you may have.
Speaker 13
Are we on? Great. Chairman Griffith, ranking member, to get members of the subcommittee. Thank you for the opportunity to testify today. I'm James Gelfand, president and CEO of the ERISA Industry Committee.
ERIC is the only national association that advocates exclusively on behalf of large employers regarding health, retirement, and compensation policies. Our member companies provide coverage through self-insured health benefit plans to tens of millions of workers and families. When an employee fills a prescription, the employer and the patient pay the bill. On average, ERIC member companies pay 80% of the health care costs. Unfortunately, health care and prescription drug costs continue to rise much faster than the economy grows.
Should this trend continue, the costs will simply be unsustainable. Employers are serious about providing affordable access to health care and being good fiduciaries. But when plan sponsors attempt to hold vendors accountable, they're met with opaqueness. They're told to go fly a kite. The data is not theirs to access.
According to a 2025 survey, one-third of employers cannot get incomplete claims data for their own plan. Four in 10 employers said their vendors simply refused to provide access at all. Employers are burdened by the costs of fraud, waste, and abuse, and yet the system often hides or even encourages it. Despite our concerns with high launch prices and patent gamesmanship, I'm here primarily to talk about middlemen. According to a recent report, 59% of drug expenditures were retained by manufacturers in 2022.
And the balance, 26% for PBMs, 10% for wholesalers, and 5% for pharmacies. The report found that drug margins were 31% for PBMs, 6% for wholesalers, and 3% for pharmacies. Wholesaler pricing practices and limited transparency add to higher costs. Congress recently took action to delink PBM compensation from the list price of drugs, but wholesalers appear to make the majority of their profit from the small percentage of branded drugs that they distribute. GPOs, and I mean PBM-owned GPOs, have diverted billions of rebate dollars from employers by renaming those rebates as fees.
We are thankful that Congress has said that this must end, but policymakers must not overlook the PBMs and GPOs' new overseas drug branding entities that add a massive secret spread price to the cost of medications. Consultants and brokers' compensation may also be tied to drug spend or vendor selection. It is imperative that this is disclosed to the employers. Can you imagine a greater conflict of interest than getting paid to steer clients to a specific vendor or getting paid by that vendor for every prescription that is filled? More transparency is also needed for the drug purchasing collaboratives operated by those entities.
The bottom line is that our current system seems designed to promote self-dealing, double dealing, arbitrage, and maximizing revenue for middlemen, and not deliver the most cost-effective drugs for patients. But there are solutions. We deeply appreciate what Congress has done on PBM reform and the administration's recent regulatory action. But more can be done. PBMs should be ERISA fiduciaries just like employers are, and PBMs should disclose a clear bottom-line number to employers during the RFP process.
My written testimony includes a series of policy recommendations to advance prescription drug affordability. It includes some great bipartisan legislation led by members of this committee. We look forward to collaborating with you to advance reforms that bring transparency, fairness, and accountability to the prescription drug supply chain. Thank you, and I welcome any questions.
Speaker 14
Good morning, Chairman Griffith, and Ranking Member DeGed, and members of the subcommittee. Thank you for conducting this hearing and the invitation to testify. My name is Douglas Hoy, and I'm the CEO of the National Community Pharmacists Association. NCPA represents the family owners of nearly 19,000 independent community pharmacists and long-term care pharmacies, providing vital health care services. More than any industry segment, community pharmacists are the frontline of health care in America.
Local pharmacists are medication experts and the most accessible health-care professionals. According to a JAMA study, people visit their pharmacies more than once a month, which is twice as much as they visit their primary care provider. And when those communities have need, they go beyond the everyday. Local pharmacies are there. It's my members who are often the last to close and the first to open before a snowstorm, a hurricane, or a wildfire, to make sure their patients are taken care of.
Despite the value our members provide, vertically integrated health insurers and their PBM subsidiaries are systematically eradicating community pharmacies. Pharmacy deserts are growing. One out of eight neighborhoods now lacks adequate pharmacy access. In 2017, I had the privilege to talk to this committee and share concerns about large PBMs and their impact on patients. NCPA is grateful and applauds Congress for just last week passing the first ever federal PBM reform legislation.
And NCPA will be working with CMS to accelerate its implementation. These are steps in the right direction to lower costs for patients and employers, and provide much needed transparency in the prescription drug supply chain. However, the supply chain has only grown more vertically and horizontally consolidated since 2017. Since that time, CVS Health acquired Aetna, Cigna acquired Express Scripts, and UnitedHealth's OptumRx acquired Change Healthcare. Meanwhile, in just the last four years, pharmacy closures have led to over 5,200 fewer pharmacy options for consumers.
Horizontal and vertical consolidation in health care has not produced the efficiencies and price reductions Americans were promised. Instead, it's worsened outcomes, raised costs, and led to rationing of access to care. It's lessened competition and has directly harmed access to independent pharmacies. The complexity of the pharmacy payment system is dizzying. Independent pharmacies are probably the only small businesses in the whole economy where their biggest competitor owns their data, decides which products they can sell, and how much they'll be paid for those services.
Anticompetitive practices such as patient steering, opaque pricing games, formulary manipulation, and punitive pharmacy audits are just some of the ways PBMs abuse their market power. The big health insurers and their PBMs are truly the judge, the jury, and the executioner when it comes to community pharmacies. On that note, nearly 9 out of 10 of all prescriptions filled in America are for relatively inexpensive generic drugs. Common generic medications like atorvastatin, metformin, and lisinopril are not what’s stressing health care budgets. It's prescriptions for specialty medications that are breaking the bank.
And specialty medications have no uniform definition. The PBM insurers define specialty drugs however it best suits their profits. And guess who controls where patients can access so-called specialty drugs? Guess who conveniently owns and operates their very own mail-order specialty pharmacies? And guess who steers 70% of all specialty drug dollars through their specialty pharmacies to the tune of over $180,000,000,000.
No surprise. CVS, Aetna, Cigna, Express Scripts, UnitedHealth, OptimRx. To help foster affordability in our health care system, NCPA recommends that congress prioritize ways to halt and dissolve the horizontal and vertical consolidation that has overtaken health care and, specifically, the prescription drug supply chain. To ban spread pricing in state Medicaid managed care programs and require fair and transparent pharmacy reimbursement, and prohibit steering to PBM affiliated pharmacies and stop PBMs from misclassifying specialty drugs. In conclusion, just as AT and T was busted up 40 years ago, the vertically integrated big health insurers must be dismantled and rebuilt to create competition, not oppress it.
Thank you, and I look forward to answering your questions.
Speaker 1
Thank you, gentlemen. Now recognize Miss Sachs for her five minutes. I have the same problems when I'm using those machines. You'd think the technology subcommittee could get this fixed for us.
Speaker 15
Wonderful. Chairman Griffith, Ranking Member DeGut, and other distinguished members of the health subcommittee of the House Committee on Energy and Commerce. My name is Rachel Sachs, and I'm a professor of law at Washington University in Saint Louis, where my research focuses on innovation and access to new pharmaceuticals. Thank you for the opportunity to testify before you today about the role actors from across the entire prescription drug supply chain can play in addressing the drivers of high drug costs, and how this committee might take steps toward solving these problems. Today, too many Americans cannot afford important medications, and many patients report that they have not taken medication as prescribed due to its cost.
Costs are high not only for patients, but also for payers, both public and private. Ultimately, these systemic costs are borne by American households. In my testimony today, I will first explain how different actors within the prescription drug supply chain contribute to the problem of high drug costs. Key issues include horizontal consolidation, vertical integration, and supply chain opacity. Second, I will identify potential solutions that act on each entity within the supply chain, offering both broader principles and specific suggestions.
Many actors within the prescription drug supply chain play crucial roles in keeping drug prices high. Pharmaceutical manufacturers benefit from a combination of government-provided exclusive rights and legally guaranteed insurance reimbursement. This combination limits competition and ties payers' hands, allowing manufacturers to set and maintain high prices over time. Intermediaries are horizontally consolidated and vertically integrated with other supply chain entities, from insurers to medical practices. This consolidation limits competition and raises barriers to entry for potential competitors.
In 2024, the three leading PBMs process nearly 80% of prescriptions, and all three PBMs are vertically integrated, including with large insurers. PBMs have been criticized for limiting access to lower-cost products, marking up specialty generics, and steering patients to private label products from which they profit. Three wholesalers control 98% of the market and are also vertically integrated, including with specialty medical practices. Wholesalers whose revenue is often based on a drug's list price have been criticized for practices, including steering patients to higher-priced drugs and limiting practices' choice of wholesalers. Reported concerns regarding GPOs include contracting practices preventing the uptake of new lower cost products.
In developing a package of reforms, this committee should keep in mind three common themes. First, for decades, our system has relied on competition to drive down drug prices. This committee should focus on reforms that make competition more effective, particularly for biosimilars. This committee should support FDA's request to eliminate the distinction for interchangeable biosimilars, conduct oversight of PBMs' use of private label biosimilars, and adopt reimbursement strategies that encourage price competition between biologics and biosimilars. Second, where the market is already highly concentrated both horizontally and vertically, solutions beyond encouraging competition may be needed.
This committee should use oversight to bring transparency to supply chain intermediary business practices, and develop data about the impacts consolidation has on companies' business practices. Depending on the results of this oversight, the committee may decide to support structural separation or other related bills. Third, given both the complexity of the supply chain and companies' motivations to alter their business practices to avoid enacted legislation, it may not be ideal to tie proposals too closely to particular business practices or market structures. It will be important to consider approaches that address reimbursement prices directly. As one example, this committee should consider strengthening the Medicare drug price negotiation program.
In closing, it is important to consider how this committee can support not only affordable access to medications, but also innovation in the next generation of therapies. Recent actions threaten the stability of the NIH and FDA, and undermine future innovation. This committee can and should shore up federal funding for biomedical research at the NIH and stabilize FDA. Every actor in the supply chain plays a role in keeping prices high, and every actor has a role to play in ensuring affordability for both patients and our health care system. Chairman Griffith, ranking member DeGet, members of the subcommittee, I appreciate your focus on this important issue, and I look forward to answering your questions.
Speaker 1
Thank you very much. We will now begin questioning. I'd ask members not to begin a new question to our witnesses as their five minutes expire, and would encourage members to submit written questions for the record. I now recognize myself for five minutes, and I will tell you that I'll have a lot of written questions for the record. Mister Marion, starting with you.
You indicated affirmatively or at least, it seemed like warm and glowing comment about competition that immediately triggered my thoughts, which then were picked up by Mister Hoy and Miss Sachs. So I ask you, if you like competition, do you think the Federal Trade Commission should break up the three largest PBMs that control 80% of the market?
Speaker 1
I think you're not on. And I'm well, I could hear you. The people back home can't. Okay. Go ahead.
Speaker 9
Yes, ours is a highly competitive market, chairman. There are 73 full service PBMs, all different shapes and sizes, different geographic footprints, different service offerings, different focus. But you.
Speaker 9
We see the small players taking business from the big players all the time. And, importantly.
Speaker 1
I gotta move on because I got lots of questions to ask, I'm not gonna get to all of them.
Speaker 1
Let me go to the next one that's vexed me for some time, we started fixing it last week. What we learned previously and what I've heard, and you said you wanted to debunk myths and go after the bunk. So here you go. This is your chance. What we've heard is that there have been situations in the past where because the PBM gets paid and that when we changed some of that last week, but because the PBM gets paid on the list price, they've gone to company a with the manufacturer and said, we have company a producing this, but there's also company b.
If company a doesn't raise their price, we're gonna stick with company b, and we're gonna take you off of our formulary. And then once the company a agrees to that, they can then go do the same thing to company b, causing the list price to go up. And I know there's all kinds of rebates and so forth, but if the list price goes up, not everybody's getting that rebate. True or false? Has that happened?
Speaker 9
That would be an outlier case, Mr. Griffin. Mister chairman, I'd like to.
Speaker 9
You know, here's the bottom line: we negotiate lower prices and provide significant value. We saved $333000000.
Speaker 1
So how do you explain when West Virginia decides to set up their own PBM, get out of the big ones, that they save 6% right off the top?
Speaker 1
I think more competition is better, too. We'll see what we can work on. Now let me switch gears and go in a different direction because time is running fast. I'm gonna start with Crowley, but I invite Mister Galefan to get into this discussion too. Mister Crowley, you said something that struck a chord with me, it's not directly related to prescription drugs, but it is because sometimes people are denied their drugs.
And you said when the policy today of some insurance companies is to deny and delay, which then can cause harm and suffering. So I submit to you. What if we started looking at, because I think this is the way it should be, insurance companies as fiduciaries. That's where you come back in. Looking at them as fiduciaries.
And if they intentionally and willfully delay and refuse to provide treatment or coverage for a particular medication, and it causes suffering and harm, have them be liable with certain parameters on attorney's fees, but have them be liable for that damage. What do you think of that?
Speaker 7
Yeah. Mister chairman, I believe that anything that advances patient protection and anything that advances medicines to patients is a good idea, and should be reviewed.
Speaker 1
Alright. And, mister Galfan, you said you thought that the PBM should be looked at as fiduciaries, which I don't disagree with you on. Explain.
Speaker 13
So a fiduciary has a responsibility both to do the right thing for the patients and to try to control the costs. There's still gonna be tough choices that are gonna have to be made, but you would have more confidence that those choices are based on doing the right thing, as opposed to making the most profit.
Speaker 1
Mister Crowley is an attorney. I'm Miss Sachs' attorney. Both the ranking member and I are attorneys. We are all fiduciaries for our clients. We lived with that our entire professional careers, and it didn't harm our clients.
It helped our clients, and we still made money. I believe the insurance companies and the PBMs could still make money even if they reviewed as fiduciaries. Would you agree with that, Mr. Crowley?
Speaker 1
He would? Yes. Alright. Mister Galefans, specialty drugs have skyrocketed in recent years. Can you explain exactly what a specialty drug is?
Because we've talked about it some, but I'm not sure the public back home knows about it, and you have 40 seconds.
Speaker 13
It's not actually possible to explain what a specialty drug is because it's a made-up definition. You look across the big three PBMs, there are variants of up to 50% on what they consider to be a specialty drug or not a specialty drug. The definition that I use is an expensive drug.
Speaker 1
Alright. Fair enough. With that, I'm gonna yield back, but I will have lots of questions for the record. And I'll now turn it over to the ranking member, Ms. DeGet, for her five minutes.
Speaker 2
Thanks, Mr. Chairman. So last fall, president Trump threatened major drug manufacturers with ruinous tariffs if they didn't accede to his policy demands, which would allegedly reduce the cost of drugs. And now 16 different companies have made secret deals with the White House. Miss Riley, I want to ask you for your members, what promises have been made by the White House to your member companies as part of those agreements, and what will the member companies have to provide in return?
Speaker 2
We don't have knowledge of individual agreements. Have knowledge about that because the details of these agreements have not been made public. Is that correct?
Speaker 5
We don't have knowledge because we're a trade association and for antitrust purposes.
Speaker 2
Companies in the baseline. So, mister chairman, I have to ask you, I don't understand what this witness is doing here if she can't give me any details about what her members are doing to try to reduce the cost of drugs. So I would hope that we can get the members in here to talk about that.
Speaker 2
They say they're reducing prices. Well, then they send somebody over here who can't even answer the question.
Speaker 1
Unfortunately, members. Unfortunately, the problem is that all of these agreements have secrecy deals. Each one of them is but saying.
Speaker 1
Not even some of the representatives of the, I don't know the answer to that.
Speaker 2
Okay. Well, let's figure it out. That is true. Along. Moving along because you're tough.
Mister Crowley, I wanna thank you for sharing the story about your family and children, and what American science and ingenuity have done for them. And I wanna thank you for your shout out about twenty-first century cures, and to let you know I'm still continuing to work on cures 2.1. How important is it, not just to your member companies, but to families like yours, that The United States fosters a vibrant and science-driven research ecosystem?
Speaker 7
It's vitally important when you think about what it takes to make newer and better medicines. It's an entire virtuous circle. So it begins most often with great academic research, oftentimes at or funded by the NIH. That's part of the foundation of the great science in America. It's what's brought us to the lead in biotechnology, and something we need to advance in.
Speaker 2
Now, Professor Sachs, you study pharmaceutical innovation and research and development. How many fewer grants did the NIH make last year compared to the previous average? About 24% fewer grants. 24%. Do you think that funding fewer grants is likely to lead to fewer treatments and cures down the road?
Speaker 15
I think it is likely to lead to fewer treatments. Almost 100% of newly approved drugs have NIH funding underpinning them at some point.
Speaker 2
Now, in this administration, the ranks of political appointees at the NIH have greatly expanded. Scientific research grants now need to go through political appointees before approval. And the agency directed the termination of thousands of awards on ideological, not scientific, grounds over the last year. Professor Sachs, I want to ask you, how has the research community reacted to these developments?
Speaker 15
We've certainly seen public reporting that scientists are self-censoring, that they're avoiding using certain words or even avoiding areas of research that are seen as politically disfavored. We've also seen reports that other countries are allocating funding to try to recruit American scientists, promising greater academic freedom and stable funding.
Speaker 2
That's not gonna lead to any better treatments. It's just gonna lead to silos. I don't think so. Now let's talk about the FDA, which some can argue is even in worse shape. The FDA has seen a significant brain drain in the last year.
Is that correct?
Speaker 15
Yes. The drug center lost over 1,100 employees, about 19%, and the biologic center lost almost 300 employees, about 20%. One report suggested that about 90% of senior leadership who had been at the agency a year before is no longer there.
Speaker 2
That's stunning. Now, Mister Crowley, I wanna ask you, is it fair to say that this type of staff turnover harms industry confidence and thus investment in new treatments?
Speaker 7
Congresswoman, we need modernized and reformed and bold changes at the FDA, and the core of that has to be the leadership and the staff at FDA. So when you look at the changes that have been made, they've been very difficult, and you've seen reductions in force. And I'm hopeful, confident that we'll start to see more and more people coming to the FDA, particularly scientific reviewers, medical reviewers, and inspectors. That is the core, the gold standard of the FDA for our industry in America and around the world.
Speaker 1
And the lady yields back. Now recognized, gentleman from Kentucky, the chairman of the full committee.
Speaker 3
Thank you very much. Last week, we just approved almost a half $1,000,000,000 increase in NIH. So, mister Gilfin, we wanted you here today because, in the commercial space, employers were covered 168,000,000 lives. So it's a big player in the commercial space. And most of the people here will argue, insurance, PBMs, whatever, their job is to get the best price for their customers.
Your customer's the employer that you're the one paying the bill, and yet you're here saying that you're not getting a fair deal. So the marketplace should work. What is preventing the employers from sitting down with, no, we're paying you too much, PBM, insurance company. You're supposed to negotiate with us the best price. We think you're keeping too much money is what your testimony is.
What's preventing your employers from making those kinds of deals? Well, for a free market, access information. That's what I want to hear. There has
Speaker 13
For a free market to work, there has to be access to information, and there have to be rules of the road to ensure that people are playing fairly. And those did not exist, at least until last week, perhaps, in parts of this prescription drug supply chain.
Speaker 3
So, I mean, what are there not people competing? I mean, why aren't these groups competing against each other?
Speaker 13
One of the challenges that we've had, and I think the legislation that Congress passed last week is meant to address, is that intermediaries who are supposed to be representing the purchaser, representing the patients, are actually getting paid by both sides of the negotiation. So if you're getting paid by both, imagine if your attorney was also getting paid by the prosecution. Mhmm. Do you think you would end up getting the best plea bargain, or would you probably end up going to jail?
Speaker 3
Right. I agree. So I know you got small employers, but you have big employers. And they should be able to affect the marketplace. They're big enough to do that.
And yet, I think Jamie Dimon from Bank of America said they couldn't even get the information he needed to reform what, and that's a major employer. And so I guess the question is, why is it this group and this group saying, if they're gonna send you for 100, I can send you if they're making that much money. Why isn't that dynamic happening?
Speaker 13
So Eric has multiple member companies that have more than 1,000,000 employees in the US and twice as many covered lives on their health insurance.
Speaker 13
One of those employers actually went to one of their big three PBMs and said, we'd like to try things a different way. Why don't we try we'll have a disinterested third party. We'll design the formulary, and we will pay you to service the formulary and run our plan. And the big three PBM said no. And not only will we not do that, but we're confident that the other two won't do it either.
So go pound sand.
Speaker 13
Guys can't negotiate, trust me, you know, 1,000 employers, 5 or employees, 500 employees, they don't have a chance.
Speaker 3
Well, thank you. Thank you for that. So, mister Davis, the big three wholesalers or fortune 15 companies we just talked about, distribute around 90% of the prescription drugs. So we're talking about the vertical integration and the process. Why did you guys argue that that's better for the system to be vertically integrated?
Speaker 10
Mister chairman, thank you for the question. The, and I actually think it's important to distinguish the degree of diversification within the leading wholesalers. And to be clear, the top three wholesalers within our membership out of a total of 36 have expanded their business model in certain ways. I know that there was a chart associated with the majority memorandum for this meeting that identified that came from drug channels. That is a build off of the vertical integration that was previously seen and discussed with respect to insurers, PBMs, and others.
But let me be very clear about what wholesalers are doing in diversifying their business, the minority of our leading members that are doing so. On the manufacturing side, on the retail pharmacy side, and on the provider side, they are creating working relationships or networks. They do not own medical practices as has been alleged by some witnesses on this panel, and they are building out these diversified business practices in large part because they are hearing from their pharmacy customers or other health system customers about their inability to access affordable medication through other sources.
Speaker 3
Thank you. And, Mister Hoy, your organization represents independent pharmacies. We hear a lot from independent pharmacies. I would say they're the people whose names are on the little league uniforms back home, the people that are really contribute to the community. How can you just take the I have 38?
Take what we passed last week. How does that benefit independent pharmacies' PBM reform?
Speaker 14
There's multiple fun facets to it, but in just thirty seconds or less, the reasonable and relevant contracts because we had to get an act of congress for PBMs to give us reasonable and relevant contracts in Medicare Part D. Medicare Part D is the worst payer. It's a taxpayer-funded program. It's putting pharmacies out of business. So we believe that this legislation can give us a shot at just, reasonable, and relevant contracts.
Speaker 3
So, mister Marin, in 10, you got a response to that or until he gavels me down?
Speaker 1
Gentlemen, yields back, and now recognize the ranking member of the full committee, Mister Colin, for his five minutes.
Speaker 4
Thank you, Mr. Chairman. I wanna follow-up on the gentlewoman from Colorado, a ranking member on these secret agreements with President Trump. But I have to say, I'm listening to so many of you talk about, you know, how great the state of medicine is. And we've got this, quack secretary RFK at the top. And, you know, some of you talked about how people gonna go work for the FDA gold standard.
Nobody's gonna go work for the FDA as long as he's there in charge. You know, the decisions are being made by quack science. He got the gold standard is gone as far as I'm concerned with this FDA because of Robert F. Kennedy Jr. And then some of you talked about how, you know, you wanna make investments, which, thank god, over the years you've made so many investments. But why would you make an investment today with, you know, with a drug or any vaccine or anything with this FDA?
I mean, there's an article today in The New York Times about how the FDA refuses to review Moderna's flu vaccine because doctor Prasad says rejected the company's application. I mean, you could spend billions of dollars developing a drug, and then the FDA is gonna not even consider it because of the quacks. Right? I mean, I wouldn't be surprised if they, you know, if RFK said, oh, rather than do Moderna vaccine, you know, I'll watch a Harry Potter film and, you know, use some potion that's created by Harry Potter after you've invested billions of dollars in drugs that are legitimate. I mean, there's no gold standard anymore.
The FDA is broken. I mean, that's the bottom line. But let me just get back to and ask Miss Riley. Just yes or no. Do you have copies of these so-called most favored nations agreements that your member companies have entered into with the administration, just yes or no?
No. Okay. Now how are Congress and the American people supposed to understand the benefit of these agreements without knowing what's in them? I mean, am I supposed to just trust, you know, the claims of drug manufacturers that this is a good deal for the American people based on the press releases they put out? How could I possibly know what's in this program or whether it benefits anybody or lowers prices, Miss Riley, briefly.
Speaker 4
That's absurd for me to take their word for it. I mean, that's not what we do. We don't take the word for anybody. We question. We do oversight.
We look into it. I is, mister chairman
Speaker 4
Well, I just wanted to let me just do this, and then I was gonna ask mister chairman Guthrie, but let me issue because I don't see him. I mean, I just think it's unacceptable the federal government can cut secret deals with these companies and that we don't know anything about it. So if you would be willing to work with us to try to, you know, get more information about these companies, mister chairman? I mean, that's all I'm asking.
Speaker 1
About the deals, not the companies. Not the deals. I'm happy to work with you, mister chairman or mister ranking member, in order to try to get as much information as we can without busting up the deals. But at the same time, I think we do need to know more about what's going on. I'm a big believer in transparency, and the more we know, the better job we can do as congressmen.
Speaker 2
I just wanted to ask, have we actually seen tangible results? Have we seen drug prices go down because of these secret agreements?
Speaker 5
Well, I think it's too soon to tell. That data wouldn't have been available back, Mr. Rangel.
Speaker 4
Alright. Let me just ask, mister, I mean, professor Sachs. In order to determine whether these agreements save money, don't the public and Congress and experts like you need additional details about how these agreements are gonna operate?
Speaker 15
There's agreement among the members, and I agree that almost nothing has been made public about these deals. We don't know basic things like which drugs are included, what are the agreed upon prices, to whom they will be available, and how does the government have any ability to detect and enforce violations of these agreements. Those are all some of the things that you would want to know before.
Speaker 4
On the limited information we have, do you think these agreements are gonna meaningfully lower prices for consumers?
Speaker 15
I don't think we have evidence of that. If you look at something like TrumpRx, about half of the drugs listed on the site are already available as generics. And sometimes the price of the branded drug on TrumpRx is hundreds of dollars more than the generic price that you could get through GoodRx or Cost Plus Drugs. So if that's representative of the types of products in this agreement, I'd be nervous about whether there's any benefits for patients.
Speaker 1
Yeah. When he is back, I now recognize the vice chairman of the committee, the general lady from Tennessee, Miss Harshberger.
Speaker 17
Thank you, mister chairman, and thank the witnesses for being here today. Mister Moran, you'll be happy to know. Bless your heart. I'm not gonna ask you a question because the panel's taking care of that. Prescription drug affordability remains one of the top concerns, and we have a lot to unpack about how the prescription drug supply chain actually works, and where costs are truly being driven.
You know, too many prescription drugs carry high price tags and are simply unaffordable for many Americans, especially seniors who live on a fixed income. And, you know, as mister Hooey knows, when a patient walks up to my pharmacy and they have to decide whether they're gonna buy their medication or buy groceries, that's a problem. That's not a statistic. That's real life. So we're gonna start out by talking about, we've had a lot of conversation around rising health care costs. Affordability tends to focus only on prescription drug prices.
Yet, when we look at the data, including the US Bureau of Labor statistic figures, and I have a chart behind me, overall prescription drug price growth between 2015 and 2025 has remained below general inflation and below price increases in other major health care sectors. So I think it's important that we ground the discussion in facts. So, Missus Riley, how have pharmaceutical prices actually grown over time, and what share do they represent of total health care spending? And since many parts of the health care system seem to point the finger only at drug prices, can you help explain what the real cost drivers are that have resulted in hospital costs and other sectors of health care skyrocketing?
Speaker 5
Absolutely. As I mentioned in my testimony, we really are the only part of the system where our costs do go down over time, and that is because we face competition from branded products. In under two years after the first medicine gets launched. And then within thirteen years, we face competition from generic medicines where the price drops 90 to 95% virtually overnight. We remain 14% of the health care dollar as we have for the last 10 years.
The next ten years going forward were projected to remain the same, in part because we have a system that both balances cost containment because we do face competition and very rigorous competition, and allows us to continue to innovate to bring the next generation of medicines to market. As your chart points out, and my eyes are testing me, but, at the top of the list, you know, hospital spending has continued to go up. It is the largest part of our health care system in terms of spending. We spend almost half of every dollar in health care on hospitals. I think a lot of that is driven by things like consolidation in the hospital marketplace, which has allowed costs to go up.
And here is a place where I do have some sympathy for payers because in some markets, there is only one hospital group that owns a certain area, and it can be difficult to lower cost. And there are no general hospitals or general doctors. There are only generic medicines, and that does serve as a cost containment. Thank you, ma'am.
Speaker 17
You know, I think the unaffordability of a lot of specific drugs is a real problem, and some of that has to do with how our current patent system works. So, mister Gelfand, you know, a large employer health plan sees firsthand how patent thinkers delay competition and keep drug prices high for workers and retirees. From Eric's view, Howard requiring drug manufacturers to make consistent disclosures to both the FDA and the patent office would help curb abuse of patient practices and lower cost without undermining legitimate innovation.
Speaker 13
Congressman Hartsberger, thank you for your leadership on this issue. You know, the FDA PTO legislation would cut down on litigation time and allow biosimilars to enter the market in a quicker, and more competitive fashion. But right now, inconsistent filings allow branded drugs to draw out litigation and keep biosimilars off the market much longer than Congress intended. Improving those disclosures would preserve the twenty years of patent life that those innovators get, but it would also ensure that the inherent features are not inappropriately staggered in order to make longer patent life. So as an innovator under the legislation, you get to choose.
You know, it's trade secrets or it's patents, but you can no longer jump back and forth between both in order to maximize how long you have exclusivity.
Speaker 17
Okay. Thank you, sir. Mister Hui, when a small-town pharmacy joins a GPO, it's to lower acquisition costs and keep serving patients. But you testified that PBM-owned, even offshore, GPOs collect fees from manufacturers before that money ever reaches the health plan. In plain terms, what's the difference, and who's really benefiting?
Speaker 14
With the offshore GPOs, what the PBMs have done is they've been able to, they were sniffed out as far as the rebates. People said, hey. These rebates aren't all going back to the employer. And so they got shifty, and it's a shell game. So they've opened these offshore different kinds of GPOs, to basically launder fees.
And so the two now employer manufacturers and employers are basically extorted for fees. Some of those fees are rebates. Some of those fees are offshore in Switzerland or Ireland, or who knows where in the world they have their places.
Speaker 17
Well, I'll talk to you later. I'm out of time, but I yield back, Mr. Chairman.
Speaker 1
I appreciate that. Just set the record straight. Apparently, some of the IRA negotiated prices are still somewhat secret as well. So we'll work on trying to get transparency across the board. Absolutely.
And I now recognize the general lady, Miss Dingle, for her five minutes.
Speaker 18
Thank you, mister chairman, and the ranking member, to get to both of you for holding this important hearing on prescription drugs. And as you can tell, members on all sides are in agreement that we've got a real problem. In the wealthiest nation on the earth, no one should have to choose between buying groceries and affording the medications they need to survive, as my colleague just talked about. And while I'm not a pharmacist, I spend a lot of time in my community pharmacies, talking to people, talking to the pharmacists, talking to the people that are getting their prescriptions. And drug prices are continuing to increase, along with the healthcare premiums and out-of-pocket costs.
It undermines the ability of our health care system to ensure patients can get the drugs that they need. I know there's no one size fits all solution, we've got to work across all the different portions of this. But in particular, pharmacy benefit managers are a major player in the supply chain that have been allowed to operate unchecked for far too long. We did some common sense reforms to the PBM industry in the recently past fiscal year 2026, labor, health, and human services and education funding bill, but there's a lot more work that needs to be done. We've got to continue to fight to strengthen PBM accountability and ensure that Americans can get their medications closer to home, and at the pharmacies that they trust.
This means meaningful reforms, not half-baked plans like those that we've heard about this week. They claim the lower health care costs, with few substantive details that explain how they will tangibly benefit patients. So, for example, while Trump are exposed, that it will offer direct to consumer that won't count for their out of pocket costs or their deductibles. That's not a meaningful solution to lower drug costs. We need to be focusing on improving Americans' health coverage instead of giving gimmicks to manufacturers.
So, Mr. Hi, I'm going to start with you. To the extent it's true for some medicines, why is it cheaper to buy them without insurance, as TrumpRx is claiming? And why do PBMs tell pharmacies that they cannot give that option, or they will be dropped? And it's true.
Speaker 14
Yes. So, PBMs, when they process the prescriptions or when the prescription goes through them, they put spread pricing on it. So spread pricing is the difference between what they charge the employer and what they pay to the pharmacy. So if they can route that prescription through the PBM, they inflate the cost to the consumer. So the consumer pays more, the pharmacy gets less, the employer pays more, and the PBM makes more money.
So that's one reason why using your insurance can actually be more expensive than paying cash. As far as your second question related to the PBMs, they do not want pharmacists talking to patients about lower costs because they want to route those prescriptions through them, where they make more money. There is a bill that was signed to eliminate gag clauses, which has been very helpful. But still, PBMs use punitive audits and other techniques to threaten pharmacies and to kick them out of the network if they do things that the PBMs don't like, such as talking about transparency.
Speaker 18
Look. I'm sitting in those pharmacies, and they're telling me the truth. And I can give you ten pills right now that an individual, a patient, can save a significant amount of money. Not 50¢, but a significant amount of money. And it's wrong, and the patient is the one getting screwed.
Speaker 18
How can Congress meaningfully address the perverse incentives for PBMs to steer patients toward more expensive drugs?
Speaker 18
How can Congress, what can we do so that your incentives for PBMs also steer patients toward more expensive drugs? What do we do to cut that off?
Speaker 14
One of the things that can be done is for pharmacies and patients to have access to the net price. So what happens, there's a list price, which is the high price, and then a net price. And PBMs, frankly, extort or draw fees.
Speaker 14
Yes, ma'am. They do. And getting that net price, allowing pharmacies to buy at that net price and to be able to sell it to consumers at that net price is one change, policy change that would help lower drug costs for our patients.
Speaker 18
Unfortunately, I'm out of time, so I'll be submitting a lot more questions for the record. Thank you, Mr. Chair.
Speaker 1
Jen yields back. Now I recognize the gentleman from Florida, Mr. Bill Rakis.
Speaker 19
Thank you, Mr. Chairman. I appreciate it. Mister Crowley, your personal story on rare disease is incredibly powerful. As you're well aware, our committee has prioritized policies to help create meaningful drug development, like the therapies that impacted your family. Recognizing the challenges to produce medicines for small patient populations, Congress created new incentives in the FDA process to spur orphan drug development.
But reimbursement uncertainty still makes this environment particularly difficult, particularly in cell and gene therapy. How can we continue to encourage investments in these potentially curative therapies without breaking the wallets of the rest of the patient population?
Speaker 7
Congressman, thank you for your question, and you highlight a very important issue. There are more than 10,000 known rare diseases that collectively affect about 10 percent of Americans. Yeah. Most of them are children, often fatal diseases. Only several hundred of them have cures, so we need to focus on two areas.
One is innovation. How do we bring more science, more technology for more biotech companies, allow our largest biotech and pharmaceutical companies to work on these rare diseases? So we need to reduce the complexity of our clinical trial system. We need to modernize the FDA so that they look again at each of these rare diseases and each proposed technology individually and employ more sophisticated regulatory tools and technologies that they have. If we do that, you'll see more capital flowing into rare diseases.
We need to reduce the cost of what it takes. I know, when I developed rare disease medicines for very small patient populations, we invested almost a billion dollars in each rare disease. Important medicines for my children and others, but only for thousands of children. That's too much. That's not sustainable.
So what can we do to bring down the cost of development, bring certainty and predictability to the regulatory process, enhance again the regulatory tools and technologies, and on the other side, ensure access to these medicines? Would you highlight, congressman, the cell and gene therapy area that has the potential to finally cure so many of these rare diseases. And what we need to do is make sure we're not only simply making these great medicines, but that everybody has access to them. So novel payment methods, looking at the effectiveness and affordability of these medicines, will be vital to ensure that when there is a cure and effective treatment, everybody has access. So I would encourage this committee and this Congress to continue to work toward that goal.
Speaker 19
You have my commitment. Thank you. While promoting the development of innovative therapies is key, we also must ensure that patients again have access and affordability. Very important. Mister Murphy, I understand that current PBM incentives could lead to PBMs prioritizing drugs with higher rebates and fees tied to higher list prices, rather than prioritizing the lowest total cost to the patient.
So the question is, you elaborate further on how these incentives affect formulary coverage for low-cost generics and biosimilars, as well as how this ultimately impacts patient access and cost sharing. This is for Mr. Murphy, again.
Speaker 8
Thank you for the question. So it's true we see a significant drop off in formulary coverage of generic medicines as a result of a number of practices. You know, I would note that in 2025, the Medicare Part D formularies, 57% of covered generic drugs were not even on generic formulary tiers. And that was just this current formulary year. So, you know, in answer to your question, I think one of the most important things we would advocate for is that we start to really recognize that as that time-limited period of monopoly pricing comes to an end and generic products are approved by the FDA, they be prioritized for coverage because of their cost savings.
And then patients actually pay from an out of pocket standpoint on the actual net cost of those generic medicines that are offered to them. Because ultimately, at the plan level or the employer level, we talk a lot about discounts and rebates. But ultimately, what we want to get to is the point where the patient is actually paying less money when he or she picks up the prescription at the pharmacy counter.
Speaker 19
Exactly. Thank you. Yeah. I guess I better yield back, mister chairman. I don't have much time left.
I'll submit. Thank you.
Speaker 17
Thank you. Gentleman yields back, and now I yield to my friend, representative Barragan from California for her five minutes.
Speaker 20
Thank you, madam chairwoman. Mister Marin, I'm gonna just ask you a very easy question. I didn't hear an answer the first time it was asked. The three largest PBMs, which are owned by CVS Health, Cigna, and UnitedHealth Group, control nearly 80% of the PBM market. Correct?
Speaker 20
Okay. That's correct. Alright. Well, that one, that's why I think it's hard to believe when you say, when there's competition, prices come down. Because if there are three that own 80%, then there's not a lot of competition.
I know what you're saying. You're saying there's others, and there's a lot of little others.
Speaker 20
It makes it hard to believe a statement you say because you gotta dig in further. It's not a good start. My I also understand from the Federal Trade Commission that the top three PBMs process 79% of approximately 6,600,000,000 prescriptions dispensed by the US pharmacies in 2023, while the top six process more than 90%. We've heard Mister Gelfand mention PBM margins are 31%. Is that right, Mr. Gelfand?
So tell me what does that do for prices for consumers?
Speaker 13
So every supply chain entity that adds fees and margins, that just means a higher price for consumers. In the end of the day, consumers are paying about 25% of the cost, and the employers are paying the other 75%. That 75% comes out of your wages. It comes out of your take-home pay. So you're paying all of it one way or another, and that adds up big time.
Speaker 20
Thank you. I'm looking at a report that shows the three biggest pharmacy benefit managers made more than $7,300,000,000 over five years, marking up the prices of specialty generic drugs for cancer, HIV, and other conditions. Mister Marin, you know, when people are sick with cancer, when people are suffering and their family see a loved one, and they're trying to get a specialty drug, that's hard enough. To then have to worry about the price of them getting their drug is serious business. I mean, I think about my own sister and how hard it was for her to get specialty drugs, and then you look at the price tag.
This is why there's a focus on PBMs. This is why there's a focus on your industry. You come in here and you say, oh, there are these missed facts, there are misconceptions. You are part of the reason why people suffer on whites, making it harder for people with cancer and HIV to get their drugs.
Speaker 20
Mister Howey, no. That is, there is no question pending for you to say anything, Mister Howey. I wanna thank you for the work that pharmacists do. When I think about my father who died when I was 23, he was always going into our local pharmacy, pharmacist, who knew our family by name, who dispensed a drug temporarily if the insurance company hadn't filled it. And so I wanna thank you for the work. You have also mentioned some of the problems and some of the concerns.
One of them you talked about was horizontal and vertical consolidation. Most people watching today don't know what that means. I have a chart, and if you can see it from there, this is a chart. If we can pan out here, where those at the top own both their then the insurance company, the PBM, the pharmacy, and the provider. So can you explain to the American public what this means for them in pricing?
Speaker 14
Yes. And congresswoman, I'm sorry for your loss. And our members are that is the type of work our members do is have those relationships with patients. To your question about the vertical con vertical integration and consolidation, what it means to patients is that the patient, frankly, is controlled. Their health care journey from the time they get, they see the doctor, get a prescription, get that prescription filled, maybe have to go to, decide which health system, which hospital.
There are three entities that control that journey because they're all the same. So, for example, CVS Aetna. CVS, people think about the brick-and-mortar pharmacies. That's probably the smallest part of their business. They own Aetna, which is the health insurer, and they own Caremark, which is the PBM.
So if a patient is prescribed a prescription, the doctor or the pharmacist is sometimes overruled by the PBM because the PBM makes more money off a different drug. So the PBMs are actually practicing medicine. That's one stage. Then the patient is trying to get their drug, and the PBM can either block it or require a prior authorization, or they can say, patient, you cannot go to that pharmacy. You can only go to my specialty pharmacy.
So every step of the way through the vertical integration, the patient choices are compromised. And when those patient choices are compromised, there's less competition and higher prices.
Speaker 17
Gentle lady yields back, and I'll now recognize my friend and other pharmacists in Congress. Representative Buddy Carter from Georgia.
Speaker 21
The oldest pharmacist in Congress, by the way. Thank you all for being here. Mister Moore and your organization, PCMA, often claim, with caveats of course, that your industry saves consumers and patients billions of dollars. As you heard, I'm a pharmacist, so I know that is not true. I know what's going on.
In fact, PCMA says that PBMs make health care more affordable and accessible for all Americans. I would also just refute that. Yet the Federal Trade Commission has found that the three PBMs, the big three PBMs, are charging enormous markups on dozens of lifesaving drugs and reimbursing their affiliated pharmacies at a higher rate than they paid their unaffiliated pharmacies. I know because I had an unaffiliated pharmacy. Had three of them, and I know what the reimbursement was.
In 2022, for example, a large share of the drugs marked up by more than 1,000%. 1000% were taken with patients with cancer, with pulmonary disease, with multiple sclerosis, a number of different things that they had to have these medications for. And in fact, the pulmonary hypertension drug tadalafil, pharmacies purchased the drug at an average of about $27 in 2022. But the three big PBMs marked up the drug by $2,079. They were paying their affiliated pharmacies $2,106 on average for a 30 day supply of the medication.
That's an average markup of over 77,000. 77,000%. In light of these findings, mister Marlin, can you still stand by PCMA's claim that PBM's made health care more affordable and accessible?
Speaker 9
Yes, congressman. I appreciate your passion on these issues, and I look forward to working with you as well. Yes. We saved $333000000000.
Speaker 9
I'd have to look at that case specifically, congressman. But let me tell you, I understand the concern about independent pharmacies across the country. They're critically important to the work we do. We can't do it without them. I think there is some good news from PBM's writ large, reimbursing them at higher rates, for example, moving to cost-plus contracts, reimbursing for the clinical services that they provide.
But there's still a lot more work to do, and I look forward to doing that with you.
Speaker 21
Well, good. I hope that you're sincere in that, and I have no reason to believe that you are not. And I'm gonna hold you to it. You know that. Let me ask you something.
The Federal Trade Commission recently reached a settlement with Express Scripts to lower drug costs and improve transparency. Chairman Ferguson, who I think personally is doing a great job, this settlement requires Express Scripts to make fundamental changes to its business practices that increase transparency and are projected to reduce patients' out-of-pocket costs for drugs like insulin by up to $7,000,000,000 over ten years. This is important. Miss Marin, as the National Trade Association representing PBMs, will PCMA commit to adopting the key terms of that settlement as standard operating practices across all of its member companies?
Speaker 9
Thank you, congressman. Look. I mean, there is a lot of good stuff in there. There's also a lot of good stuff that the industry was already moving toward. Right?
Moving to cost-plus contracts, for example. Higher reimbursement rates for independent pharmacies, $0 drug list for patients with no cost sharing, enhanced transparency, passing through all rebates. Understood. The legislation that you passed also just two weeks ago includes a tremendous transparency requirement.
Speaker 21
Well, thank you. We're very proud of that. I'm very proud of it, personally. So I think, but let me ask you something. What about GPOs?
They're based in foreign countries. Are you gonna try to bring them back to America?
Speaker 9
Those are strategic business decisions that I would want to ask the individual companies to answer. But overall, look, you know, we use our purchase.
Speaker 21
Wouldn't you encourage them to come back to America, though? I mean, that's the focus of this administration is to try to
Speaker 21
Good. So I hope that we can count on you to help us with that and count on your companies to help us with that.
Speaker 9
And I think we, you know, we can help get you the facts around those situations.
Speaker 21
Okay. Alright. Mister Hui, thank you for being here. Appreciate it. We both know that PBM reform has been a long time coming, and the aforementioned wins that we had last week in the consolidated appropriations act were significant.
Perhaps some of the most significant reforms in PBMs that we've ever had. And I'm very proud and very thankful to the members of NCPA for their help and their advocacy on this. Because after all, folks, we all want the same thing. We want affordable, accessible, quality health care. Pharmacists are the most accessible health-care professionals in America.
90% of all citizens in America live within five miles of a pharmacy. They are the most accessible health care professionals, and as they begin to close, we impact accessibility to health care. I hope, Mister Marin, that you will keep that in mind and that your organization will keep that in mind.
Speaker 1
Gentleman yields back now. Recognize the gentle lady from Washington, Dr. Schreyer.
Speaker 6
Thank you, mister chairman, and thank you to our witnesses. Two things can be true. At the same time, innovation's important to the American economy, and every American should be able to afford their medications. As a pediatrician, I just have to start with EpiPens. They've been around for decades.
People with severe allergies carry them around in case they have a life-threatening, allergic reaction. EpiPens can cost over $600 out of pocket, and I just wanna say that is outrageous, especially for kids who have to have one at home, one at school every single year. And I wanna call on Viatris and all manufacturers of EpiPens to drop the price, or we will take congressional action. Turning to vaccines, also a pediatrician. And this administration's war specifically on mRNA vaccines.
Just yesterday, as Mister Pologne said, we learned that the FDA refused to even review Moderna's breakthrough mRNA flu vaccine, even though the FDA had previously helped guide the company's study design. Many of you have talked about the importance of American innovation. Mister Crowley, Moderna is a member of Bio. What impact does this inexplicable decision that radically deviates from FDA practice have on American innovation?
Speaker 7
Women, we share your belief in the importance of vaccines. How in the world are measles coming back? We have an entire task force at Bio advancing the interest of vaccines for the American people, ultimately, for the entire world. And, well, I can't comment on any specific company or decision. I think we're in agreement, though, very broadly.
We are concerned about shifting standards. We need consistency. We need predictability from our regulatory bodies, and we need acceptance of the vaccines. You know, perhaps no biotechnology has done more to change and improve human health globally than vaccines.
Speaker 6
Thank you for acknowledging that. Yes. So just to emphasize that, double-click on it. If you have an unpredictable FDA, and there's no guarantee your medicine will even be reviewed, depends.
Speaker 6
Whim of whoever's in charge, you may not decide to innovate. Next, I wanna turn to the vaccine injury compensation program. Secretary Ken Kennedy continues to dismantle vaccine confidence and infrastructure in this country. He's spent decades elevating fringe conspiracy theories by continuing, as just one example, to falsely claim that vaccines cause autism. And I'll note that his own NIH health director or physician said last week that he has, quote, not seen a study that suggests any single vaccine causes autism.
Now RFK Jr. is threatening the National Vaccine Injury Compensation Program. This is a really important program. It protects patients and manufacturers. Patients with compelling evidence of serious vaccine injury receive financial compensation. And I want to be really clear.
This is extraordinarily rare, but it can happen. Impacted patients, they deserve an accessible, affordable pathway to get payment, and the data show that patients are more likely to succeed in getting compensation through VICP than they would in a lawsuit. And I just also have to mention Secretary Kennedy has made nearly 2 and a half million dollars recruiting people to sue vaccine manufacturers. And if VICP goes away, he benefits from the lawsuits. Mister Crowley and Miss Riley, both of you if you have time.
Why is it important to have a strong VICP? And are you concerned by the Trump administration's threats to add autism to the VICP?
Speaker 7
The VICP program has worked, as you indicate, congresswoman, for decades, and it compensates people in those rare instances who are harmed. Anything that threatens the system, we're very concerned about. We too have seen no study that shows that autism is linked to any vaccine, and any change needs to be based on strong science, that's well vetted, and that's a great concern of ours.
Speaker 5
Ms. Riley, I would echo what mister Crowley said and note as well. As you mentioned, the reason the VICP was put in place was bipartisan, and it was done because we saw vaccine manufacturers fleeing the market. And the last thing we want in this day and age is to have vaccine manufacturers leaving the market. It is vital, and I would agree also with what John said.
I think the one thing that has been studied significantly is any connection between vaccines and autism, and there is no study that suggests vaccines cause autism. As a mom of four, I can empathize with parents who are searching for what may be causing their child's autism, but I can affirmatively say it is not due to vaccines.
Speaker 6
Thank you for your answers. Just to emphasize, we need the VICP. It protects patients. If it goes away, RFK junior will profit heavily, and patients will be harmed, and we will lose innovation. Thank you.
I yield back.
Speaker 1
Gentle lady yields back. Now recognize the gentleman from Pennsylvania, Doctor Joyce.
Speaker 22
Thank you for yielding, Mr. Chairman. One of the worst examples that we have seen showing the incentives in our drug supply chain are broken and don't respond to market forces was the launch of the Humira biosimilars. It was particularly alarming to me to hear from manufacturers that despite the dramatic decrease in list price, they were having problems getting any sort of traction with formulary placement because PBMs preferred the higher-cost branded medication because it meant a bigger rebate. We even saw one company in particular launch two products, one at a higher cost and one at the lower cost. And within the same company, they saw that the higher-cost drug received more volume.
Honestly, it seems insane that given the PBM mission of lowering drug costs, your companies, Mr. Marin, would seemingly prefer to keep prices high. Now to be fair here, I've heard from employers and the broker consultant companies that they work with to design their PBM RFPs, that they often build in rebate guarantees as part of their pharmaceutical contracts. I am concerned that these rebate guarantees, especially considering the aforementioned HUMIRA example, shift drug pricing behavior and incentivize manufacturers to launch at higher list prices and PBMs to prefer that higher list price, higher rebate drugs even in situations when lower list, lower rebate alternatives might be available. Mister Marin, can you explain what a rebate guarantee is?
Speaker 9
I think it's important. Doctors. This thing's not working. Hello? Yeah.
There we go. So PBMs obviously use rebates to help drive down the cost of drugs. Rebates now must be passed through fully to the employer.
Speaker 22
Do you feel that the guarantees that the rebates have play a role in PBMs placing preferential treatment of high list prices over lower list price drugs?
Speaker 9
To the extent that it occurs, it's because we were able to negotiate a lower price.
Speaker 9
Well, the issue is what employers choose as the design of their program.
Speaker 22
But a higher list price would generate a higher rebate. Correct? Of course. Mister Galfin, do your member companies include rebate guarantees as a part of their PBM RFP process, and
Speaker 13
Do you feel that these guarantees lead to overall lower costs within the system? So prior to the legislation that Congress recently passed, a rebate guarantee was one of the few metrics that an employer could judge apples to apples between the different PBMs that they would be choosing for, to contract with. But as you, I think, are pointing out, choosing the highest rebate guarantee is kind of like going to one of these stores where everything's always 60 or 70% off. You have no context, so you don't actually know if the net price is a good price. We think that that's going to go away.
Thanks to the legislation.
Speaker 22
Without that legislation, that impact was being felt by businesses, by patients, and by America at large. Mister Marin, would you say that the report that I will mention, which addresses affordability and insurers and PBMs, has an incentive to manufacture and own generic and biosimilar medicines? Do you feel that incentivizes companies to form their own companies to manufacture their own drugs?
Speaker 9
No, congressman. I think, look, I think PBMs in general believe that biosimilar competition drives down costs. That's what we do. The more biosimilar.
Speaker 22
A 2025 analysis performed by the four six Brooklyn found that on a product level basis, Cigna's Qualant Pharmaceuticals offered products that were 30 times higher and more expensive than the average wholesale price based on the cheapest average wholesale price.
Speaker 9
Do you think this report is accurate? I'm not familiar with the report, doctor.
Speaker 22
Allow me to enter into the record how PBMs can use private label drug products from July's '46 Brooklyn publication. Turning to another, that objection? Vertical integration across our entire health care system has become a major concern for this committee. Many members have mentioned this today. Mister Gelfman, major wholesalers have made acquisitions of oncology and specialty physician practices over the recent decade and are operating specialty groups at higher cost oncology and other specialty drugs.
How do these acquisitions potentially increase the demand for high-cost drugs?
Speaker 13
I know that we're always told that vertical integration is going to lead to efficiencies, but it never actually seems to work out that way.
Speaker 22
In this case, does that vertical integration lead to efficiency? We believe that it.
Speaker 13
Impact on the patient? That means the patient will be paying a higher out of pocket, have higher deductible, higher co-insurance, and higher out of pocket max.
Speaker 22
Thank you, Mr. Chairman. My time has expired. I would submit additional questions for review. Thank you all for being here.
Speaker 1
Gentlemen, yields back. Now recognize the gentlelady from Massachusetts, Miss Treyhan.
Speaker 23
Thank you. Thank you, the chair and the witnesses, for being here today. Access to affordable, innovative, and life-saving therapies helps patients manage acute and chronic disease and live healthier, fuller lives. And when patients can access the medicines that they need, it can also lower long-term health care costs by preventing avoidable complications and hospitalizations. But we also need to be honest about what Americans are experiencing right now.
Accessing and affording the care that they need is one of the defining issues for families across the country. The anxiety that high prices create is real. It's not a hoax. Prescription drug costs are a major part of that burden for many Americans. And affordability is not just required at the pharmacy counter.
It's also about whether we're building a system that can deliver the next generation of cures in a way that is competitive, resilient, and accessible to patients. Other countries, including China, are moving aggressively to attract clinical trials and accelerate biomedical innovation. At the same time, we're seeing real uncertainty and cuts in federal health research dollars here at home, which risks weakening the very ecosystem that has made the United States the global leader in biomedical breakthroughs. If America falls behind, we risk weaker supply chains, less domestic capacity, higher prices, and a reliance on other countries for our life-saving medicines and treatments. That's why today's hearing really matters.
If we want patients to access the medicines that they need, we have to understand why prices are high, where the dollars go, and how the system can work better for the people it's supposed to serve. China has a clear strategy to lead the future of medicine development, and their role in the global clinical trial pipeline has grown dramatically over the last decade. Today, China-based companies account for a significant share of global trial starts and are running phase one trials faster and at a lower cost than in the US. Miss Riley, in light of this global competition, what concrete steps should Congress take to strengthen America's clinical trial and biomedical innovation ecosystem, including ensuring stable federal research investments so that we remain the world leader in developing new cures without compromising safety or patient protections?
Speaker 5
Thank you. Thank you for the question. And I could not agree more on the importance of having The U. S. Maintain its lead in biomedical innovation and research.
I think there are a number of steps that we should be taking to ensure that we remain the leader. China had a multi-decade plan to overtake the US. They've streamlined the regulations. They have added to their workforce. They are graduating 100,000 more STEM grads in The US on a regular basis.
They're doing everything they can to overtake us. To all the points you made, they're having success in doing that. We still remain the global leader, to keep that in check, we do need to do some of the things that, mister Kyle mentioned before in terms of improving the process at the FDA. We need to make our clinical trials more efficient. We need to lean on technology like AI. We need to centralize IRBs, other things that would bring costs down, and increase speed in the process.
At the same time, we need to keep what does work in our system. Strong intellectual property protection is important. Our companies make big bets. They spend over $2,000,000,000 to bring a medicine to market. So having certainty in intellectual property is key, but also having a predictable, transparent regulatory system is crucial.
And as you've mentioned, the ecosystem that exists in the United States, that cooperative research between academia, government, and industry has been part of the reason why. S. Overtook Europe 40 years ago in terms of bringing new medicines to market, and we cannot let that go away.
Speaker 23
Thank you. Appreciate that answer. Thoughtful. As we think about innovation and competition, I think we also have to think about preparedness. This committee has often been able to work together on health preparedness.
And I hope we can continue that tradition as we look ahead to reauthorizing important preparedness programs. Because at the end of the day, being ready for the next public health emergency is something that we all share responsibility for. We have seen in recent years that having flexible platforms already in place, whether for vaccines, diagnostics, or therapeutics, can make a difference between responding in months instead of years. Mr. Crowley, how important is it that we invest in platform technologies and strong health data infrastructure that can help accelerate clinical trials, support faster development of new treatments, and strengthen our ability to respond quickly when new threats emerge?
Speaker 7
Congresswoman, thank you. Congresswoman, thank you for your leadership on this issue. Preparedness is what it's all about when it comes to the next natural COVID that we may see, the flu, whatever it may be, or a bad actor in bioterrorism. And as a former intelligence officer, I have a uniquely vivid perspective of the threats that we face. And when we use platform technologies, and I'll give you the example of the mRNA technologies, and what we were able to do with that technology that didn't just magically appear when COVID appeared.
It represented decades of academic work, work in our smallest companies, and our biggest companies. To take that platform technology to utilize the entire ecosystem to come together to tackle that problem was essential for public health, and essential for our national security. So platform technologies are vitally important. Thank you.
Speaker 1
Generally, he'll be back. Now recognize the gentleman from Ohio, Mister Balderson, for his five minutes, and then we'll do at least one more after that. We'll get Mister Visi before we break for the votes. Mister Baldesson, you have five minutes.
Speaker 24
Thank you, Mr. Chairman. Thank you all for being here today. My first question is going to go to Mr. Crowley. Thank you for your story this morning that you shared. Your testimony highlights the importance of reducing unnecessary regulatory barriers at the FDA as a means of lowering costs.
A significant driver of these costs is the clinical trial process itself. How can the FDA accelerate and modernize the trials to expedite early stage drug development, especially as competitors like China streamline their regulatory pathways and seek to undercut US leadership in biotechnology?
Speaker 7
Congressman, I think we could look to what's directly under the FDA control. So, for instance, the requirements to get into clinical studies, they become overly bureaucratic, arcane. For an example, what it takes the animal preclinical testing, I think we need to step back and even begin with the question of why do we test our medicines in animals first? Here we did see, I think, important improvements, new guidance from the FDA last year. They reduced the requirement without at all threatening patient safety.
So that's one example of what the FDA can do to shorten the timeline, reduce the cost and complexity of getting into the clinic. Another area that's, I think, the FDA can influence but doesn't directly control is the clinical trials. When we developed medicines for rare diseases in my biotechnology company, I knew exactly what we needed to do to get into clinical studies. Wasn't easy, but we knew what we needed to do. Once the FDA cleared us into the clinic, it was another year of working with academic centers, hospitals, going through their institutional review boards, and most of them have their own.
Their ethics committees, separate contracting, separate informed consent, that's part of the system that we could make much more efficient. So, for instance, if hospitals and major academic centers would use centralized IRBs, it could significantly cut the time and cost of getting into clinical studies.
Speaker 24
Alright. Thank you very much. Well done. My next question is for Mr. Hoy. I represent a very rural district, and not only is access to health care a problem, but access to pharmacy services is growing more challenging as well.
The 2025 FTC report, I think it's been talked about here this morning, examined PBM pharmacy contracting practices and found that internal PBM documents suggested rural pharmacies are often forced to accept take-it-or-leave-it reimbursement rates. Could you elaborate on the specific challenges rural pharmacies face when negotiating contracts with PBMs, how these practices may affect access to care in rural communities. Thank you, Congressman.
Speaker 14
Yes. Take it or leave it contracts are part and parcel of the so called negotiations between pharmacies and PBMs. PBMs hold all the leverage. They hold the patient lives. So if the pharmacy does not sign basically whatever's put in front of them with very little negotiation, then I'm sure our friends at PCMA will say there's lots of, there's robust negotiation, but in reality, it's a take it or leave it contract.
So these pharmacies are forced to sign contracts that oftentimes will pay them below their cost to even acquire the drug. And, yes, rural pharmacies as well as pharmacies in underserved areas and urban areas, suburbia. They're all taking these contracts in which they are paid below their cost to acquire the drug. And as a result, 5,000 pharmacies have gone out of business in the last 4 years alone. There are 5,000 fewer pharmacy choices in the last four years alone.
It's a systemic process, it's a systemic problem. And, in fact, pharmacy deserts, especially those in your district in Ohio and across the country, are growing because of these take-it-or-leave-it contracts.
Speaker 24
Thank you. My last question is for Mister Murphy. Mister Murphy, the US generics market has historically driven price reductions of up to 95% and expanded patient access through increased competition. Some stakeholders have raised concerns that provisions of the Inflation Reduction Act may affect the long-term viability of the generic market. Can you explain how the IRA could alter incentives for generic drug development and market entry, and what implications that may have for the future competition and patient access?
Speaker 8
Certainly, sorry. Thank you for that question. So certainly, you know, our view is that a free market and pro competitive opportunity for generics and biosimilars to compete, to bring prices down is the most surefire way for us to save money on medicines over the course of the US health care system. And obviously, parts of the IRA were very well-intentioned and certainly make a lot of sense. But, you know, aspects of implementation like CMS implementing the biosimilar launch delay provisions were done in a way that actually reduced the predictability of the ability of biosimilar manufacturers to get on the market.
And so they, you know, have a thumb on the scale against development in those cases now that we would really look to.
Speaker 24
Thank you. I need to yield back, so we can keep moving. Thank you for your.
Speaker 1
Gentleman yields back. Now recognize the gentleman of Texas, Mister Vezy, for five minutes.
Speaker 25
Thank you, Mr. Chairman. As a reminder, Americans pay far more for medications than any other country in the world, and that is a real problem and it's going to require real solutions. And I just wanna take a second, to be honest, with the American people. And I don't know if anyone else has noticed this pattern. But the president loves to take existing programs and institutions or ideas and slap his name on them.
First, it was the US Institute of Peace, then the Kennedy Center, and now is this TrumpRx. And TrumpRx is being marketed as a drug pricing breakthrough. For those of you that don't know, I want you to take a closer look at what TrumpRx actually is and what it is not. TrumpRx lists 43 brand-name drugs, and that's it. You cannot get these drugs directly through TrumpRx, but you can print a coupon that may work at the pharmacy counter to buy your medications with cash.
That means patients cannot use insurance, and they have to pay entirely out of pocket. In many cases, when you try.
Speaker 25
TrumpRx, patients are redirected to pharmaceutical companies' existing direct-to-customer sales or discount programs. And these patient assistant programs offered directly by manufacturers, they can be helpful, but they existed long before TrumpRx, and yet he has taken credit for them. Also, existing platforms have long offered cash-paid discount options for patients, including GoodRx and cost-plus drugs. In fact, when you look at TrumpRx coupon, it is not only identical to one from GoodRx. They both have the same identifiers.
And last week, president Trump rolled out TrumpRx and claimed, and I quote, this launch represents the largest reduction in prescription drug prices in history by many times, and it's not even close. Secretary Kennedy then claimed TrumpRx would deliver, quote, the lowest prices in the developed world. And so I wanted to ask Miss Riley, yes or no. Are these claims accurate? Please answer yes or no.
Speaker 25
The this launch represents the largest reduction in prescription drug prices in history, many times, and it's not even close.
Speaker 25
Thank you very much. There's also a key difference between TrumpRx and other discount sites. GoodRx allows patients to compare prices across multiple pharmacies and across both brand-name and generic drugs. That comparison function is critical because generic drugs account for nearly 90% of the prescriptions filled in the US. They are often dramatically cheaper than their brand-name equivalents.
TrumpRx does not offer that comparison. And, in fact, it does not include generics at all, despite the fact that half of the drugs listed have cheaper generics available elsewhere. Let me give you an example. Tucosa, a drug that is used to treat irregular heartbeats. Its listed price is $672.
Trump listed at $336. That's half price. So that sounds good. Right? Well, the generic equivalent is actually available through cost-plus drugs for $10.
You can likely get it through your insurer for cheaper, too. Professor Sachs, is it your understanding that paying out of pocket for a brand name prescription drug through TrumpRx for a drug that has a cheaper generic alternative manufactured costs consumers more money? Yes or no?
Speaker 15
I agree with that, and I fear consumers will not understand that when they're using the platform.
Speaker 8
We certainly hope that there's more information out there too. Can you hear me now?
Speaker 8
Yes, Mr. Beesy. We certainly hope that patients have a full complement of information available to them about where they can get cheaper medicines.
Speaker 25
Thank you very much. And many of you may be asking yourselves, why are there only 43 drugs listed on TrumpRx? And I can tell you that these drugs are limited to those made by manufacturers that enter into a so-called most favored nation or MFN pricing agreements with the Trump administration. And as we have already gone over today, these are backdoor deals that have zero insight into the information. And so, mister Crowley, in your February 9 letter to Congress, you warn that MFM agreements could eviscerate the innovation pipeline that caused the engine of American biotech innovation to grind to a halt.
And that's on top of the trillions of dollars Republicans have stolen from Americans while inducing chaos at HHS. And so there are a lot of concepts of this plan, but I think America is still alert, there's a lot of answers when it comes to these direct prices. Thank you, Mr. Chairman. I'll yield back.
Speaker 1
Gentleman yields back. Now gonna recognize Miss Miller Meeks for her five minutes. Before she goes, I'm gonna say that we will recess after that for votes. And then as soon as Miss DeGet and I can get back here and somebody's here to ask questions, we'll start again. Miss Meadowmeeks.
Speaker 26
Thank you, mister chairman, and I thank all of the witnesses for testifying before the subcommittee today. As both a physician, a military veteran, and a member of Congress, I approached this issue from two perspectives, one clinical and one policy-driven. From my clinical experience, I've sat across from patients who have skipped doses, split pills, or simply went without the medications they needed. After searching through every data set I could, I couldn't find a less expensive medication to substitute. So they went without medications because they simply could not afford them. This should never happen in the United States of America.
From a policy standpoint, I believe that for too long, the conversation around drug pricing has been overly simplistic, often pointing fingers at just one part of the system. Manufacturers blame PBMs, PBMs blame manufacturers, insurance blame both, but the patients are paying the price. The underlying fact is patients don't particularly care which part of the supply chain is to blame. They just know they're paying too much, all the while seeing their premiums rise every year. Mister Gilpin, from the ERISA employer plan perspective, you represent the businesses that directly bear the cost of rising premiums for millions of workers, about 130,000,000 in the United States.
My bill, the Lower Health Care Premiums for All Americans Act, is designed to increase transparency, strengthen competition, and reduce the hidden cost drivers in the system. From your vantage point, would these reforms translate into lower costs for employer-sponsored plans and, ultimately, lower premiums for American workers and their families?
Speaker 13
Thank you, Congresswoman. We absolutely believe that more competition and more transparency are key to getting health care costs under control.
Speaker 26
Thank you very much. As I noted in our last subcommittee hearing, the largest PBMs have created PBM GPOs, two of which are based overseas. Miss Bolivar, to the best of your knowledge, can you help this committee understand if medical GPOs are based in the United States? If medical GPOs are based in the United States, why are several PBM GPOs based overseas?
Speaker 11
Yes. I can confirm that the GPOs that belong to my association are all US-based. I'm afraid I cannot speak to the business practices of other associations.
Speaker 26
Are medical GPOs retaining fees in the commercial market like PBM GPOs do?
Speaker 26
K. Mister Marin, as I've said, since my time as public health director and even in congress, sunlight is the best disinfectant. So I'll ask you directly. Why do several of your affiliate companies, CVS Health and OptumRx, operate PBM GPOs based overseas? And are medical GPOs retaining fees in the commercial market like PBM GPOs appear to do?
And as we've heard, no. They're not.
Speaker 9
Well, importantly, congresswoman, and, again, thank you for your passion on these issues. I know it goes back to your time in Iowa. All GPOs, all rebates, whether it's PBM rebates or GPO rebates now must be passed through, thanks to the law that you passed two weeks ago.
Speaker 26
Thank you. Miss Riley and or Mister Crowley, should there be, the NIH provides research support to academic institutions to advance basic biomedical research. And I have seen this in real time as, in academic medicine when I was on faculty. If patented inventions arise from that research, the Bay Dole Act allows the private industry to negotiate licensing agreements to further research and develop the invention into new medicine to benefit patients, to take that into cheap private. Should there be a reasonable mechanism, such as royalty or revenue sharing arrangements, as there are with Venture Capital investing in a new innovative company, to ensure that the public sees a return on its investment once a product is commercially successful?
And if not, what alternative approach would you propose to balance strong private sector incentives with responsible stewardship of taxpayer dollars that are used to initiate research?
Speaker 5
Thank you for the question. And there actually are requirements that if a university licenses an invention that they have patented to a pharmaceutical company, and that pharmaceutical company is able to produce a tangible asset, the medicine from it, that that company would then owe royalties back to the university, and that the university retains the royalties for that, which there are requirements in terms of how those royalty dollars get spent. They have to share some with the inventors and use the rest of it to reinvest into research and development.
Speaker 5
Potentially. I think, you know, there are other ideas in terms of how that money could be used. But I think the system, I would say, today by Dole was transformational when it was passed in 1980, because it created a system that does not exist and had not existed anywhere else in the world, which is cooperative research between academia, industry, and government. And I would say we should hold that system and ensure that we keep it.
Speaker 26
My time is over. If I can, I would like to submit a letter from representative French Schuel, so that's submitted for the record.
Speaker 1
Date? What's the date on the letter? What's the date on the letter? Date of February 11. Letter from French Hill, without objection.
So ordered. Alright. With that, the committee will stand in recess until Miss DeGettin, I return, and somebody else, whoever it might be. The committee will come to order. We'll once again begin questioning, and I now recognize the gentlelady from Texas.
Miss Fletcher.
Speaker 27
Thank you, Mr. Chairman, and thank you to the witnesses here today. This has been an informative and helpful hearing. And I'm sorry I won't have time to ask follow-up questions to each of you, but I do think, like everyone else, I'll end up submitting some for the record. But we have covered a lot of ground in the hearing today. Miss Sachs and Miss Riley, you both touched on the importance of research and the research ecosystem between the government, academia, and the private sector.
In your testimony this morning, Mister Crowley, you raised in your written testimony the importance of protecting scientific research and integrity in general, and at the FDA in particular. This cannot be overstated. I represent a lot of people who work in this space, and it is critical that we do not undermine and destroy this ecosystem, whether with unchecked cavalier decisions made by un or underinformed actors in the administration like we saw last year, or with bad policy decisions coming out of this body. Miss Riley, you also testified that there are some perverse incentives in the system today, and I want to touch on some incentives of concern at this moment. Understanding your role as the representative of a trade association here, I'll ask my questions with that in mind.
But, mister chairman, I want to support ranking member DeGette's request to have the member companies appear before this committee as well, because these are issues of real concern. Miss Riley, have any of your members expressed concerns that FDA approvals or meetings about approvals or review or milestones have been conditioned upon holding those meetings at properties owned by President Trump or his family members? You have not heard that?
Speaker 27
And so none of your members have notified you of any such requests for meetings with the FDA to be held at Trump properties? No. Or for representatives of pharmaceutical companies to stay at Trump properties when meeting with the FDA? No. Okay.
Same thing for requests that member companies participate in private events.
Speaker 27
So you're not aware of those requests being made at all? No. Okay. So making sure that I understand you correctly, none of your members have expressed concern to your association that to get meetings with the FDA or information about approvals, it is being suggested to them or instructed that they stay at Trump hotels, hold review meetings at Trump hotels, or attend events at Mar-a-Lago or elsewhere, or even discuss whether those proposals are being made to them.
Speaker 27
Are your members prohibited from raising those kinds of concerns with the association?
Speaker 5
I don't know whether they would be prohibited from it, but they haven't. So.
Speaker 27
It is not your understanding that the antitrust laws would prohibit the companies that are members of your association from having those conversations in your meetings?
Speaker 5
No. I mean, I'm a lawyer. I'm not an antitrust lawyer, but I don't know that that would be an antitrust concern. Usually, it's about the conduct of how they do business.
Speaker 27
Yep. Well, and I think this is an important question. But you would agree with me, would you not, that the FDA or any government agency conditioning participation in the provision of information relating to the regulatory approvals of any kind on staying at properties or meeting at properties owned by the president of The United States and his family members, and that even the suggestion of doing so would be illegal, unethical, and unacceptable.
Speaker 5
Certainly, probably unethical. Yes. I don't know if it's illegal, but it's unethical. Yes.
Speaker 27
Okay. Mister Crowley, I have the same questions for you about your members. I can go through them all again, or are you aware of any of those conversations for your member companies?
Speaker 27
Okay. Thank you. I will submit some additional questions for you. For the record, I do wanna follow-up on, with the little time I have left, some of the questions from mister VC when he was discussing TrumpRx, before our break. And I think that, we've covered a lot about what TrumpRx is, so I have just a minute to ask a question about it.
I will say I am confused as to why the pharmaceutical companies that fought against the Medicare drug negotiation program and were actively objecting to efforts that Congress was undertaking to negotiate drug prices are now willing to negotiate drug prices with the Trump administration. But, Miss Sachs, I just wanna ask you, with the thirty seconds or so we have left, which program will provide more cost savings to consumers? TrumpRx or the Medicare drug negotiation program?
Speaker 15
This administration has said that in the most recent round of drug price negotiations, they've saved about $12,000,000,000 net for consumers as compared to previous cycles, or what would have otherwise been paid. Excuse me, 12,000,000. And so I'm happy to get additional citations and share them. The short version of this is that the drug price negotiation program is saving costs for Americans, out of pocket, and a much broader range of Americans than the small number of products we're seeing on TrumpRx so far.
Speaker 1
Gentleman yields back. Now recognize the gentleman from Oregon, Mr. Bentz, for his five minutes.
Speaker 29
Thank you, Mr. Chair. Thank you all for being here. Miss Sachs, I've read your incredibly impressive bio, and I note that it says her work analyzes problems of innovation and access to new health care technologies, primarily pharmaceuticals. I'm extremely interested in what part artificial intelligence might play in analyzing situations just like the one we're engaged in today. And I've been on my phone going through questions that I might ask using the systems that we now have available for that purpose.
But you're an expert in this space. Do you anticipate that artificial intelligence is going to provide us or maybe already does provide us with ways of looking at this entire space, this pharmaceutical space, and determining where best to focus our attention?
Speaker 15
So it's my understanding that companies all across the supply chain are using various AI tools already, but there are many different ways in which it can appear. So we know that FDA has approved, at least the last time I looked, well over 1,000 AI enabled medical devices, thinking about the potential benefits they might have for patients. I've certainly read that companies are using AI to think about streamlining clinical trial enrollment, and things like that. So there's certainly a wide range of applications that it could have. I'm not an AI scientist.
I'm not sure what is the best place to focus that investment energy.
Speaker 29
Described in Congress as a bunch of people on horseback trying to catch up with a moving Lamborghini to install a seat belt. That's how they described our efforts to understand artificial intelligence. That's why I'm asking you, do you anticipate that we in Congress can use these tools to better refine and understand that which is going on in this space? Because to me, a lawyer represented a small hospital years ago. I don't know anything about this.
I have to rely on experts like you now to tell us the best tools available to determine the best thing to do. So I'm asking, what would you recommend we do when it comes to using these new AI tools as Congress to sort this out?
Speaker 15
Well, one important thing for this committee to consider is oversight and transparency. And so getting some of these contracts between the various entities in the supply chain, sometimes they are voluminous. Right? There's lots of different provisions in them, and it is possible. I certainly can't speak to specific technologies, but it is very possible that advanced technologies like the ones you suggest could be helpful in having this committee look at the vast amount of data and contracts that you are hoping to get from some of these companies.
Speaker 29
I had a physician call me about four weeks ago. We spent two hours a day for four days going over his analysis using new AI tools to determine how many, how much money could be saved in a hospital. To protect the innocent, or not. So innocent, I won't mention which one, but I'll just say that at the end of the four days, he had determined that he thought he could reduce the number of tests being given in the hospital by half, just because of the analytical assistance provided by AI. In the $50,000,000,000 that's been given in the big beautiful bill, two small rural areas to try to use innovation to transform, which I think is another word for innovation.
What would you recommend we focus on? That we can, I can look at the WHO six pillars of health care, but tell me, what should we focus on?
Speaker 15
Well, I appreciate that this congress instructed CMS on certain factors to consider in issuing those awards, and CMS issued a very detailed funding notice and took applications, and lots of states have proposed lots of different things that are tailored to their rural health populations. One concern I have, and maybe one thing to keep an eye on, is the potential for an AI arms race, right, between providers and insurers. How is AI being used to, as you said, streamline care, avoid unnecessary tests, but also maybe deny care or in the prior authorization process?
Speaker 29
I'm aware of that, and thank you for calling it out. I'm going to shift over to mister Hui for just a moment. I was speaking to the Murray pharmacy out in Little Condon, Oregon, where one of the small areas I represent in my rather large district. And they were hoping we would do something. I mean, they're third generation working.
I couldn't believe the amount of work that they were doing as they were talking to me. I couldn't believe it. They're moving as fast as they could possibly go, and it was apparent that they were in deep trouble. What would you recommend that we do here to try to help these small pharmacies? I know the whole day we've been focusing on this.
What's the best thing we could do?
Speaker 14
Yes. We the Murray's are members of our organization and her family. And it is a vital question. How can we better support these pharmacies that are in rural deserts? One, provision could be a fair cost plus.
Right now, pharmacies are paid in the Medicare program. 80% of the time, the prescriptions they dispense are paid below their cost plus a minimal dispensing fee. 80% of the time, the Medicare program is putting pharmacies out of business. The legislation that was passed last week, it will help. It doesn't go into effect until 2029, though.
We need CMS to implement it much faster. We also need to take away the perverse incentives of PBMs with the patient steering.
Speaker 29
And I understand that. Thank you. We're out of time. Yield back, Mr. Chair.
Speaker 1
Thank you. The gentleman yields back. Now recognize the gentleman from Massachusetts, Mr. Ogden Claus, for his five minutes.
Speaker 30
Thank you, chair. I'd invite my friend from Oregon to join the pharmacist fight back act, which I've introduced bipartisan bill that would do cost plus reimbursement for our small pharmacies as well as cracking down on specialty steering and other PBM abuses. So we'll send it over to the gentleman's office. It's 60 cosponsors in last congress. I appreciate the thoughtful and substantive testimony from all of you here today.
However, I don't think right now the moment calls for us to have nine witnesses. We need one witness, and that individual needs to be Commissioner Macquarie of the FDA, whose incompetence and whose poor stewardship of the Food and Drug Administration is undermining the world's gold standard biomedical regulator. Just today, Sieber's rejection of mRNA vaccine, which overruled career scientists at the agency, builds upon a pattern of replacing safety and efficacy with fear and favor. The commissioner's national priority voucher is unethical, unwise, and illegal. And they have refused now, after three letters from me, to respond to any of the questions or assertions I've put forward.
One former FDA commissioner told me that FDA has hemorrhaged 20 years of competence and credibility in just the last one, and yet we don't have a hearing. When is this committee gonna do its constitutional job and bring Commissioner Macquarie here and ask him under oath what he is doing at one of the agencies that keeps Americans safe. In my district, I represent a lot of people who invent medicines as well as a lot of people who consume medicines, and they are consistently frustrated by a false choice that is put forward between innovation and access. We can have both. With strong intellectual property laws, with insurance design that lowers or limits copays, and with negotiations that prioritize value as opposed to rebates, we can have both world-leading biomedical innovation, and we can have virtually no cost exposure at the pharmacy counter.
To that end, I'll be putting forward a request for proposal from all nine of you that seeks to establish two pillars for drug pricing legislation. One pillar being access and affordability, and the other pillar being innovation and manufacturing. And I would request that rather than pack into five minutes questions from all of you, that you would all respond in writing within 14 days to the request for proposal. Could you all be willing to do that? Thank you.
I'll give you a flavor of some of the things I'll be putting forward under access, for example. Prior authorization reform that prioritizes transparency, timeliness, and an appeals process with electronic-based prior authorization under an affordability agenda, extending the $2,000 out of pocket caps into the commercial markets. The $2,000 out of pocket caps under Part D have been an important way to ensure that patients don't face high out of pocket costs. I understand that in the commercial markets, that $2,000 copay cap may need to be paired with a ban on pharma funded coupons so that they cannot undercut negotiations that the PBMs do, for leverage. Under innovation, I will note that a July 2025 meta-analysis of peer-reviewed studies found that, quote, after the IRA's implementation of the pill penalty, larger manufacturers prioritize incremental innovation or lower-risk therapies, while smaller firms face challenges in their R and D pipelines.
The president's misguided Globe and Guard models would further distort and add rebates to a value chain that already has too many of them. And I welcome thoughts from all nine of you about how we can induce more R and D in this country and deliver more cures faster, because we know that the Chinese have not just caught up but may actually be outpacing us at this point. And I think American patients want access to new medicines first. Also, welcome thoughts on clinical trial reform. Mister Crowley, you spoke, I think, very cogently about institutional review boards.
We're also interested in ways that we can better integrate electronic health records at more sites of care so that people can enroll faster. Faster, better, cheaper clinical trials is a win across the board. And then finally, on manufacturing, would welcome proposals about how to improve the recently introduced bipartisan legislation, the Drug Shortage Prevention and Mitigation Act, which basically envisions a CMS pay-for-performance model for quality and reliability to also incentivize more made in American manufacturing. I think we need to reindustrialize much of our biomedical backbone, and CMS has a role to play in its pay for performance program. I would appreciate your willingness all to engage on this with written responses, and I look forward to releasing the RFP.
Thank you.
Speaker 1
And the gentleman yields back, and now recognize the gentleman from Texas, Mister Crenshaw, for his five minutes of questioning.
Speaker 31
Thank you, Mr. Chairman. Thank you all for being here. I wanna talk about something pretty specific, the biosimilar interchangeability that's in statute. And it's a statutory distinction, and it does seem to a lot of us that it's an extra hurdle for biosimilars to come to market. And, of course, be you know, it's the generic version of biologics and cheaper for the patient.
But this distinction requires that extra statutory hurdle or extra regulatory hurdle. And I wanna see if you have conflicting views on this. Mister Murphy, in your view, does updating these somewhat outdated distinctions like biosimilar interchangeability strengthen competition without undermining safety? What would eliminating that extra statutory distinction do for uptake, affordability, and investment in biosimilars?
Speaker 8
Yeah. Thank you, Mr. Crunchall, for that question. We have long supported removing the statutory distinction, as has the Food and Drug Administration, which publicly called for the same earlier last year. I think what we hear from our manufacturing partners is that anything to reduce the cost and regulatory complexity of biosimilar development is going to be a net benefit for the patients. And I think that, ultimately, we will see more investment across the biosimilar pipeline.
I would note just for the record that, you know, we looked at 118 biologics that lose exclusivity over the next ten years in The United States. Only 12 of them are currently being developed for biosimilar competition, and that transcends just the regulatory barriers. But, this would be a huge step forward. And, as you noted, the biosimilar red tape elimination act, which is cosponsored in this committee by mister Lanzman and mister Pfluger, would be the step in the right direction. I'm sorry.
I left it over there for you.
Speaker 31
And mister Crowley, what do you think about that? Would what would eliminate any of that extra distinction do for uptake, affordability, sure. Investment in biosimilars?
Speaker 7
Yeah. Congressman, we agree with mister Murphy. We need more biosimilars, and we need to see where the barriers are to getting these biosimilars to market and into patients. Interchangeability is an important concept. There are many biologics where you can simply do laboratory testing or some basic bridging studies in animals, and approve them without lengthy, expensive clinical studies.
There are some medicines, including the one I developed for the rare disease Pompe, where you can make a biosimilar, same amino acid sequence, same protein, same number of carbohydrates that are essential to get into the muscles of these sick kids. But if one of those carbohydrates is slightly off, you lose 90% of the effectiveness of getting into the muscle. Ultimately, that needs to be a science-driven decision of where you need more extensive clinical studies. But whatever we could do to break down barriers, that supports.
Speaker 31
Yeah. I mean, you're specific in your wording. You said you agree with breaking down the barriers, but, you know, we're talking specifically about removing this particular hurdle. So, I mean, mister Murphy, you heard those that particular concern. I mean, so how does congress design a system where we could meet in the middle there?
Speaker 8
So, mister Crenshaw, the current legislation that's being considered by this committee actually has the authority for FDA to order additional studies should it determine in consultation with the manufacturer and the reference listed drug product that additional step is necessary. But as a predicate matter, it aligns the US regulatory system with all of our peer countries to have a base level of singular approval.
Speaker 31
Yeah. You know, sticking with this theme, Miss Riley, for advanced therapies, whether it's biologics, cell, gene therapies, talking about regulatory modernization, how does that play in ensuring that innovation really translates to patient access?
Speaker 5
Well, I think, you know, the important pillars that exist in our country absolutely need to remain if we're going to continue the kind of innovation that we have been responsible for since, you know, over the last many decades. I worry a bit that some of the new therapies that are coming to market or that are being studied, cell and gene, some of the more expensive therapies. If there's not a market to be able to sell into, if we don't have a transparent regulatory body that we can rely on for predictable advice, then we risk, candidly, this science, much of which is in its infancy stages. So I think continuing to have strong intellectual property protection so that when companies do make the big bets to bring a therapy to market, there is a reward at the end and that companies can rely on that. And then having a regulatory body that has the capability, the scientific capability to evaluate those products, and then a market to sell those products into, where patients can get access to them at an affordable price.
Speaker 31
I appreciate that and agree. You know, we big pharma companies, they're gonna be fine, when these kind of, extra stringent, whether it's regulations or price controls, get put on them. They're just gonna invest in things that aren't risky, and that's a problem. And it leaves behind, you know, these small portions of patients that need that need cures. I yield back.
Thank you.
Speaker 1
Gentlemen, yields back. Now recognize the gentleman from Ohio, mister Lanzman, for his five minutes of questioning.
Speaker 12
Thank you, mister chair, and the ranking member, to all of you for being here. It's been a long day, so appreciate the patience as we had to go vote. I wanna get into the goal I think we collectively have, which is, or at least our assignment, is to increase care and reduce costs. And, we have to make policy decisions. We do.
As lawmakers, you all do, or your companies that you represent have to make these policy decisions. I wanna take on two. One has to do with, on the profit side, where you invest those profits. So, miss Riley, the number I have in terms of big pharma and how much they have pulled down in profits last year is around $130,000,000,000. Does that sound accurate to you?
Speaker 12
Fair enough. I wasn't trying to get you on that one. I just of that, you can so when you know, after expenses, you got a 100 and you got a $130,000,000,000 across these pharmaceutical companies. You can invest those dollars in innovation, R and D, employees, lowering cost, investing in pricing, which is a strategy, or the, you know, it goes up to the investors and the stock buybacks and the dividends. Our understanding is that of the 130,000,000,000 made last year, 84,000,000,000, or the majority, the vast majority of the profits went up, not down.
Right? So it went to the shareholders and to pay out dividends. That's a decision in terms of how to invest these additional resources. And I'm curious now that more and more Americans are struggling to pay their bills in general, in particular their health care bills. Are there discussions around changing that percentage so that the vast majority or a greater majority of the profits are investing in pricing?
Speaker 5
I would say this. Our industry is the most R and D intensive industry in the world. We reinvest 30% of our profits back into research and development. That's by far, in a way, more than anyone else.
Speaker 12
Yeah. But the challenge is that if pharma gets this sort of reputation, well, we have to invest in innovation, and I agree, so that you can move more and more of these drugs to generics, and it could be cheaper, and we're saving lives 100%. But that means 70%, even at 30%, 70% of those profits are going elsewhere, not in R and D, not in so, know, how do we get the investments in lowering prices and R and D to be the vast majority, 90%?
Speaker 5
Well, you know, when individuals decide to invest with our companies, there is an expectation for a return on investment just as there is for any for-profit company. But our companies are different in the sense that 90% of what we do and what we put into the FDA clinical trial process fails. So they're investing with an acknowledgment that more than likely we are going to fail 90% of the time. So when we do succeed.
Speaker 12
It's been a great return on investment. I mean, every, you know, folks are.
Speaker 12
But the investors always get paid. You know, I don't know how many investors have walked away empty handed. Most of the folks who are investing are walking away with enormous amounts of money. And I agree there's risk, but it is challenging when you're seeing 85 of the $130,000,000,000 go up, not to patients who are to lower prices.
Speaker 5
Well, you know, 77% of our investors are institutional investors that represent firefighters, policemen, teachers, and the like. So I think they do expect a return on their investment for their retirement, and lots of other things. You know, as I said, we're a risk-intensive industry. It's almost like playing the lottery. When people are betting money on our success, there is an expectation.
Speaker 12
to earn I it's a good line. I wish that the firefighters and folks in pensions were reaping the benefits of what Wall Street is, you know, pursuing in terms of profit. But it's.
Speaker 12
Sure. It's just they're not the big winners. Miss Sachs or Professor Sachs, pharmaceutical companies set prices. I mean, they can lower prices by investing more and more with the profits and prices.
Speaker 12
I'm not allowed to ask another question even though I had a question about biosimilars, which is on our end because there's a ton that we have to do to reduce the cost, and bringing the biosimilars to the market faster is one of those things. So, hopefully, everyone jumps on board. This one thing that you all agree on, I think, is the biosimilars work. So thank you, and I yield back.
Speaker 1
Gentlemen, yields back and remind everybody that you have questions for the record. You can always ask. And I recognize the gentle lady from Florida, Miss Kammock, for her five minutes.
Speaker 32
I appreciate it. Thank you, mister chairman, and thank you to our witnesses. I know it has been a long day. Our apologies for votes getting stuck in the middle. But, I wanna start with the folks back home.
So families and employers keep asking us the same question. Why does health care cost so much, and why is the system so stinking hard to navigate? Now, if you can't explain the bill, you can't defend the system. And if you look at the facts, it really presents as this. Between 2021 and 2024, median launch prices for new drugs more than doubled.
And in a single year, over 1,000 existing drugs saw price increases averaging more than 30%. That is far above inflation. Now patients didn't see their paychecks double. Workers did not see their premiums fall. And so what we have right now looks a lot less like health care, and a lot more like sick care.
A system that is waiting for people to be in crisis before it acts. This is a maintenance rather than a prevention system. And as we all know, particularly you all before us today, know that crisis is more expensive than prevention. When a patient is handed a bill that they don't understand, they don't care which entity in the supply chain is responsible, they just know that they are paying more. And so costs being layered across manufacturing, distribution, and contracts are something that patients never see.
When prices rise and revenues grow, families still struggle, and people begin to question whether the system is prioritizing patients or profits. So we should be able to do two things at once. We should give companies the certainty that they need to invest and innovate here in the United States, but we also need to be delivering real, tangible, visible savings, affordability, and accessibility to patients. So I think that this discussion is very timely. I'm gonna start with you, Mr. Davis.
Three companies control the majority of drug distribution, excuse me, in The United States, and many are vertically integrated to control each phase in the prescription drug supply chain from manufacturer to pharmacy. Does consolidating the prescription drug industry lower prices for patients? Yes or no?
Speaker 10
I'm sorry. Does the consolidation lower the prices? Correct. It has the potential to. Yes.
Speaker 32
Okay. So, respectfully, your own industry report projects that the big three will generate $871,000,000,000 in revenue just this year, and that's after four straight years of double-digit growth. So if this is potentially saving patients money, why are your revenues growing so fast, and where are patients seeing the savings?
Speaker 10
So, thank you for the question. I would say there's a couple of aspects to your question. One, we're the only sector in distribution that I'm aware of where our, actually, our cost of goods sold, the amount that we actually sell downstream for, is more money than the revenue that we get. Right? So it's an unusual one where we're actually in a position that we are selling a product for less than we're purchasing it for from a wholesaler, excuse me, from a manufacturer.
Manufacturers set the list price.
Speaker 32
Okay. But let's get back to the patients, because this is ultimately about patients. Right? So, absolutely. Your industry has spent $16,000,000,000 acquiring physician management companies, basically buying doctors.
Right? Where's the savings for the patients?
Speaker 10
So in the ability to have the doctor treat, we're not buying physician practices. With respect, what we're doing is we're purchasing organizations that are providing the business support to physician practices in places like oncology and gastroenterology and in eye care as well. And these are, again, three of our 36 members that are in this diversified business area. But one of the things that we hear from those provider groups when they're actually partnering, and in certain instances, they are being purchased by the wholesaler and others. The wholesaler is either a majority or a minority investor.
They're not the complete owner of the vertically integrated MSO, as they're called, management services organizations. But to be clear, they are not purchasing the physician practice.
Speaker 32
Well, and my time is running short. So I have a whole litany of questions that I'm gonna submit in writing for the record for you. Mhmm. Right now, I wanna jump to Mister Gail Fan. Did I say that right?
My apologies if I botched that. You represent the employers who sponsor the health coverage for millions of workers, the lion's share of those who are covered and insured. So when distribution gets more concentrated, in your opinion, do premiums go up or down for the workers?
Speaker 13
And we've heard this story before. It took place when private equity started to buy up physician groups, and what
Speaker 13
It led to the surprise billing crisis that Congress had to ultimately intervene.
Speaker 32
So who, in the end, with my remaining fifteen seconds, who captures the, quote, unquote, savings from all of this consolidation?
Speaker 32
Thank you for driving that point home. I know my time has expired. I have a number of questions I'll submit for the record. Thank you, Mr. Chairman. Yield.
Speaker 1
General, I yield back. Now recognize Mister Ruley for his five minutes. Thank.
Speaker 33
You, chairman. My question is for mister Mayeron. President Trump recently launched TrumpRx, a revolutionary platform bringing price transparency and competition back into the drug market. My constituents tell me every day how often they dread going to the pharmacy because they never know what kind of price they're going to pay at the counter. It always changes.
And then you have the, you know, brand name versus the off-brand name. So I guess my first question to you, sir, would be, how have your members reacted to the transparent pricing of brand names on the Trump RX?
Speaker 9
Congress. Thanks for the question. Look. The PBM industry is all about transparency. We're enhancing it for our customers every day, for employers.
The bill that Congress just passed a couple weeks ago takes it to a whole another level. We're happy with that. We support and applaud the mission of the administration's goal with TrumpRx. Obviously, the details will matter.
Speaker 33
Well, and that's what we're looking forward to, you know, working out all those ruffles and those bumps in the roads. How are letting patients and employers see the compare prices affecting a wider pharmaceutical industry? Is there gonna be a big impact, or what is your opinion on that?
Speaker 9
From TrumpRx? I think that's yet to be seen, Congressman. But, you know, obviously, we applaud new entrants, more choices, more competition.
Speaker 33
Do you have any final words that you would like to, as far as the Trump Rx program goes, that you would like to see happen or maybe pulled back a little bit? What is your opinion on that? No.
Speaker 9
We look forward to being a partner with the administration as it unfolds the initiative, and we know that at least a couple of our members are participating.
Speaker 33
Well, hey. We look forward to any kind of emails that you want to send to our office on suggestions to make it a better product. And with that, chairman, I will yield my time. Thank you.
Speaker 1
Jimin yields back. Now recognize the gentlelady from Indiana, Miss Houchin, for her five minutes of questioning.
Speaker 34
Thank you, Mr. Chairman. Thank you to the witnesses for coming before the committee today. This is our second hearing in a series examining the overall affordability of health care. A huge part of that conversation is the cost of prescription drugs for patients. For millions of Americans, especially seniors in those living in rural communities like my hometown in Southern Indiana, the price of medications can determine whether people stay healthy or go without care altogether.
Today, Americans are paying more out of pocket for their medications than ever before. At the same time, we're seeing growing concerns about drug shortages that threaten patient access and provider stability. A central part of that solution, as I have advocated for since coming to congress, is transparency. We've heard consistently from independent pharmacies about the challenges they face navigating complex reimbursement and contracting structures, particularly when they're not always negotiating directly. Many independent pharmacies rely on pharmacy services administrative organizations to collectively negotiate PBM contracts, manage administrative requirements, and secure network participation on their behalf.
While that aggregation can create efficiencies and bargaining leverage, it can also create distance between a pharmacy and the contract terms that ultimately govern the reimbursement and performance obligations. My first question is for Mr. Hoy. Since PSAOs negotiate PBM contracts on behalf of many of the members that you represent, do your members always have a line of sight into the terms that they are agreeing to on behalf of your members?
Speaker 14
Yeah. Thank you for the question. No. Not always. The PSAOs represent several thousand pharmacies, and they don't always know what those terms are.
Those terms are sometimes limited to their site. They don't have a site in them because of restrictions in that contracting process, or a PBM may say, you cannot reveal these terms. One important thing with those PSAO contracts to add is that when you get a group of independently owned businesses together, while it does create some efficiencies in the administration, it doesn't create much leverage in the negotiation of those contracts. The contracts are still basically take-it-or-leave-it. If you leave it, I'm gonna take a third of your business away from your pharmacy.
If you take it, you're gonna take my terms, says the PBM, not your terms.
Speaker 34
I come from a line of pharmacists. Some of them are community pharmacists. Some work for national chains. I have worked for, but when I'm in my district, I do hear from community pharmacists and independent pharmacists that are concerned about the way that these drugs that they're being required to dispense often cost them money out of pocket when they can get a reduced price. A patient could get a reduced price at the CBS across the street.
How is that? I still haven't been able to have anybody really explain the math to me about how if I go to one of your pharmacists, it might cost the pharmacist $7 out of pocket to dispense that drug to me, but yet the pharmacy, the independent or the chain pharmacy across the street makes a profit. How does that work?
Speaker 14
Well, you specifically mentioned CVS as the example. CVS is one of the vertically owned pharmacies that's part of the Aetna, Caremark vertical integration of families or family of businesses. They can manipulate things by putting money from one pocket into the other. They also set the reimbursement terms for that independent pharmacy. So the competitor is setting the reimbursement terms for the small business.
And so they can say, competitor, you're gonna lose money on that, and I'm going to make money on that. I'm also gonna set the terms for the patient too, so it can appear the patient is paying less. But in reality, that employer may be paying even more for that drug at the chain pharmacy.
Speaker 34
One of the things that we hear is that because of their larger size, they can often negotiate cheaper prices, and that's why. I wanna turn to mister Marin just to ask a question about, how does the PBM who's negotiating the rates between these entities, how do they make a profit?
Speaker 9
All rebates have to be passed through now. So it's gonna be up to the employers who receive the pass through to determine how best to use those dollars.
Speaker 34
I'd like to turn to Miss Riley about the differences and how it's changed from a rebate structure to a fee structure and what that has done to cost. Yes.
Speaker 5
I think increasingly as employers and others have gotten wise about the fact that rebates were increasing, they demanded access to the rebates. So PBM shifted to a new strategy. They set up offshore PBM GPOs and started collecting more money from fees that were not transparent to the employer, not transparent to the taxpayer. Today, about two thirds of the revenue and profit that PBMs get are from their specialty pharmacy and from the fees that they collect. In part because, again, like the laws that were just passed, they're requiring rebates to be passed through, so they've shifted and moved on to a new path.
Speaker 34
I appreciate the conversation. I'm sure we'll talk more. Thank you to the witnesses, and I definitely want to engage on this issue further. Thank you, Mr. Chairman.
Speaker 1
Thank you very much. Generality yields back. Now I recognize the gentleman from New York, Mister Langworthy, for his five minutes question.
Speaker 35
Thank you very much, Mr. Chairman. A consistent theme across the prescription drug supply chain is that every major actor blames another major actor for high prices, opaque practices, and rising patient cost-sharing. Manufacturers point to PBMs and rebate structures. PBMs point to manufacturer list prices. Pharmacy site reimbursement practices.
Wholesalers reference contracting dynamics, and plan sponsors often claim they lack visibility into any of it. While there may be some truth somewhere in the middle of all this, that does not change this reality: congress, employers, and patients still do not have access to transactional level price data needed to determine where excess costs are accruing, who benefits, and who ultimately bears the burden of that. And if we do not understand the accounting of our health care system, we cannot answer a basic question. Why is health care so much more expensive than it was 10 or 15 years ago? And that's what I think many of us here in Congress struggle with, with that opaqueness across the entirety.
But with that, Mister Galfin, given the competing claims that we've heard across the prescription drug supply chain, how does the lack of transaction-level pricing data limit Congress's ability to determine where the costs are truly occurring? And without that level of visibility, how can we distinguish between reforms that would meaningfully lower costs for patients and those that merely shift the costs around the board among stakeholders here today?
Speaker 13
Thank you, Congressman. You know, we strongly believe we've got to open the books. In no other part of the economy, is it considered acceptable that all of the prices for goods are essentially kept secret? Employers can only solve the problems that we can clearly see and identify. So that's why we so strongly supported the reforms that passed last week, and why we hope for more transparency throughout the health care system and especially throughout the opaque parts of the drug supply chain.
Speaker 35
Well, thank you. And I think that's exactly why better data has to come first. It's time for all the stakeholders across the health care system to flip their cards over and be honest, so we can have an honest discussion as to why the cost of health care in this country has exploded the way they have. Mister Galfin, would requiring clear price disclosures for patients and giving plan sponsors full visibility into what they are actually paying for prescription drugs help address the lack of transparency that we have now?
Speaker 13
Absolutely. That's why we strongly support the Patients Deserve Price Tags Act. Not only would that bill for the first time shine a light on the black box of drug prices, but it'll also guarantee that employers can actually see their own claims data, which today they oftentimes cannot. And it would even require that patients get real timely bills, which today you can go to the hospital and you may not get a bill for ages, years. You'll get the bill later.
Price tags, we think, would lower drug costs. It would certainly enable us to lower drug costs for the people who work for us and their families.
Speaker 35
No. Thank you. I think price transparency is an absolute prerequisite to identifying which policy reforms will actually reduce costs rather than simply just shuffle them across the entire system and continue on this endless cycle. Pivoting here to prescription drug data, Mister Marin, under the transparency and coverage rule, health plans and PBMs are already required to disclose machine-readable prescription drug pricing data. However, those prescription drug reporting requirements were never meaningfully enforced under the Biden administration.
From your perspective, how would access to this level of transaction-level pricing data change Congress's ability to conduct meaningful oversight of the prescription drug supply chain and to determine where those excess costs are actually accruing?
Speaker 9
I think it would be significant, Congressman. And I think, you know, the only thing I'll say about transparency, given the law that was passed just two weeks ago and the reams of information that now will be providing to clients and to, and to the government, is that it should be it should be applied across the supply chain. Right? But, yeah, to your question, I think that would be a massive improvement, and we'd love to help you think it through.
Speaker 35
Price transparency must come, and it should come across the prescription drug supply chain. It needs to come into our hospitals, into all of our providers, so that the American people can exactly see where these dollars are going.
Speaker 9
The information that we have to provide congressman now is to the clients and the government. It's drug by drug, claim by claim, pharmacy by pharmacy. It's robust.
Speaker 35
Thank you. It's clear that if we wanna lower prescription drug costs for patients, we must ensure the real transparency exists across the supply chain and enforce these rules that are on the books now. And I appreciate all the witnesses for their time in being with us here today. And with that, I yield back, mister.
Speaker 1
Gentleman yields back and now recognize Mister Mullen of California for his five minutes.
Speaker 36
Thank you, Mr. Chair. Thank you to our witnesses for being here today. As we turn our attention to the prescription drug supply chain, Congress has taken important steps in recent years to address high drug prices, such as Medicare drug price negotiation. A language recently signed into law increasing PBM transparency and cracking down on unfair practices. But it is vital that we find a balance to enable patient access to affordable drugs while ensuring the US continues to lead the world in developing innovative therapies and cures.
I'm very proud to represent California's 15th Congressional District, the birthplace of biotechnology in my hometown of South San Francisco. From well-established companies to scrappy startups and everything in between, my constituents are pushing scientific boundaries in the hope of developing the next drug that could change your patient's life, your mother, your uncle, your sister, your child. For this life-saving work both in my district and across the country to translate into real outcomes for patients, each step in the supply chain must function effectively and reliably. One area that I'm concerned about is the current staffing cuts and leadership turnover at the FDA. Without a dependable and science-based drug review process, there could be dire consequences for the future of US R and D and innovation, and delays in this process can quite literally spell the difference between life and death for some patients.
So, Mister Crowley, are timely interactions with the FDA important for your member companies to get products to patients? I think I know the answer to this question.
Speaker 36
Boy, that's the speediest answer I've gotten in my three years here. Mister Murphy, thank you, sir. Thank you for being here. Since the staffing cuts, have you heard of the potential for these cuts to undermine the upcoming review capacity and timelines for drug reviews? Give us kind of the lay of the land there.
Speaker 8
Yes. So there's obviously been a lot of historical support that is no longer with the agency, and that's created a lot of concern amongst the members. We have been surveying our members. We have not yet seen delays, but we understand from the members a lot of angst, because they realize it could take time to matriculate through the system given how the FDA practices work.
Speaker 36
So thank you for affirming what I suspected. Appreciate the answers. It's important that the federal government meet the needs of patients by ensuring the FDA is a reliable partner for drug review and approval. Another area I want to touch on is rare diseases. Despite nearly one in ten Americans having a rare disease, only about 5 percent of the thousands of rare diseases have an FDA-approved treatment.
Given how small some of the patient populations are for these diseases, developing therapies requires innovative thinking and policies to ensure patients have solutions that they can turn to. So, mister Crowley, if you could just break down the factors that companies must consider when developing a rare disease therapy so my colleagues can understand the complexity with that.
Speaker 7
Hello? There we go. So it is very complex, congressman. So when I ran a biotechnology company, when we looked at any one of the 10,000 plus rare diseases, obviously, enormous unmet need, suffering, death. So you certainly had the need out there.
We'd look at the patient population size. We'd look at what is the natural history of the disease. Are there ways to do clinical studies faster and better? Are there biomarkers that could accelerate the research process as well? So that's all on the science and innovation side.
We look at the manufacturing. How complex is it? Biotech, small emerging biotech companies where 70% of our medicines originate, our business model is not to build manufacturing plants. We rely on our partners, large companies, or on contract manufacturers. We don't have enough capacity in the United States.
That's a huge limitation on making medicine. So that's an important factor. And, of course, we look at the regulatory environment. What is the pathway? Is it certain?
Is it predictable? Are there known endpoints? Do the regulators have experience? Do you have regulators, enough regulators, scientific, medical reviewers at the FDA? So it's an incredibly complex problem set to go through all of that.
And at the end of the day, we also need to make sure that our patents are protected for our inventions, and we need to make sure that we're paid for our innovations and inventions as well. That's the lifeblood that continues to provide capital so we can research the next disease.
Speaker 36
Appreciate that very much. Thank you all for being here. Thank you for the answers. The biotech industry is a prime example of America's indispensable role in advancing science and health care. Breakthroughs that once sounded like science fiction are becoming a reality.
But to sustain this momentum, we must continue to incentivize domestic research and development while ensuring that patients can afford the life-changing therapies developed here in the United States. And with that, thank you all. Yield back.
Speaker 1
Gentlemen, yields back. Now I recognize the gentleman from Georgia, Mr. Allen.
Speaker 16
Thank you, Chair Griffin, for letting me weigh in to this important hearing. I wanna thank all the witnesses, and I wanna thank what you do for the American people. And it's amazing, the progress we've made in research and development. The rising cost of prescription drugs has been causing significant burdens for millions of American patients and seniors. Far too long, Americans have had to choose between much-needed prescriptions and household expenses.
That's why I'm glad we're having this hearing today to explore solutions to lower the cost of care for Americans. Now I had a really great experience with my pharmacist on Monday before I left to come. Usually, he is there to complain to me. But he came, and he says, well, can I speak to you for a minute? And I wanna give you some good news.
He said, Eliquis, which is a drug they use, he said, the price is substantially down. And he said, furthermore, we're making a little better than a dollar when we sell it. And before, we were losing a lot of money selling it. The only problem is my accountant says revenues are down because drug prices are going down. But I said, you know, our profits are up.
He said, yeah, profits up. So that's something that corporate America could learn, I guess. But that was good to get that good news. And, I told him I would spread that. Mister Gilbert, insurers and PBMs often go against doctors' orders by requiring patients to step through multiple medications before they can receive their originally prescribed medicine.
This happens in the Part D market, the commercial market, and now in the Medicare Advantage market for Part D drugs. With the Safe Step Act, which I introduced earlier this congress, would help hold insurers accountable for increasing the use of step therapy leading to non-adherence and access issues? Mister Gafford?
Speaker 13
Oh, thank you, miss, congressman. We believe that reform to step therapy does make sense. And, for instance, it should all be electronic. It should not be faxed on old fax machines, and it should be timely when patients need an answer. But we also believe that medical management is important.
Speaker 16
Okay. Thank you. Miss Riley, in other countries, patients have access to fewer innovative medicines. In The US, 85 percent of new medicines are reimbursed versus only 20-24% in Australia and 21% in Canada. In The UK, uptake of new cancer medicines is only about 8 percent of what it is in The US, patients in other countries also wait longer for their medicines on average.
OECD countries have access to 18% of new medicines launched within one year of the global first launch. US patients have access to 78% of new medicines within one year. But I still hear from my constituents that they have all kinds of hoops to jump through before they can access these groundbreaking therapies. It is critical that patients are able to access the medicines they need to treat their health conditions. Could you please explain what the biggest barriers to patient access in the US are, and what can be done to address those barriers?
Speaker 5
Yes. Thank you for the question. I think the first step is today there are 1,453 medicines that last year got excluded from the big three PBM formularies. If you look back 10 or 15 years ago, when a medicine was approved, it typically was available to patients. That's no longer the case.
Large numbers of medicines get excluded. Once you've actually gotten on the formulary, it doesn't necessarily mean you're going to get access to the medicine. If you're in Medicare Part D and you're prescribed a brand new medicine, half the time that medicine is going to get denied originally. You're going to have to jump through a hoop, prior authorization, some form of utilization management. And in the commercial market, it's 70%.
So, yes, your patients or your constituents are experiencing a lot of what we are seeing, which is the hurdles continue to go up. We also now have high-deductible health plans. Eighty million Americans are in a high deductible health plan, which means when they go to the pharmacy before they've met their deductible, their insurance company and PBM are charging them the full list price of the medicine, not the negotiated price. As a result, the PBMs and insurance companies are making money every time a prescription is written. In fact, GAO looked at this in part d and found of the seven of the 100 most rebated medicines in 79 cases, 79 out of a 100, the PBM and insurance company made 400% more than what the patient was paying for the medicine.
So this is not a system that is sustainable. We have a great system in America. Patients do have availability of medicines, but the hurdles that are put in place are significant.
Speaker 16
Well, I thank you. My time is up, but I will say this. I'm gonna do everything I can in my time here to correct this problem. This is it, should not be going on in our country.
Speaker 1
The gentleman yields back. I now recognize the gentle lady from Virginia, Miss McClellan, for her five minutes.
Speaker 37
Thank you, Chairman Griffith and Ranking Member DeGet for holding this very timely hearing. For many Americans, approaching the pharmacy counter today feels like falling into a financial sinkhole. Within the past year, approximately 1 in 5 adults opted not to fill their prescriptions because they were just too expensive. In Virginia, that burden is even heavier, with one in 4 adults skipping essential medicines. Seniors, parents, and individuals with chronic illnesses or disabilities have to make impossible choices between paying for household necessities and the medications that grow more expensive with every refill.
Women in particular shoulder a heavier burden for prescription drugs. In 2024, women spent nearly 30% more out of pocket on prescription drugs than men. Whether it's recurrent costs for birth control, menopause treatments, or medications for conditions like endometriosis and postpartum depression, women pay a prescription pink tax simply to maintain our health. At the same time, rather than working to reduce the drug prices women and families are facing, congressional Republicans have driven up health care costs and undermined efforts to lower prescription drug spending. The big ugly law included provisions to weaken Medicare's ability to negotiate the price of essential drugs like Keytruda, which is often used to treat cervical cancer, endometrial cancer, and breast cancers.
According to the Congressional Budget Office, this change leaves pharmaceutical companies with almost 9,000,000,000 in additional revenue over the next decade. Congressional Republicans have put profits ahead of the health and financial security of women and families. Meanwhile, congressional Democrats' Inflation Reduction Act, which empowered Medicare to negotiate for lower drug prices, has already saved the taxpayers and seniors on Medicare billions. Democrats will continue to fight to advance policies that actually lower prescription drug prices, to bring relief to Americans' prescription costs and pocketbooks. Miss Sachs, following the congressional Republicans' weakening of Medicare drug price negotiation program, which expanded the program's orphan drug exemption and delayed the selection of blockbuster drugs like Keytruda, what avenues exist to strengthen the program and continue to bring savings to the American people?
Speaker 15
There are already bills introduced in this committee that would do things like extend the benefits of the drug price negotiation program to the commercial market, extend the inflation rebates from the IRA to the commercial market. And there's a number of proposals that would do things like consider the selection of the drugs. So as you noted, right, whether some of these products are orphan drugs and should truly be exempted, as Keytruda made $31,700,000,000 last year alone, whether that's the type of drug the drafters really had in mind when trying to expand this orphan drug exemption. There's a whole range of ways the program could be expanded to more patients or strengthened even within the Medicare program.
Speaker 37
And, Miss Sex, your testimony discussed incorporating international reference pricing into the Medicare drug price negotiation program. Can you expand on how this approach would work alongside the existing negotiating framework, and the potential benefits and challenges?
Speaker 15
So international reference pricing seems to have bipartisan interest. It was included in H.R. 3, which was a previous drug price negotiation bill, and then it's obviously a topic of interest for the presidential administration as well. There's a lot of ways to think about including international reference pricing elements within a negotiation if that's desired. So, for example, it could be one of the factors that Congress instructs CMS to consider as part of the negotiation. It could be a tool to think about selecting drugs in the first place.
Where is the price disparity largest? It could feature into the setting of some of the initial offers. What is the ceiling as defined under the law? So there's no one way to do it and to incorporate it, but lots of choices.
Speaker 37
Okay. And, Miss Riley, in less than a minute, what actions can pharmaceutical companies take to ensure critical medications, including those for birth control and menopause, remain affordable for women and families?
Speaker 5
Thank you for the question. You're right, our companies, many of whom are in the women's health space, pride themselves on ensuring that we have access to women, whether it's looking for contraceptives, IVF care, post-menopause, the new menopause drugs that have come to market. You know, our companies operate in a system where we do face competition, and that's a good thing because it does help to drive down costs in the system and make those medicines more affordable. As you know, in the Affordable Care Act, contraception is available for patients at zero cost, which I think has expanded access in that space. And we would love to work with you to ensure that all women's health care products are available and affordable for patients.
Speaker 1
Gentle lady yields back. Now recognize the gentle lady from California, Miss Matsui, for five minutes of questioning.
Speaker 28
Thank you very much, mister chairman, and I want to thank the witnesses for being here today. I know it's been a long day. I'll be quick. We are one of the richest countries in the history of the world. But today, one in five adults says they haven't filled a prescription from their doctor because they can't afford it.
One in five. It's unconscionable, really, and I'm glad we're here to discuss solutions. I'd like to share a story from one of my constituents. She's a small business owner in my district, and after struggling with opioid addiction, she's 11 years sober. Now for 11 years, she's relied on buprenorphine to help her stay in recovery.
But recently, her insurer, Aetna, and PBM, CVS Caremark, tried to cut her off from her typical medication and switch her to Suboxone. That's not only an entirely different medication, it's one that this constituent had already tried and failed. And despite her doctor explaining she needed buprenorphine, not Suboxone, the appeal was denied. She was forced to pay $700 at the pharmacy counter to get her prescribed medication. Mister Maren, how can the PBMs you represent possibly justify keeping someone from their life-saving medication, given the very real possibility of relapse?
Speaker 9
Congresswoman, thanks for the question. That's a terrible story, I'd like to follow-up with you and your staff to better understand the details of what happened and see what we can do about it. But, look, PBM's mission is to keep drug prices lower. They do that. The market is very competitive, and employers choose the right fit for them.
Speaker 28
Okay. That's your answer. Is that right? Okay. But this is just common sense.
I don't think we need all the facts to agree that people need to stay on their medication-assisted treatment to avoid a life-altering, even life-destroying relapse into substance use disorder. And unfortunately, this is a pattern too many patients are familiar with, being blocked from their lifesaving medications because your insurer or PBM thinks they know better than the doctor itself. And I'm really sorry. And I welcome your comments, and I hope that she will answer them. And that's it.
Thank you very much.
Speaker 1
General lady yields back. Seeing no other congresspeople showing up to ask questions, we will move forward, and I would ask unanimous consent to insert in the record the documents included on the staff hearing documents list. Without objection, it is so ordered. I would like to thank all of our witnesses. It's been a long day to be here today, and thank you for giving us your time.
As we have said repeatedly, many members will have additional written questions for you. I'll remind members that they have ten business days to submit questions for the record, and I would ask the witnesses to respond to those questions promptly. Excuse me. Members should submit their questions by the close of business on Thursday, February 26. And without objection, subcommittee hearing is adjourned.
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