The House Oversight and Government Reform Committee focused nearly exclusively on the drug pricing practices Turing Pharmaceuticals AG and Valeant Pharmaceuticals International Inc. at a Feb. 4 hearing and steered clear of a widespread indictment of the biopharma industry.

At the hearing, many members of the committee drew a distinction between innovator companies that spend a significant amount of revenue on research and development and the two firms, which do not have a history of doing so.

That might be a relief to many mainstream innovator companies that have sought to distance themselves from the practices of Turing and Valeant Also see "PhRMA Takes Aim At Valeant In Defense Of Drug Pricing By ‘Innovative’ Firms" - Pink Sheet, 26 October, 2015..

“You’re trashing the industry and you’re going to cause us to have to put heavy, heavy regulations on good companies,” Rep. Stephen Lynch, D-Mass., told the two companies. “You’re trashing the pharmaceutical industry that’s doing a great job on a lot of different drugs, from organ transplants to cystic fibrosis, good researchers out there that are doing great work.”

Turing and Valeant executives were the only industry witnesses to testify at the session. Turing’s infamous former CEO Martin Shkreli appeared briefly at the beginning of the session but invoked his Fifth Amendment rights to avoid answering any questions and was excused. Turing Chief Commercial Officer Nancy Retzlaff took over when he left.

Turing has been a poster child for exorbitant drug price increases, provoking a major outcry by acquiring the antiparasitic Daraprim (pyrimethamine) and then boosting its price 5,000%.

Valeant Interim CEO Howard Schiller testified on behalf of that company. Valeant has come under fire in Congress and the press for raising prices for the cardiovascular drugs Nitropress (nitroprusside) and Isuprel (isoproterenol) by 212% and 525%, respectively, after purchasing the rights to the products.

FDA Center for Drug Evaluation and Research Director Janet Woodcock also testified at the hearing, focusing on the agency’s efforts to streamline its generic drug approval process.

The committee focused on the fact that both companies instituted sharp price hikes on drugs they did not develop internally. Members also hammered away at the fact that Valeant previously devoted a percentage of sales to R&D that was well below the industry norm while Turing, as a new company with only one drug, has had no R&D activity.

Both companies have recently vowed to underwrite more significant R&D programs. In her testimony, Reztlaff said “I want to take this opportunity to emphasize Turing is a research-based company that is committed to innovation and reinvests 60% of its net income from the sale of Daraprim into research and development – a figure that far exceeds industry standards.”

Schiller testified that “Valeant’s US pharmaceutical R&D spending is about 8% of our US branded pharmaceutical revenue, and we estimate that total U.S. R&D spending will exceed $400 million in 2016.”

Committee Chairman Jason Chaffitz, R-Utah, expressed skepticism about the companies’ claims to be research-based concerns. He also maintained that Turing’s former chief exec, Shkreli, previously made exaggerated claims about the extent of the company’s plans for R&D investment.

Much of the four hour-plus hearing was devoted to members accusing the companies of seriously restricting patient access to the drugs because of the price increases and of seriously burdening patients, hospitals and payers with increased costs. Members also expressed outrage at the companies’ seemingly callus approach to pricing, particularly on the part of Shkreli.

Before Shkreli left the hearing, Ranking Member Elijah Cummings, D-Md., urged Shkreli to mend his ways and become a force of change in the industry.

“People’s lives are at stake because of the price increases you imposed and the access problems that have been created,” Cummings said. “You are in a unique position, you really are, sir. Rightly or wrongly, you have been viewed as the so-called bad boy of pharma. You have a spotlight and you have a platform. You could use that to come clean, to right your wrongs and to become one of the most effective patient advocates in the country. …The way I see it, you can go down in history as the poster boy for greedy drug company executives or you can change the system.”

Full Disclosure On Pricing Decisions

Chaffitz also had some advice for the companies, counseling them to come clean about the basis for pricing decisions.

“The proper role of congress is not to micromanage a private company,” Chaffitz said. “It’s not my role and I believe in the right to profit. I think profit is a motivator that does a lot of good. But I do believe it’s imperative that people tell the truth, that they’re ethical, that they not mislead the public.”

Valeant’s Schiller said the company takes a number of factors into account when pricing a drug, including “clinical value, alternative therapies and patient access.” He added that “obviously it’s quite subjective and in some of the situations we’ve talked about, we have clearly gotten it wrong.”

For Turing, Retzlaff said, “first you take into account the clinical value of the medicine, we’ve also taken into account the size of the patient population and other products in the category, the need to invest in innovation, the assessment of whether or not there are mandatory rebates and things like that associated with the product and…the need to fund patient access programs.”

“You know why I feel like you’re both lying to us?” Chaffitz asked in response. “You didn’t say ‘profit’ and if you don’t include that as a factor in how you price a drug, you’re lying. … You can tell me about patient access and all the other things but profit is a motivator. I happen not to think it’s an evil thing. But I think you’re purposely avoiding it.”

“I think you’re both being disingenuous and incomplete in your answers and I want you to reconsider that in the future.”

Chaffitz indicated the committee is willing to hold other hearings to challenge egregious pricing practices in the pharma industry but stopped short of pledging to pursue price control legislation.

“You are taking advantage of the system. And that’s why the pressure comes back to the government and FDA to increase the competition so there is a proper balance here. You could find the right amount of profit, not have congress dictate or set up price controls. And that’s why we will continue to do this. This has been a very fruitful and enlightening hearing.”

At Drug Pricing Hearing, Innovator Companies Mainly Escape Congressional Wrath

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