that describes the spend-down and how that would be allocated. and it's my understanding that it will be very helpful to have it will be very helpful to have it is my understanding it will be very helpful to have that analysis from the state that will be forthcoming hopefully soon. >> we need to continue the discussion. thank you. >> tonight on c-span two, a hearing on the cost of prescription drugs. world leaders at a conference in london pledge $10 billion in humanitarian aid for syria. president obama speaks at the annual prayer request at washington d.c. >> at a house hearing on the cost of record entrance prescription drugs, we will learn how they set drug prices. when members question ceo about the company raising the price of

the drug he declined to testify invoking his fifth amendment rights. officials were at the hearing and discuss the approval process for generic drugs. this hearing is four hours. [inaudible] [inaudible] [inaudible] [inaudible]

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[inaudible] [inaudible] [inaudible] [inaudible] [inaudible] >> please take a seat. welcome everybody the committee on oversight will come to order. without objection where declared

a recess at any time. the chairman is responsible under the rules of the house and the role of the committee to maintain order of the committee room, and i will will do that. we have an important hearing today. we have a number of hearings that are very important. today we're talking about the cost of healthcare in our country. because it is growing at an unsustainable rate. congressional budget office reported the federal government will spend $1 trillion on medicare, medicaid and other healthcare programs. they also report within ten years time that cost will double. roughly $2 trillion. the cost for prescription drugs are a substantial portion of the federal health care expenditures. 2014 the federal government paid out 77,000,000,000 dollars in billion dollars in medicare part d prescription drug benefits. clearly, it is very difficult to sustain this. one way that affects the cost of

prescription drugs is to increase access of generic drugs and others that have been on the market. our committee is fortunate to have one pharmacist in the united states congress. he happens to sit on our panel, i would like to yield a minute to mr. buddy carter from georgia. >> thank you mr. chairman. i'm disgusted that we are here today to talk about drug price increases. as a pharmacist for over 30 years i have owned and operated numerous pharmacies in southeast georgia. the only pharmacist in government i know free-market principles are the only way to provide affordable healthcare to american people. what was done here was different. the first business practices were to exploit a patient group to do nothing more than to extend their lies. none of the witnesses here today had to look into the eyes of someone who is

trying to make a decision between buying groceries and by medication. no one here today has seen the look on her mother's faith when she realizes she can afford to buy her child's medication. i have. but as a healthcare professional i have worked with these people in order to make sure they can get their medications and to make sure my business and my employees stay afloat. some here today may hide behind their shareholders or corporate boards and say this is just free-market principles. i for one do not agree with that. i will tell you that you can meet your shareholders need that you can meet your boards needs, and and still take care of the american public. then again, i am not not sure those who are hiding behind their shareholders and boards really care about that. mr. chairman, you'll back back.

>> think a gentleman. the fda, is responsible for approving applications to manufacture generic drugs. it is drowning in a backlog of of applications. in an attempt to deal with the backlog congress passed unanimously out of the house by voice vote, with only one dissenting vote in the senate, the generic drug user fee act in 2012. the act promise shorter wait times but required applicants required applicants to pay $1.5 billion in user fears over a five-year period. despite the fees and promises the f da still has a backlog of more than 3700 generic drug applications. the basic premise here is what a basic economics. if you have someone who rapidly increases the price of a prescription drug that is going to invite more competition. if that competition can get approval from the fda then there is no competition and the price

will be and it will continue to rise. most of my questions today are for the fda and what they are doing to accelerate that process. i believe the fda has failed to meet its statutory responsibility. it is dramatically behind in its processing. a good example of how valuable a shortened fda review process has become is the program that offers priority review vouchers. because the review process can be time-consuming drug companies have been paying outrageous sums for these vouchers. last last year one of the boucher sulfur $350 million these vouchers only speed up the process by four months.

one applicant was willing to pay 2,000,000 dollars per day for an additional 120 days. given the fact that it is obvious our current review process for generic drug application is too slow. along with the fda we have representatives from two drug manufacturers here today. touring pharmaceuticals purchase the prescription drug dara prim and raise the price from $13.50 to more than $750. value pharmaceuticals ceo is also here to explain how his company bought drugs and raise their prices of 525 and 212% respectively. all three of the respectively. all three of the drugs lacked generic competitions even though patent has expired. i look forward to hearing. i want to thank ranking member coming who has been very passionate on the issue. i'm glad that we did this together. i now yield the time and recognize esther cummings for five minutes. >> thank you very much. from the depths of my heart i think you again, and again for

holding this hearing. the issue has been my number one, number one investigative priority for several years. i'm so grateful we're holding this hearing today and the drug companies, the fda and other stakeholders have been called here. thank you for also sending joint document requests to these companies, they both refused my previous request and abstracted our ability to investigate their actions. the fact is we would not have documents we have today without your action. i thank you again for that. we have now obtained more than 300,000 pages of internal documents from these companies after they stonewalled. they include e-mails, analysis

on revenues and profits, communications with hospitals and other providers and public relations strategy documents. earlier earlier this week i circulated two memos, i summarize these documents i now ask unanimous consent that they be made part of the official hearing record. >> without objection so ordered. >> these documents provide an insider view about how executives are lining their pockets at the expense of some of the most vulnerable families in our nation. their basic strategy has been to buy drugs that are already on the market and then raise the prices astronomically for a temporary period of time before other competitors enter the market. these companies did not invest funds to research or develop these drugs.

they bought them, jacked up the prices, took as much money as they could out of the pockets of patients, hospitals, and others and put those funds into their own coffers. i call this money blood money. how much money are we talking about? value reported gross revenues of more than $547 million on nitro press and isopropyl, just to drugs. that is more than half a billion dollars in one year coming out of the pockets of hard-working americans. the company reported profits of 351 million on just these two drugs in 2015 alone. these returns by the ceo j michael pearson according to the

press reports these massive profits allowed mr. filler who is here today, on behalf of valiant to select a salary of $400,000 per month. per month. out of the pockets of our constituents. the company reported 980,000,000 dollars in revenue in 2015 with a 2015 with the manufacturing cost of only $1 million. yet they try to claim that it took $44 million loss last year. the company reported it's been $22 million on research and development. this money apparently went to donations to on named entities, both contributions to foundations.

they quote other research and development costs. the documents we have obtained that these expenditures were just as much about pr as rnd. like the ponzi scheme it appeared that turing may be using research to identify the next truck to acquire and then impose similarly massive price increases on future victims. it is not funny, people are dying and they are getting sicker and sicker. based on the documents obtained by the committee we know exactly what these companies will say as part of their public relations strategy. they will try to distract from their massive price increases it by talking about their r&d. they will downplay their massive profits by claiming they help patients who can't afford the

exorbitant prices. the the testimony for the drug companies today will be the same, the difference now is that we have been behind their smokescreen. these tactics are not limited to a few bad apples. they are prominent throughout the entire industry. many companies have taken significant price increases on their drugs. the reason i care so much about this issue is because it directly affects my constituents and the constituents of every member of this committee, every member of this congress. the people in my district are not on the forbes billionaire list, they don't buy albums for

2,000,000 dollars. they can't liquidate assets to free up millions of dollars. they work hard, they get the early bus, and many take-home decent salaries area and like many americans they struggle every single month to support their families and to pay for the increasing cost of housing, education, and healthcare. they live from paycheck to paycheck and sometimes from no check to know check. hard-working american families should not be forced to pay increases of 10%, 100%, or 1000% just to subsidize the lab us lifestyles of hedge fund managers and corporate executives. as i can conclude i hope we can also talk about solutions today.

for example secretary of state, hillary clinton has sent letters to the fda and ftc proposing stronger regulatory action to crack down on companies that engage on price gouging. i think this is an interesting approach that could be significant bipartisan support. on the legislative side i have introduced a drug affordability act was senator bernie sanders. one provision provision in this bill would allow hhs to negotiate drug prices for medicare. this this is something that even donald trump supports. there is significant bipartisan agreement on the need to address this crisis. according to the knob partisan kaiser family foundation rising prices are the top healthcare concern for all americans. including democrats, republicans, and independence. i

hope today's hearing is the beginning of a sustained effort to address this issue in a bipartisan way, it should be addressed in a bipartisan way that brings much needed relief to american families. again mr. chairman, i sincerely thank you for this hearing. man i ask unanimous consent to take care of some business before we continue? since i started this investigation several years ago i have literally been inundated from letters from families, hospitals, and patients a begging for relief from these astronomical price increases. i have 12 letters here that i would like to include in the official record of today's hearing. they have been been signed by more than 100 different organizations. obviously i will not go through all of them but some of them include the american association of poison control centers, the american federation of teachers,

the california port control system, consumers union, fair pricing coalition, hiv medicine association and infectious disease society, human rights campaign, national alliance of state and territorial aids directors, national multiples closest society. finally mr. chairman there is one more letter that i would like to submit, it is one of the first letters i received on this issue back in 2011. this started this journey. this is a a heartfelt letter i received from brenda freeze. she is the coach of the women's basketball team at the university of maryland. coach freezes son was diagnosed with leukemia and treated with a drug called -- now the interesting thing is this is what the coach wrote. my son tyler would not be alive today if we do not have access

to the drugs that rid his the body of cancer. every family should have access to these drugs, it is the same that they are either not of available, only available to the highest bidder. i kept that letter with me for the past five years. it has motivated me every day on this journey. so i ask unanimous consent that all of these letters be included in the record. >> without objection, so ordered. >> with yet, i yelled back. >> i will hold the record will open for five legislative dates for anyone who wants to submit a written statement area will now recognize or witnesses. we are pleased to welcome our panel, mr. mc merritt is the president and chief executive officer of the pharmaceutical

care management association. janet woodcock is the center -- the united states within drug ministration. ms. woodcock is accompanied by mr. keith flanagan, director, director of the office of generic drug policy whose expertise might be needed during questioning. by prior arrangement we are going to release an excuse doctor woodcock at approximately 10:30 a.m. and she is testifying in another committee in order to accommodate this we are squeezing it in and appreciate your participation in both. you you will be excused at 10:30 a.m. she will be replaced by mr. keith flanagan and we'll swear him and at the same time. mr. howard schiller is the interim chief executive officer of value pharmaceuticals, we appreciate you being here. miss nancy -- at turing pharmaceuticals and mr. martin school rally.

we appreciate you being here all witnesses are to be sworn before they testify. we will also be swearing and mr. flanagan. if if you would please all rise and raise your right hand. do solemnly swear that the testimony you are about to give will be the truth, the whole truth, nothing but the truth? >> thank you. let the record reflect that all answered in the affirmative. in order to allow time we appreciate you limiting your oral statements to five minutes. mr. merritt you are now recognize for five minutes. >> thank you. i am mark merritt, president ceo of of the pharmaceutical care management association, the group representing the benefit managers. or pbm's. we administered drug benefits for more than 260 million americans.

over the next decade pbn's are projected to save 654 billion or up to 30% on drug costs while still offering consumers broad choice and access. they reduce drug costs in several ways. negotiate price concessions from drug manufacturers, negotiate discounts, offer more affordable pharmacy options including home delivery, inc. courage the use of generics, manage high-cost specialty medications and improve accountability. pbn's are most noted for their role in administering medicare part d plans. since its launch party has come under projections and offer calloused choices to patients. as the ga i/o reports one-way

reduced cost is the ability to negotiate prices with drug manufacturers and pharmacies. pbm's do that by competing drugs and drug stores against one another and using differential co-pays to encourage patients to choose the cheaper options. according to news reports the price of drugs has been cut nearly in half over the past year as neighboring competitors have entered the market place. pbm's will demand greater discounts as other competitors come inches the pricing tactics to discuss today are just one piece of a much larger puzzle, that's important to know. they highlight how you can't separate joad on -- many drug companies use market strategies to reduce awareness and resistance to higher prices. one of the most prevalent of these tactics is the use abate and switch co-pay assistance program to encourage patients to start on the most expensive brand instead. unlike programs for the poor and uninsured, co-pay assistant

programs target patients with drug benefits and encourage them to bypass less expensive drugs for higher cost branded drugs. co-pay coupons are different than normal coupons for groceries where consumers pay 100% of the cost to get 100% of the benefit. co-pay coupons only pay pay the cost of the co-pay, the employer's unions and others pay hundreds or thousands of more for the most expensive brand. practices are considered illegal kickbacks and a been under scrutiny. co-pay marketing programs are widespread in the commercial marketplace and play key role in increasing costs. now that i've outlined the problem what can policymakers do about it? first we need to accelerate fda approvals of brands that face no

competition. second we need to accelerate fda approval of generics with top-end brands that face no competition. third, congress should create a government watch list of all the a patent brands that don't have competition so people are aware that we're monitoring. finally, co-pay coupons should be considered illegal kickbacks for any program that receives subsidies. thank you very much. >> thank you. >> thank you, good morning mr. chairman, ranking member area and i'm janet, head of the drug center at the fda. we regulate generic drugs as well as brand drugs. the hatch, waxman legislation established generic drug programs and has been extraordinarily successful. today, 88% of prescriptions given out our generic drugs.

saving the public almost $1.7 trillion. in the last second the generic drug industry grew rapidly and globalized its operations. fda generic drug review program did not grow significantly and fell behind both in our review and in our inspection capacity and a large backlog accrued. to resolve this, 2012 congress enacted the generic drug user fee act reflecting a negotiated agreement between generic drug industry and the fda. this was a five-year program during which industry would pay 300,000,000 dollars per year in fees and fda would attempt to made a progressively a progressively more difficult series of performance measures over that time. in the three years since that has been enacted the fdi has exceeded all the performance goals. this has been a formidable task.

in these three years we have been managing over 6000 generic applications. 2500 that were piled up at the start of the program and almost 3000 that have been submitted in the three years since the program started. the good news is that over 90% of these applications have received review at the fda. or review communication, and over 1700 have been approved or tentatively approved. tentative approved. tentative approval means they are waiting for their patent exclusivity to expire. over 1000 have been sent back to industry because they had deficiencies. this means there are only about 600 applications out of the 6200 that are awaiting review. many of of these have been submitted recently. the generic drug backlog has been a big problem caused by rapid growth in industry not

matched by corresponding investment in fda generic review program. this was ultimately fixed by the user fee act that was passed by congress. it takes some time for us to dig out of this whole, it will take a bit more time before we are fully caught up. nevertheless, applications have been submitted in the last two years, 2013 and fiscal year 2015 have a 15 month review clock that we expect to make. by this act tovar we will have a ten month review clock. so an application some so in applications amid this october or beyond we would ask back to completely review in ten month. it is the older applications that we need to clean up. we are we are working very hard and very successfully at doing that. the purpose of hatch waxman was to introduce high-quality competition into the market to improve access to patients. 65% of drugs have generic

competition right now, another 24% are still protected by patents or exclusivity. they are they are not yet eligible for generic competition. 10% have no protection either patent or exclusivity will but lack generic competition and lack applications submitted to the fda. 2% have applications with the fda awaiting approval. those are all expert dated, we expedite all first generics and those are all moving through the process and getting review and so forth. under the system we have the potential to get on the market very fast because these first generics are prioritized and all applications will have a ten month review clock.

i am scheduled to testify at a second hearing this morning beginning at 1030 a.m., i may need to depart before all committee questions have been answered. mr. answered. mr. keith flanagan who is director of the office of generic policy will be able to off answer any technical questions after i leave. i think you very much for your attention and i look for to answering your question. >> thank you. mr. shelley your recognize for five minutes. >> chairman, congressman, members of the committee, thank you for the opportunity to testify. i have been with valiant since 2011, first as cfo then on the cfo than on the board and now as interim ceo. over this time valiant has grown substantially. today we are a large innovative pharmaceutical company that employs 22000 people around the world. that includes 6000 in the united states. we have about 1800 products including 200200 prescription drugs in the u.s. we are leading to metrology,

ophthalmology, consumer healthcare company. our flagship brands like bausch & lomb and sara lee are known to many americans. we have largest presence including 60 manufacturing sites. we are making significant investments in the united states. in rochester, new york alone we have invested more than one quarter billion dollars to upgrade the plant and added nearly 200 jobs. weeks back to add the 630 jobs in the future. we have assured congress their concern by drug prices in the industry generally in valiance increase in prices including for two of our drugs nitro press and i so proud. we are responding to those concerns. we created a volume base rebate

program providing up to 30% discount for nitro press and i so proud. we just launched a 20 year year partnership with walgreens that will have a 10% discount for dermatology and ophthalmology products. these steps are in addition to the existing patient assistance programs which help ensure that out-of-pocket expenses don't prevent eligible patients from receiving the medication they need. we expect to spend 1,000,000,000 dollars in patient assistance in 2016. i want to address isopropanol and which are cardiac drugs which is our fixed rate of reimbursement. these are not drugs purchased by patients in a pharmacy. when we acquired them we commissioned an outside pricing consultant to review the market. they concluded that nitro press and isopropyl were clinically very valuable to hospitals and

patients and the fixed reimbursement rate would allow for price increases without eliminating the hospital profit. based on the findings we implemented significant price increases. since then we have experienced a 30% reduction in volume as hospitals move to alternative drugs. the the volume discounts we implemented will address the needs and now let me say word about commitment to research and development. valiant review results make as a leader in the industry, our productivity drugs approved for r&d dollars spent our seven times higher than the average 15 companies with the most new drug approvals. in just the last two years we have lunch 76 of prescription drugs, medical devices and other products in the united states. there's more to come from our robust u.s. pipeline which has more than 200 active products. we expect approvals this year from significant novel treatment from glaucoma and a biologic from moderate plaque psoriasis.

we believe r&d should focus on outputs and should not be judged by spending alone. nonetheless our r&d spending is significant expected to exceed $400 million in 2016. we have 43 r&d with 1000 employees worldwide. in addition we addition we have followed successful model of technology industry by acquiring valuable r&d assets. mr. chairman, where we have made mistakes we are listening and we are changing. our wild dream partnership is a key step four but we have more to do. the internal development and acquisitions we have a world class franchises. like other pharmaceutical companies will sometimes adjust our prices but our price increase in the future will be well within industry norms and much more modest than the ones that drew legitimate concerns. thank you for the opportunity to appear today and

i look look for to answer your question. >> thank you. >> thank you chairman, the ranking members and distinguish members of the committee. i appreciate the the opportunity to provide touring perspective on the issues before this committee today. touring is a small research focused pharmaceutical company founded just one year ago. we invest in developing and commercializing important drug treatments for patients who suffer from serious and often neglected diseases. our prescription drug used to treat a parasitic, which most often affects patients with compromised immune systems. the drug was on the market for more than 60 years before touring acquired it last august. in the preceding five decades

there was no significant pharmaceutical innovation in the treatment of toxoplasmosis. so the drug is the only fda approved treatment for the disease. perhaps that's not surprising since only about 3000 patients are patients are prescribed dara from each year. it prevented an investment opportunity for touring because it was price are below its market value in comparison to other similar drug treatments for rare and serious diseases. after considering the pricing of comparable drugs, the value dara prim, the small patient population, and the mandatory discounts and rebates that apply to many who received the drug, touring made the decision to raise the wholesale list price to $750 per pill. as touring chief officer i was

comfortable with that decision. first, because of our company's commitment to ensure access to the drug for every single patient who needs the drug, regardless of the ability to pay. second, because of, because of our commitment to invest a large portion of net revenues generated from that drug for new and improved drug treatments. let me address patient access. fundamentally in terms of cost it's important to realize the wholesale list price of a drug is not the same as the price paid by patients, hospitals, health plans, or government programs. to our knowledge, no no patient needs to pay $750 per pill for the drug. in fact, about two thirds of patients get the patient through government programs they receive a discounted price of 1 penny per pill.

beyond the discounts available through government programs touring has taken several additional steps to ensure affordable access. we have a patient assistance program that offers the drug free of charge to qualify, uninsured patients with income at or below 500% of the federal poverty level, well above, well above industry standard for patient assistance eligibility. we provide co-pay support to help insured patients meet their co-pay applications. we fund a bridge program to give those with commercial insurance a supply of their friend at no charge if there are delays in coverage. in response to concerns about cost and after consulting with key stakeholders holders we announce that we would discount the price to hospitals by up to 60%. that's especially because hospitals are the first to treat 80% of patients with the most

common form of toxoplasmosis. we have begun offering the drug to hospitals and a smaller 30 pill bottle to help ensure availability and lower the cost burden. there has been challenges with patient access particularly in the first weeks after touring acquired the drug. to the best of our knowledge, most of those challenges involved deficiencies and distribution which were unrelated to our pricing. since then we have worked hard to improve and expand the distribution system, including through including through the engagement of a new specialty distributor providing streamlined access to more than 90% of hospitals. of course we expect to generate profits, but but our net income is not passed on to shareholders. we are committed to bringing innovation to the treatment of

neglected diseases. we invest 60% of net revenue into r&d. a percentage for higher than other companies. thirty-six about 139 employees are dedicated to r&d and are research has candidates for innovation. we are proud of our pace -- i believe we have been appropriate strike the rate talents between patient access, innovation and shareholder value. thank you. >> mr. squirrel you did not provide the any written testimony, do you wish to provide any opening statements. >> on the advice of counsel, i will not be giving an opening statement. >> i want to ask a few questions. what do you say to that pregnant women who might have aids, no income, she needs the drug in order to survive. what you say to her when she has

to make that choice? on the advice of counsel i invoke the fifth the amendment and respectfully decline to answer the question. >> you recorded as saying on fox five in york that if you raise prices and you don't take that cash and put it back into research, i think it's despicable. i think you should not be in the drug business. we business. we take all of our cash, all of our extra prophet and spend it on research for these patient and other patients are terrible life ending diseases, did you say that? >> on the advice of counsel, i invoke my fifth amendment privilege and declined to answer? >> do you think you've done anything wrong. >> on the advice of counsel i invoke my fifth amendment privilege against self-incrimination and respectfully decline to answer

your question. >> i would like to yield time to congressman south carolina. >> thank you. is it pronounce squarely? >> yes sir. >> see there, you can answer some questions that one didn't incriminate you. i just want you to understand that you are welcome to answer all questions and not all questions are going to incriminate you. >> i intend to follow the advice of my counsel not your. >> i just want you to get the right advice. you do know that not every disclosure can be disclosed to the fifth amendment, only those that you reason leave could lead to other evidence. >> i intend to use the advice of my counsel, not your. >> do you also understand that you can wave your fifth amendment right, you gave an interview to a television station in new york where, what

if i understood correctly you cannot wait to educate the members of congress on drug pricing. this would be a great opportunity to do it. do you understand that you can wave your fifth amendment right. >> on the advice of counsel, i invoke my fifth amendment privilege against some incrimination and declined to answer your question. >> mr. chairman's been willing to answer at least one question this morning, that that one didn't subject him to incrimination. i don't think he's under indictment from the subject matter of this hearing. so the fifth amendment actually doesn't apply to answers that are not reasonably correlated to expose you to incrimination. even though it did it imply he's welcome to wave it. i listen to his interview and it did not have to be prodded to talk during that interview. he he doesn't have to be prodded to tweet a whole lot or to show us his life on on that little

webcam he has. so this is a great opportunity if you want to educate the members of congress about drug pricing or what you call the fictitious case against you. we can even talk about the purchase of the wu-tang clan, is that the name of the album? the name of the group? >> on the advice of counsel i invoke my fifth amendment privilege against self-incrimination and deny the question. >> i don't know how a question about. >> i understand that he is under indictment but we don't need to ask them questions about that top it. >> so we are not good ask him

questions that are going to be a subject matter of his current pending criminal charges and if we were to get close to one or in a gray area he is welcome to assert his fifth amendment privilege there. if we stay away from the subject matter of his indictment he is, some some could argue has a legal obligation to answer under cascara versus united states. certainly has the right to do so as he did in a television interview and as he does quite frequently in social media. >> correct. >> may be recognized for moment. >> no. no under the house rules you have not been sworn in. >> understand. >> know you are not recognized, and you will be seated. >> the gentleman from south carolina's correct, we are trying to provide an opportunity to have a candid discussion related to issues about drug

pricing. we now recognize recognize mr. cummings for any question. >> thank you very much. mr. chairman let me say for the record that i completely support your decision to bring mr. squarely to make sure he has asserted his fifth amendment right before this committee. normally democrats on our committee have accepted the assertions of all witnesses attorney that his or her client is going to take the fifth. in this case, and a number of public comments himself, raising legitimate questions about his intentions, honestly i did not know whether he was even going to show it today. so it's nice to see you. now that he has invoked his constitutional right, of course i will respect his decision. since i have you in front of me

after trying to get you in front of this committee for so long let me say this. i want to ask you, no i want to plead with you, to use any remaining influence you have over your former company to press them to lower the price of these drugs. you can look away if you would like but i wish you could see the face of people, no matter what is said, who cannot get the drugs that they need. by the way, it's the taxpayer, it's the taxpayer, someone is paying for these drugs. if the taxpayers who end up paying for some of them. so those are our constituents. people's lives are at stake because of the price increases you impose in the access problems that have been created.

you are in a unique position, you really are sir. rightly or wrongly you have been viewed as a so-called bad boy of pharma. you have a spotlight and you have a platform. you could use that attention to come clean, to write your wrongs, and to become one of the most effective patient advocates in the country and one that can make a big difference in so many people's lives. i know you're smiling but i am very serious sir. 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. yes, you. you do tell the knowledge about drug companies and the system we have today and i truly believe, i truly believe, are you

listening? >> yes. >> thank you. i truly truly believe you could become a force of tremendous good, of course you can ignore this if you'd like but all i ask is that you reflect on it. now i don't ask, i beg that you reflect on it. there are so many people that could use your help, may god bless you. thank you. >> the gentleman gilds back. it is your intention to decline all answers to the questions and in both your fifth amendment right? >> yes. >> and the witness it is his intent not to answer any questions. i asked now that the

committee excuse the witness from the table without objection. >> so ordered. >> we will pause for a minute as he is escorted out. [inaudible] [inaudible] >> will continue and recognize the gentleman from florida for five minutes. >> thank you mr. chairman, we have been around this committee for a long time, i don't think i've ever seen the committee treated with such contempt. in fact, i'd like to know if based on his response today and

his actions if he could be held in contempt? >> it is not my intention to hold him in contempt. we have heard multiple statements from him before this from everything from i can't wait to go to congress to i will invoke my fifth amendment rights. it is important for us to have a person like that, next laymen answer those questions in person. i wish he would have answered those questions with no intention to answer - asking many questions that he was under indictment for. >> at this time i may move to hold the gentleman in contempt. it is very sad and mr. comments that he may be the poster child for greed and unfair pricing and it's a very serious matter.

while he is the focus of attention and he is the villain we have a lot of blame to go around. the pricing for drugs from all of these companies has skyrocketed. some of the information i have his prices have more than doubled for 60 drugs in the past year. a survey of about 3000 brand-name prescription drugs from the prices of more than doubled for more than 60 and at least quadrupled for at least 20, is that correct? >> on pricing,. >> we do not follow that. >> you said about 80% of the drugs consumed out there are generic to today.

>> that are dispensed by pharmacists are generic. >> in the situation with their pricing, has that increased or decreased? what did you testify to? >> hhs recently released a report that showed for medicare about two thirds of the drugs over the last several years decreased but there is a few where the prices have increased. so there is a group that has increase. this may have to do with the amount of competition for those drugs. >> one of the problems is the approval process. you spoke of getting drugs out there and have competition and the price can come down. you have made some progress you say today. is the company you work for own by mr. schick rally? >> he is a shareholder, yes.

>> does he own what share? >> i'm not sure what share he owns but i can check that out. >> you described a little different scenario on what has been publicized as the drug cost it is pretty sure that your shareholder would take that attitude. at least you did explain to the committee some of the pricing. again, there are other companies and drugs. anyone know the% of the increase? but and that's not your drug is it? so it's another manufacturer who is just as guilty. maybe not as arrogant but just as guilty.

millions of americans depend on medication, i bought mine and i'm pretty fortunate i have coverage but a lot of people's life depend on it. mine is not that situation. but what we have seen here is an unprecedented arrogance and what we see is a situation where people who need these drugs are denied these drugs because of pricing and lack of competition. i think we're going to see more of this because people take advantage of the system. i'll back. >> thank you. i now recognize ms. maloney for five minutes. >> when you read the e-mails between violent and turning,

after you finish you would not describe your business as a business, but as an exploitation machine. your basic business model was to buy a company, fire people to save money, then check up prices to reach revenue goals. you set a revenue goal and then you jacked up the price. now when you talk about discounts it really is disingenuous when you raise the prices 5000%. so my first question to mr. shaler is when you were jacking these prices and sending your e-mails back and forth, did you ever inc. about the impact on patients, on hospitals, public health payers? did you ever think about it? how can you justify raising prices by thousands of% on

life-saving drugs for which there are no competing manufacturers? no generic. people are going to die if they can't get the drug. did you ever think of how hiking the price and der pram which is important in treating life threatening infections and aids, did you ever think of the people who would not be able to afford it? did you ever think about it? or the impact or the impact on the hospitals in the payers? your memos show this is the price we need to make, this is the goal we need in the profits we need to make. >> i can't comment on der pram, that's not our drug. >> then let me ask you another question since you mentioned it was from someone else. how is valiance conduct any different from the conduct of

the other company? is the conduct of your company and your business model any different? >> i'm not that familiar with their company other than reading newspaper articles. as part is valiance is concerned, valiant is a global company, we have over 1800 product. >> were not looking at the company were looking at your strategy which from your own memos that i would like to place into the record show the business model was to set a goal, revenue goal, the profit you would make and that was all you did. now yesterday, in response of questions that were put forward by this committee that was put forward, your company said mr. pearson made an inaccurate statement during the first quarter of 2015 conference call.

they were clearly setting the goal that we must raise the price to that goal. in light of this, why should this committee have confidence in your testimony today? >> the statement you're referring to related to an email that i sent to mr. pearson which is 100% correct, our fcc filings were 100% correct. i can't tell you what his intent was or what he was answering but as a company yesterday we chose to clarify and make sure it was clear that we put out that press release. >> he talked about increasing prices in july of 2015 to meet goals of revenue. did you increase the price of isopropyl in 2015?

>> i believe, yes. >> you did. so on may 20 first, 2015 you wrote an email stating, last night one of the investors asked about price versus value for q1. excluding -- price of about 60% of our growth. if you include marathon, price represents about 80%. so, price increases 80% of your company's growth for the first quarter of 2015. is that correct? >> that is correct. >> most of your growth is attributed to one strategy and that is increasing the price of your drugs. all of your memos, the only strategy i saw was let's increase the price of the drugs, will increase revenue. that was your strategy, correct? >> in the past there were examples where we bought older

drug. >> i would like you to place that in record, any strategy that was it different from increasing prices? >> i think you. your time is now expired. >> i just would like to say increasing revenue and profits was there strategy regardless of cost and impact. it is a terrible example of american business. i would say the american people are tired of paying the price for it. >> thank you. >> thank you for this hearing. >> will now recognize the gentleman from tennessee. >> thank you mr. chairman. doctor woodcock, i have a report here from tufts university. >> ..

to some big drug giant to get a drug to market which is what many think has led to this over consolidation of the drug business, how it has ended up in the hands of a few big giants. >> the industry is changing rapidly. last year we approved a large proportion of orphan drugs. it is doable. and the drug development paradigm is in flux because of the new scientific findings. >> what do you say? >> as doctor woodcock says, the market has been changing for more specialized drugs

we know the best way to get cost down as the competition. more products we can get on the market the faster whether they are competing the generic competitors the better it is for consumers the generic programs. >> we all believe there should be some testing. you can go ridiculously overboard. it is taken ten or 12 years to get a drug to market and is costing 2.6 billion as the test that he says, going a little bit overboard. i have a detailed letter that i would like to face. her cost of a drug and her cost for 30 pills in

december 2013 total cost annual cost of $13,566. lessless than two years later the cost for the same had gone to 106 dollars and $0.74, 224 percent increase in have a lettera letter from another individual or state representative in tennessee that says the average pharmaceutical company spends over 20 percent but that your company averages less than 3%.3 percent. what do you say about this 224 percent increase?

>> sure. only place or drugs which are to take into account the clinical value come alternative therapies, patient access among other chapters. we are also trying to manage the bottom line to be able to invest in our research and development pipeline and make the investments and expanding our manufacturing. lectures from new york to increase the capacity and that facility as well as patient access. >> my time is running out. you need to do much more to hold down these costs, but in all my time in congress i have seen hundreds of witnesses. i've never seen an individual act with such arrogance, such childish, smart-alecky sparks turning

away from ranking member while the ranking member was speaking, andspeaking, and i think it just was totally ridiculous. i can tell you, his lawyer better advice of a little bit because a jury would love to convict somebody if you ask that way on trial. >> thank you, mr. chairman. >> thank you very much. it may have been mr. straley's antics that drew the kind of attention that gets us this very important hearing today. i understand your testimony about competition and encouraging patients to go to less expensive drugs. i also appreciatei also appreciate what you said about a more specialized drug. let me say this about pharmaceuticals.

pharmaceuticals on the work of our company,, most extraordinary, not only save lives, people out of the hospital,, i want you know that there is great appreciation for the industry here even for what is often given as reason for the price of drugs. we understand r&d, that more of the r&d is done hear and abroad. and then of course it cost less abroad. all of that and i think it was made clear that the government understands. that understood,understood, let us go to a kind of paradigm here. a life-saving drug it is used for parasitic or indeed

what could be fatal parasitic infection known as rats live. it is not as text the cosmos is. hiv a relatively small patient market. now this drug is been purchased. i give all credit to the industry for r&d, but it is true, is it not? if you did not do the r&d you purchased. >> it is true. yes, we

purchased it. it was on the market for 60 years and even after 60 years it is still the only fda approved treatment for toxoplasmosis. >> isn't it interesting that for 60 years has been able to manufacture this drug for $13.50, but when you purchase it the tablet overnight went to $750 per tablet. do the math. that is a 5,000 percent increase. is there any conceivable justification for a companya company that has nothing to do with the r&d taking over company and that overnight raising the price so that it is, let's be fair, out of reach for patients and even some hospitals. what is your justification?

critically needed and reinvesting much of the revenue. >> how much? >> you brought it, immediately began to reinvest. the reinvestment was so large you had increase those. not talking about future uses. increase at 5,000 percent. investing in other serious and neglected diseases. we put it all on this one, putting it all on this one life-saving drug. it is not going customary from one product.

chained by the committee, indicated in response to this very widespread concern by public relations strategy to divert attention to patient assistance program and research and development efforts. in other words, is set of keep the price so that it could be purchased by patients in hospitals he went through what i think even some of your testimony was about, the patient assistance programs. is that your strategy? trying to obscure those by

telling people that will give you a 50 percent increase? the rest of you were using this money. is that your strategy? >> no, it is not. our intent was to correct any miscommunication and testimony, two thirds of patients are product those two thirds. 23 percent, for those patients we there coparents at $10. every single patient who needs. >> we will talk more we will now recognize the children from michigan for five minutes.

importance affect our communities, neighbors, families, friends. we can also agree. the question is how we do that the presence of healthcare law back in the districts. >> congress, created environment prescription drugs, we have our fault in the process. so farso far we have acted to approve more than $2 billion in additional funding for nih.

>> we have acted responsibly in passing 21st21st century cures act which performs the fda approval processto accelerate the discovery and development of treatment and cures. the president pushed for it. it is my understanding and i justi just want to delve a little more deeply into your response. the drug applications in the median process rate of 42 months. can you explain our committee why your agency is so far behind? >> we were so far behind. at this point the number of

applications the manufacturer has not heard from us all we have approved >> they have not heard from you. >> in the past generic program before we reform the it went through four cycles of review. this is a very efficient process. trying to streamline the process so that we can get it right the 1st time. under that scenario this year 15 months starting in october ten months. we still have to deal with the backlog which we are cranking out approvals of 12th they were -- they started in 2012. already 40 months old. they will not get any younger.

their time to approval will be more than 40 months. these newer ones we approve drugs and ten months under the new program. >> i wish you well. efforts in the pharmaceuticals to try to get away from that perception. they have used backlog to capitalize on a system that allows them to pillars of market. >> times when there were no backlog and there were still no generic competition to them, other reasons that for a very small segment, the 88 pet for small segments there is

no generic competition. she we at the end of the 1st program will have eliminated the backlog and be in a steady-state type of activity, stillactivity, still the problems with drugs that don't have generic competition. >> bio similars. do you think they can play a part in a patient's access to the drugs they need? >> absolutely and is what they are intended to do. we have vigorously enacting the program. we have had a vigorous response. >> aa patient and healthcare professional confidence and bio similars is essential for savings to occur? >> i believe it is the number one issue.

we completed studies of seizure drugs because all these years later in the drug -- the urologist is not believe they were equivalent. they showed no different. >> your efforts of moving them forward will assist. thank you and i yield back. >> the german from massachusetts. >> the children from tennessee's line of questioning. the costs are prohibitive in terms of trying to develop some of these drugs. massachusetts and in the boston area we have blessed with 29 ipos, small pharmaceutical companies, companies come the market in the last two years. so we do have some growth in the industry. they are not dominating like they were before. she did not do a lick of

research, but the drug, and the gentle lady from district of columbia pointed out the next day it went from $13.50 per pill to $750 a pill overnight. and that is disgraceful. there is not a lot of shame at the table today. but this is disgraceful. it is well-known the impact would be great home of the public. so after you in august increase the price of the drug by 5,000 percent people who had no alternative on august 18 attorney employees an e-mail you were cced on regarding the increase in price, and she said that she

wrote, and i quote, there are patients now waiting for products to have a $6,000 co-pay. you just said that -- and you are under oath. you are subject to perjury charges. she is saying that these patients had a $6000 co-pay and you are saying in error had to pay more than a penny for a pill. >> allowing to provide some context. she said there was a $6000 co-pay, however we paid the majority. >> majority. >> everything but a penny? >> we pay the co-pay. >> glad to get you on the record on that. incredibly high co-pays.

>> in another e-mail. of the mountain thousand. did not compare access. >> he did not want to impair access. >> the axis excuse had nothing to do with the price. to enough they were based on gaps in the distribution network. >> our reclaim my time. she asked the question because there was a patient ina patient in north carolina with a co-pay of $16,830. >> yes, and we paid that down. >> four days later.

>> the presentation on patient access. and this is your presentation. patients experiencing increased co-pays and delays in claims approval, one has a 50% coinsurance percent coinsurance resulting in a co-pay of 16,830. that is your own company and presentation. >> leadership. >> those. >> those were the subsidies. >> i think we got a solution. >> congress has the power. i would suggest are regulations that we adopt an amendment that would anybody acts like touring is acting and increasing the price congress can suspend the exclusivity period, we can

eliminated the next day and contract with darpa, our research arm of government research labs producer drugs at no cost to the consumer. the problem is it will impact the good companies that are actually doing research, not the hedge funds. >> i didn't ask you a question. i'm telling you what we can do. it will hurt a lot of good companies and you are trashing the pharmaceutical industry doing a great job from organ transplants to cystic fibrosis, good

research is that are out there doing great work for your trashing that industry and are going to cause us to have to put heavy regulations on good companies and choke off of the drugs that will come into the pipeline. what is the impact? >> we are going to ask cues doctor woodcock per our previous arrangement in the lower to hopefully make the next hearing without any hesitation as we change this name place. previously introduced and was also sworn in. he too is under oath. four to five minutes. >> i thank you, mr. chairman. explain further. >> sure.

>> we reengaged a consultant that have been engaged previously by the prior owners. the made a presentation the conclusion was that given the reimbursement for the procedures size 12 or 14 thousands of cases, there were significant opportunities to increase the price without impacting on making it unprofitable for the hospital. >> it is neurology and other divisions. therapeutic categories.

>> they lost a patent. >> a patent. >> they lost their patents, but there is not generic competition. >> of a hospital settinga hospital setting, part of a procedure clinic. it is not the patient. they are actually in a hospital. their blood pressure is going through the roof and the dr. has no other choice but to use your chart. you raise the price 252 percent, $257 for a 2-milliliter vial. >> correct. >> laying there in the icu in your blood pressure go sky high the dr. doesn't ask you. whatever you charge the hospital for they have to pay. >> that is correct. it is used in emergency.

>> in the same way. you raise the person that 525 percent from $215 to 1,346 a while. you have an arrhythmia in your heart, things are circling the drain in a hurry to the doctor doesn't have a choice. he has to get that drug. >> they are subject to the volumes. >> a you're saying that you raised one 212%212 percent and 1525 percent they are so gracious is to drop the price 30 percent? >> we have gone to the hospitals that have the largest users, large cardiac departments who would be most impacted to make sure they have a significant impact. when you look at the overall portfolio we tried to address the issue of price

by 10%.10 percent. and by dramatically increasing the amount of patient -- >> i picked up something in your opening statement. i think anyone who has been a patient that comes home from the hospital, they get a big bill. somewhere in that bill is the medicine used. the patient doesn't up paying for that in the end. >> these type of transactions thought we have purchased some drugs. we raise the price, as you you mentioned. we were too aggressive. >> way too aggressive. >> we will not be looking for this kind of acquisitions going forward. >> you also did the same thing. it's a unique dragon people

don't have much for choice. you're giving it to for a penny. your making a lot of money. he would not even answer question he was so ashamed of himself. you are basically saying you are doing these people a favor. bottom line is, your company made aa heck of a lot of money on this drug in there only a handful of patients that needed. >> we did not make a lot of money on the drug actually. the committee has our financial statements. you will see that it is being offered. >> offered. >> people are hurt right now seeing increased premiums and deductibles. in this type of thing does not help. thatthat gas station can jack the price and people have to pay it. you guys are rest of the

same thing. >> thank you, mr. chairman. this unsustainable situation. in springville hospital wanted to buy that over they have to pay you? >> who introduced a hospital discount program. >> what would they have to pay? >> a hundred count it would be roughly $35,000. roughly $11,000. >> how much does that come to? >> $750 is the list price. they are offering discounts.

>> 1100 is the discount. >> no. 50 percent off. >> brookville hospital one of the bible. >> blue cross blue shield and it was covered. over they pay? >> that would depend on the copayment and coinsurance. about 25 percent. the examples that were mentioned above. the patient willthe patient will be asked to bring co-pay of $65,000. you would pay all that except a penny. >> except $10.

>> what if they were on obama care? what would be the cost for that bill? >> on obama care. if they are medicaid patient. >> medicaid. >> medicaid patient. patients that are treated through the 340340 b program, they can get the medicine for 1 penny per pill which represents two thirds of the business. >> who pays the rest? >> that is the price. nobody pays. >> why is impossible to just have a price or anyone who wants to know what the prices can go to a website and see. do you provide that? >> we provide a list price which does not reflect the price that patients makepay, hospitals pay, other government programs pay. the government program there

are often mandatory statutory reasons. >> reclaiming my time, the list price is just a starting point. >> that is correct. those people have no idea what the price will be. >> that's correct. that's the way pharmaceutical pricing works >> that's a mess in the industry. we have had a lot of outrage at the next year. we cannot under do it. we have a broken market, and there is a challenge for us as members who represent the public a hammered with this to deal with the broken market. anything we can can do to help with the fda we should, but on the other hand you have market power without competition and it is resulting in ripoffs, glaringly represented and i hope we can have an action

plan to streamline getting the drugs to market and deal with ripoff approaches where the companies are often times extending the license of the patent,, imitating a drug that is on the market. slight changes that don't increase the efficacy. bringing generics to market faster. and let's after two cups of transparency and pricing. that is the legitimate cost. incidentally taxpayers, 30 billion, nih, that is our contribution. the bottom line is that we know prescription drugs are life extending and pain relieving. but we are getting killed the price. >> the children yields five seconds.

>> trying to do the right thing. >> think the gentleman. >> i just have one. >> the benefit management industry a paper by applied policy. >> without objection. >> i will yield back my time. >> let's start recognizing mr. walker for five minutes. >> i appreciate the time. thank you for being here and testifying on this panel.

i want to go back a littlea little bit and talk about what you said the shareholders. as far as mr. shirley, you said he is a shareholder that you are unaware he is you largest shareholder. would you dispute that? not aware of that. >> a major shareholder. i was not aware he was the largest. >> as far as code of conduct most organizations, la clipper is that ever part of the discussion? do you have anything in your bylaws? prevent somebody from being

so outlandish and behavior? >> thank you for the question. is no longer ceo of the company, and subsequently our chief compliance officer just published a code of conduct for the organization which is customary for pharmaceutical companies. >> said published it when? >> she published it a few weeks ago. >> was that code of conduct published to push back a little bit of behavior? >> again, he is no longer a party to the organization and the code of conduct was put in place to make sure current employees behaved in a manner that reflected her values. >> i find it odd that all the sudden you have a code of conduct but as far as you know there is no link with the institution of this code

of conduct with the behavior. >> touring is a young company, just one -year-old. we brought on our chief compliance officer who are still the process of putting together policies and procedures and happened to you the code of conduct out a few weeks ago. >> a mere five days after he was in the emails about the timing of the price increase. and e-mails dated august 12 he asked when the price will be updated which is a compendium of drug pricing used by healthcare. he said i need an answer. when he said the last amended this was he referring to the 2,000 percent price hike that he implemented in his former company? >> i'm not sure, but i'm happy to check. >> we could you get that back? >> i can get it back. >> by the end of the week. >> sure. >> i want to come back and make sure i am clear earlier

you said there was 600 manufacturers waiting to here back from the fda approval. is that part of the backlog camargo's all-new? you are trying to reduce it for 15 months to ten months. can you explain the new manufacturer versus the old? use the microphone please. >> let me see if this answers most of the question. there is basically two big buckets of work. an incoming submission, something that comes in right now beginning october we will have a ten-month goal. that is a big part of much older submissions.

those have been at fda before they started. >> give me a number value. >> it was 2,866. abbreviated new drug applications in october 2012. >> ranking2012. >> ranking back as far as 40 months or three and a half years. >> forty months after october 2012, and many have been long pending fda before the user fee agreement started. so now we clear out the backlog anytime we approve an old the approval time aside. >> aside. >> what makes you think you go from 15 to ten? >> we made very substantial improvements to the program like rebuild the factory,

described and dr. woodcock short testimony. >> now recognize the gentleman from virginia. >> thank you. mr. flanagan, just to try to understand how pharmacological pharmaceutical research works, basic research a lot of it is done by the government. >> yes. >> i understand. your understanding of our research is done as a precursor to the development is usually done for the government. >> on technical expert.

>> in testimony in response to storms question but how could you go, whatever it was. .. >> the company we bought drug

from was not doing any promise to the goat research for toxoplasmosis. >> are you doing basic research. >> as we're doing early research. >> but you said other conditions as well. >> can you provide the committee with the list of these basic research efforts that this revenue is financing? >> i believe we can, i am not involved in the day-to-day operation of the research and development but i can check. >> but it is your testimony on behalf of your company is the what you're doing with this revenue. that was the rationale are part of the rationale for jumping the price of 5000%. >> yes, i, i believe we provided the committee with the research and development, the correct? >> i'm been a little more specific, in answer to ms. martin's question. i would like to see the correlation. i like to see where that revenue is going. from this increase.

your testimony that it was funding other good thing then the only way presumably we could do that is with this 5000 presenting price increase. let me a few question, a corny question, in your company to the public interest ever come up in terms of by jacking up the price we really could affect access? we could have unintended consequence of people's health, especially since we produce a drug no-no's produces. with produces. the only drug for this condition that exists on the planet and we just bought it, we control it and we have just increased the price 5000%. was there any discussion at the corporate level about the morale, the ethics of that in terms of impact on people's health and lives?

>> as i said in my testimony, is comfortable with that price increase. first because of the company's commitment to invest generously and patient access programs, both are important. we do we do not want the price increase to disadvantage patients in any way. second, the company's commitment to reinvest in research and development. i will just say that we believe there is a need for a new and better treatment for toxoplasmosis. >> would you agree, whatever your motivation and your ultra stick instincts, that promote public relations point of view it did not work out so a? >> we had challenges from a public relations point of view. i believe it was because there is a lot of misinformation. there continues to be misinformation out there. >> i would suggest and i know he is no longer your ceo, but when

you have an individual behave the way he did when he was ceo and in the public appearance today, and in his tweet, he has put a pretty ugly face in front of the public in terms of the industry on his motivation comments prophet motivation, his concern for patients, and a sense of ethical responsibility. i would echoing mr. lynch mr. lynch said, it has unfairly damaged the entire industry because of the practice of one ceo at one company. i just think, i would hope that it would cause a profound re-examination about the practice of jacking up prices the way touring did with this one. i you'll back. >> i think you. i now recognize the gentleman from georgia for five minutes. >> thank you mr. chairman. if it's true that your organization, pbmc pharmacy managers three of those

companies control over 75% of the pbm market. >> i don't have the exact number. >> i have a, 70% to be exact. 70% are controlled by three different companies. >> they get discounts-make. >> are you aware of the terms maximum reliable house. that's a pbm generated list of drugs that an insurance will pay for medication. in other words words they tell the pharmacy what you're going to pay. >> is created by medicare. >> and there are no two with that of the same. each pbm can have their own separate lists, correct. >> right. they have their own list. >> they choose their product that they want, they're the ones who dictate that. so on the other side, pbm's also have a list on how much they will charge the insurance company. that is a different list is that correct? >> sometimes come all the companies are different.

>> all the different companies are different. they have one less fear that they will reimburse the dispenser, they have another list here that they're going to charge the insurance company that they are representing. so you have two different list here. don't you find that somewhat awkward. don't you find it to be a situation where a pbm could distort the market greatly? >> no, because that is a decision that negotiated him a contact between the client on a pbm. pbm. there are millions of the contracts including those, the client thinks is in their interest -- >> if the point is you're deciding what you're going to reimburse the dispenser for and what you're going to charge the insurance company for. therein lies the difference. are you familiar with the print spread pricing. >> f. >> and you understand what sprint pricing is. >> f. >> that's when the price of the drug goes up, cause the pharmacy more to buy it, but yet you're still reimbursing at the lower right. for instance and touring when

they when the drug was $13.50 a pill, if you had it on. >> at $13.50 cents, viewed in increase that mac and she went up to 750 per pill you would still be reimbursing that dispenser $13.50. you would be charging the insurance company $750. that is spread pricing. that's was happening. you are not increasing, you're not updating the pbm's are not operating. >> that's an accurate. >> that is accurate. if that's inaccurate and let me let me ask you, why is it that just recently let me quote here, at a recent hurry of the judiciary committee one of your largest member companies who are not here today and i'm disappointed by that. i'm sorry that you have to represent them. we invited them and they decided not to come. anyway the judiciary committee one of your largest member company to testify december that they have people who constantly

update the list is that correct. >> i don't know about the specific company but industrywide pbm's update this regularly. >> that was the testimony in the judiciary committee. if if that's true, don't you find it somewhat odd that cms found it necessary to mandate, to require that these mac less be required every seven days. in 26 states have passed laws requiring pbm's to increase and to update their mac lists. if i met someone if you have teams of doing this. >> we just don't why this happened. they lobby for changes and got him. >> drugstores want to get paid what they're paying for. when companies go up from $13.50 to 700 dollars, that's a a problem. when we are only getting reimbursed $13.50 cents. that is

what spray pricing comes inches i noticed the profits of the pbm's have increased enormously over the past few years. in fact, almost double. i find that very disturbing particularly when you're talking about spray pricing. let me ask you this real quick as you know, i formally owned three independent retail pharmacies. i have a family member who got a prescription filled at my pharmacy, she got she got a bill that my pharmacy, later on that night she got a call at home from the insurance company encouraging her to use mail order pharmacy. a mail order pharmacy that is owned by the pbm. don't you find that the conflict of interest when a pbm not only owns the pharmacy but they are reimbursing here? is that not a conflict of interest? >> they said they are no conflicts of these.

>> that is a conflict of his interest. i've had experience when i was adjudicated if you don't know what adjudicate me it tells me what they're going to pay me, i've adjudicated clients and it tells me they were going to cover it. while this patient was still in my lobby. they got a call from the pbm saying hey, you can use our mail order pharmacy. that the conflict of interest. thank you mr. chairman. >> think mr. gentleman out no recommends for five minutes. >> thank you for calling this hearing, i'm obviously concerned about these price increases on a number of levels. one of the levels is a former hospital director myself, mr. schiller because isobel and nitro press hospital administered drugs, and his

hospitals that are bearing the biggest burden of your price increases. am i correct in that. >> that is correct. >> last year the cleveland clinic reported that price increases for isopropyl and nitro press added $8.6 million to its budget. isopropyl and nitro press about her medication. >> correct. >> given the choice between paying higher prices and risking the lives of their patients, most hospitals choose to pay the price, am i correct in that? >> icing that is correct. so my raising the price of these medications exponentially, your your words and hospitals to make that decision between their budgets and the patient's live in well beans, almost like holding their own patients hostages against them. valiant was not the first

company to raise prices, baxley bought isobel and nitro press from a company called marathon pharmaceutical. >> correct. >> marathon pharmaceuticals acquired the drugs in 2013 from another manufacturing, marathon also raised prices the tears in the years it owned and by 400 percent. so it had a net impact to the cleveland clinic, at that time of $2.8 million. the cleveland clinic is not alone in bearing the burden of rising prescription drug prices. the john hopkins hospital sustained and impact of $20 million in which 4 million was attributed to price increases for injectable drugs like isopropyl and nitro press. these price increases heard hospitals in ways that reach far

beyond the immediate care of patients. they also divert much-needed funding for research and other programs and technologies that improve care. the truth is hospitals are struggling in this country, we have to keep hospitals alive. there is no greater impact to your healthcare then when your local community hospital has to close. i've seen this. they trimmed their budgets, they absorb the price increase, the absurd the cost of uninsured care and they absorb it until they can't absorb it anymore. they can cut back nursing and staff anymore and patient's lives become endangered and they have to close. there is no greater impact to them when your local hospital close so that when you are having a heart attack it is not a ten or minute drive to the hospital, it's a 40 or 50 minute

drive to the hospital. that can be the difference between life and death. i understand from understand from information your company is provided to this committee that valiant has spent a nominal amount of money on research and development for isobel and i depressed, my correct and that. >> that is correct. >> the usual vindication of these exponential drug price increases that we need to do this because it is funding research, but you have admitted there is a nominal amount of money, the very drugs that are experiencing, let me ask you this, isn't it also true that one of the key elements of your company's operating policy and i quote do not bet on science, but on management. have i have i quoted that correctly? >> that is a quote from mike pearson, i don't know what the date is on the.

but i would say that this company has changed quite a bit. >> mike pearson, your company. >> if he is. >> and you have turned over newly sent him. >> if mike were here you look at his cause of the last year two, he has changed the way has described her company and her focus and emphasis on research and development. out outside in the pharmaceutical industry it is rare to trace the dollar revenue to a dollar r&d. >> i understand that shareholder return is your primary concern and objective but i say it is unconscionable to deprive hospitals of the resources they need to fulfill their primary objectives caring for patients in developing new and better treatments for the future. again, i appreciate you bringing this hearing and calling all of this information to light. i you'll back. >> i think the gentlemen. we now

recognize the gentleman from texas for five minutes. >> they give mr. chairman. you test them by your seven and $50 drug nobody pays for. some people get get for a penny, some people for $20. how much of my pain for that? rest of that is either coming from the federal government, medicare medicaid, state government or from the insurance company that is being funded by the premium that i pay and hopefully will never need the drug. you make it sound like nobody's getting hurt by this. but everybody in this room is getting her by these prices are they not? >> there are only 3000 patients in the united states that are treated with the drug. 2525% are covered by commercial insurance. >> right, so that's my insurance rate who has done great up under obama care. >> so the overall impact in terms of the budget print healthcare plan is very, very

small. >> but you're potentially setting another trend in the industry. by. by these urban drug and jack up the price, or gone by a generic manufacturer that is the only manufacturer of a generic drug which brings me to the fda. you're saying you're getting down to ten - 15 months, but you basically said the ten - 15 month monopoly monopoly for anybody with a single source of a generic drug to do that kind of price increase and name their price for that drug, that not correct mr. flanagan? >> can you ask a question differently, keep their fight? >> so the amount of time it takes the fda to approve a generic drug manufacturer, if there is only, if there's only one manufacturer in the generic market they basically got the 15 month it takes and i'm going to argue that number with you, they have an exclusive ability to sell that drug for 15 months at

1,000,000 dollars per pill they choose to do that. >> right. >> so what take so long to do this? >> i'm not an expert within all in a place to manufacture drugs. i assume that if you can manufacture xyz drug in a place then you have a clean facility, no roaches on the assembly line, if you if you want to add another product why should it take 15 months to get that approved? i assume you can test what other drug you make and see if it is what they say, what else is involved there? and if they do screw up making up 1800 bed drug is going to bankrupt the company. >> so basically to review a generic drug there is a scientific and technical review by chemistry manufacturing controls and stuff like that. >> how much of this is really necessary and how much of it is regulations that are what colors the toilet paper?

>> so the reason we have 80% prescription penetration in the united states is because when you or your family go to the pharmacy to get a generic drug that you can be confident that is the same as the brand. >> why does it have to take 15 months, how difficult is it to get output and analyze and see how it is. i can't believe it takes 15 months. the tsa tsa in a matter of seconds can televise have a bomb in a matter of seconds. why are we using technical technology. every day you delay getting a competitor in the market is a day that companies can screw the consumer. let me ask you another question on your numbers before i'm out of time. when doctor woodcock was my bs detector went options that we have a number of application way

down but she also mentioned a great many of them were in return due to technical defect. so are you artificially decreasing your numbers and wait time is a result of someone turning something in without a t crosser and i doubt it? >> no. >> so what are those give me an example of a technical defect. i fit with the virginia all the time in the case work i do. while you don't have this piece of paper, you don't have that. you go to the back of the line. my fears we have a bureaucracy at work here discussing the taxpayer money in the amount we have to reimburse medicare medicaid for discussing the insured money based on higher rates they have to pay for the premium so the taxpayers are having to pay for premium supplements under obama care. >> cert, please answer way.

u.s. route two example. one example would be if the application doesn't show that the generic drug would be bioequivalent to the grant so we want to make sure it is going to work the same as the brand. another example would be at the facility it is manufactured in is substandard and cannot produce the same quality drug. >> again, the amount of time this takes is criminal in 20 that we have a system with plenty of attorneys willing to go after any company that screws up the slightest. this has to be fixed. >> the gentleman makes a good point. i .. i left further questions on this. >> went to remind you that you are under oath by the way.

when you increase the price of the drug by more than 5000% on august 11, 2015 your hoping to avoid attracting attention for the media and the public that right? public is that right? >> yes, poor. >> yes, despite your best efforts it became a major news story. they sent an e-mail to a member of the board of directors laying out a pr strategy, i'm sure he paid a lot for pr here for responding to this unwanted attention. the board removed mr. correll is ceo and i quote as early as next week,". it also suggested that turing reduce the price of the drug. is that correct. >> i believe that's correct. >> i believe that's correct. >> you don't know? >> your memos regarding, do you have an answer for me. >> yes, that's that's correct. >> so he wrote, and i quote the rights drop have to be significant and tied to something. this cannot be seen as something

that appears to be as arbitrary as the price hike in the first place, do you remember that. >> yes, i do. >> if they recommend touring issue a press release announcing a quote, package of patient assistance program for patients, do you remember that. >> if they do. >> did you all those instruction. >> not all of them. >> okay, let's talk about that. they also recommended specifically type profits from the drug to the research and development of a new and more effective treatment for those patients you remember that. >> yes i do. >> and that's what you're doing today. the consultant also suggested a long-term strategy and i quote, forcing a focus on turing as a

research and development company, not a farmer, has run hybrid, do you remember that? >> yes, i do. >> of this email was forwarded to you by a board member, do you recall receiving then. >> i believe i, yes. >> it seems that turing followed most of the consultant's advice with one glaring exception. you never lowered the price of the drug. let me read another e-mail you received on october 2, 2015. since you're so can certifications and discounts, she read she said it's pretty clear now, it is price. she continued to say we all realize that we need a solution as soon as possible but we don't want to commit to something beyond the smaller pack that would potentially debilitate the business and risk of future

revenues. you remember that? >> yes, do. >> this e-mail indicates that turing was aware that its price increase created issues for inpatient hospitals and it also indicates that turing was unwilling to do anything to risk of future revenues including actually lowering the press for everyone. is that fair, that a fair reading? >> no it's not. >> will give me what it is. >> yes, we did learn the price was an issue with hospitals. in november we announced the discounting program for hospitals up to 50% based on feedback from hospitals we introduced a small account bottle to alleviate. >> i'm glad you said that, now let's move on. let me read an excerpt from an e-mail.

he asked if there is a lower price that would discourage generics from entering the market and generate positive pr? he replied to that quote, it is the best we don't pr something like that unless we are willing to commit to doing. he added, the only thing to pr is a patient assistance program in the r&d. he replied jokingly and this is a maybe you can interpret this for me, maybe its millennial thought, says my ours bring in a d in my can't wrap. >> you know what that meant? >> no answer and do not. >> but this was sent to. >> i read it but i don't know what that whole sentence mean. >> there are very real issues for people compromised immune

systems. this e-mail indicates that despite the promises of lowering the price turing has no desire to actually fix what it is broken. the thing that really gets me, the former ceo who just sat there walked out of this hearing a few minutes ago before he got out of the door he sends a tweet : everybody on this committee, imbeciles. did you know that? >> i was not aware that. >> so instead you spend all of your time strategizing about how to hide your price increase the time positive pr and coming up with the stupid jokes while other people were sitting there trying to figure out how they were going to survive.

>> no, that's not true. >> i said said it before, this is about blood money. one question for you, you said and i quote a few minutes ago you said in some cases we have been too aggressive and increasing prices you remember saying that? >> yes, i did. >> know just so we can be effective and efficient what we do, are you going to reducing prices? >> we have looked across our portfolio and we have reduced prices. >> are you going to continue to reduce prices? >> if you said you learned your lesson, you said the you have a new attitude. i want people watching this that know that they are not being ripped off. >> we look to cross our portfolio, we took a 10% reduction% reduction in two of our largest business unit, hard to retell ophthalmology, we reduced up to 30% major press

and isopropyl. we increased our patient assistance program, will continue to look at ways to improve access at affordable prices. at the same time manage our business so we can invest in r&d, manufacturing, manufacturing places like rochester and greenville, south carolina. we have made mistakes, we are acknowledging those mistakes and we are going to change, we to be a responsible corporate citizens part of the healthcare community we have made changes. >> so you're going to continue to make those changes. >> we are always going to look to do the right thing. we have made significant changes. >> thank you very, very much. >> thank you now recognize myself. the proper role of congress is not to micromanage a private company. it is not my role and i do

believe in the right to profit. i think it's a motivator to do a lot of good. i also do believe that it is imperative that people tell the truth, that there truth, that their ethical, that they not mislead the public, that they properly represent the truth. would you disagree that her disagree with that. >> i agree with that. >> let me show you a video a few weeks ago i believe it was on channel five. [inaudible] >> if it's up to the company which you raise prices and don't take that cash and put back into the research i think it's despicable you should not be in the drug company. we we take all of our cash, all of our extra

prophet suspended on research for these patients and other patients who have terrible, life-threatening illnesses. >> is that true? >> we invest 60% of our net revenues into research. >> that's not all of it is that? >> he may have met profits he may have misquote. >> he said we take all of our cash, all of our extra profit, what's extra profit? >> i'm not sure what he meant by extra profit, it could have meant that once we deal with expenses, operational and we take

>> you says that you are giving out increases and bonuses. we have a document from the agenda of october 15, 2015. one person had a pay increase of 250,000 dollars to 600,000 $250,000 to $600,000, correct. >> correct. >> another person 275,000 dollars to 600,000 dollars, correct. >> correct. >> another person 160,000 correct. >> correct. >> another person $160,000 to $800,000, correct? it went from an additional $160,000 to 800,000 dollars. >> i'm not aware of that one. >> we will release and look at it. it's from your agenda. it's from your agenda. so people can make a prophet and pay exorbitant salaries but don't say in front of the american people that were not making any money. and the person who is the major investor who says we invest all of our cash into research and

development. we don't even know if they are. we wanted to make sure that's even part of the plan. it sounds like a contrived pr plan in order to do that. you do that. you know who metro yacht charters is? >> yes i do. >> why would you know them? >> i believe we rented their charters for a sale for many. >> for a party, 23,000 $3000. did you spend money on fireworks? >> yes. >> did use been money on a cigar roller for 800 bucks. >> yes we did. >> so don't tell me you are losing money. don't try to pretend and tell us that $750 is dollars is justified when you have a woman who has aids and what she's supposed to do? is she supposed to tweet and try to get that for a penny is that how it works? >> no that's not how it works. >> so who pays the $750?

>> $750 is paid primarily by commercial insurers and that represents the minority patients, about 25%. that's a very small number of patients. >> but it generates a lot of money doesn't it? >> who pays visitors? are those the those the insurance companies, who are they, who pays their money who then has to pay you. >> i suppose big companies were insuring their companies were insuring their patients. >> again because there are so few the impact on their budgets, the budget impact is very, very small. >> what is your first year revenue? >> this year's revenue, gross sales were 98, are 20 million. >> is one drug that services 3000 people.

then you wonder why the average person who is trying to scrape by missing insurance rates go up double digits, screaming high is because the people like you. that's why they are going to. it is one of the key reasons. >> i i will add and i think i need to be clear that touring is a specialty pharmaceutical company. we are 139 employees. 36 of nine employees. thirty-six of which are dedicated to r&d. we are committed to taking that revenue that we generate from the drug and invested in next-generation treatments as well as other neglected diseases. that's a fact. >> i think that is legitimately part of what you're doing. but what your former ceo is saying publicly, to say that you're losing money, it's not true. if you're going to continue to lie to the american people

congress is going to continue to pro. i can investigate under this under the house rules. the house of house of representatives, the oversight committee can investigate anything at anytime. >> i am being truthful. i'm looking at our income statement and operating profit for 2015. >> i have additional questions i've gone far past my time. let's recognize this lauren. >> thank you mr. chairman. i have just before i started just want to date that heart disease and stroke kills one in three women. more than all the cancers combined. i personally experienced the miracle of medicine and the need when my husband had a heart attack. i really want to talk about r&d. in the 2014 proxy statement filed with the fcc, valid

reported that one of the key elements of the company's operating philosophy and i quote, do not bet on science, bet on management. it has been reported, financial reports that balance r&d was equal to only 3% of sales between 2014 and 2015 is this correct, 3% of sales is r&d #speemac the past year would have been about 4% of the total sales, but a big chunk of our portfolio, consumer products were generics which do not require r&d. if you look. if you look at our branded pharmaceuticals the number is 8%. last year if you look at what we spent to acquire late stage projects which we later commercialize was over $1 billion.

so we have a significant commitment, we have over 200 active programs and r&d, we expect to get approval for significant new law, drug and a new logic for the treatment of moderate to severe plaque psoriasis. we are projects and phase one, two, three which we hope would bring new products in the future there is the risk associated with it but that comes with the territory. we will continue to invest in our portfolio. >> 3% for r&d you said was $1 billion. what is 3%? >> if you look in her total revenue we spent about 4% of revenue, again we have a very significant percentage of our revenue which is consumer-products for four

generics where there is no r&d required. so it's about 80% on our branded pharmaceutical business which does require r&d. additional we spend $1 billion on acquiring late stage product last year, over $1 billion. >> committee staff received an e-mail from doctor benjamin -- who is conducted in nih funded research on exercise, and heart failure. i so i so probably the drug that simulates and causes the heart rate to go up uses the same biological pathway. now doctor levine uses this drug to conduct his research and has been impeded in meeting his commitment to nih because of the increase of cost of this drug.

he has attempted to reach out directly to your company to no avail. here we have a dr. who is focused on doing real research for people's lives. what should doctor levine do so that he can use this drug in his research to fulfill the requirements and perhaps extend the lives of individuals. what you recommend? >> i am not aware of that. now that you have made me aware but i think if you could give me his number i will call him tomorrow to make sure we help them wherever we can. make sure it is in a compliant passion. >> sir, you have to know the connection. your research that your funding, but also if you are increasing the drug that are being used in research you must recognize the impact you're having.

>> of course we do, if there's ever a situation where we need to do something about access that is something where want to do. i'm happy to talk to him tomorrow and see if we can rectify the situation. i am assuming it is all compliant. i'm assuming we can take care of that tomorrow. >> i just want to say before my time runs out. in america, while we are a leader in the world of r&d and medical research in some areas, we have to focus for medicine be part of the healing of people to a profit-making industry. every business should make a profit but it has turned from profit to greed. this is why this is important to me. i know there are senior citizens who are making

decisions between food and drugs , the medicine they need to live. then there is someone in your industry that is buying a yacht. i want you to be able to be part of the american economy and pay salaries that are, that will allow basic and even an advanced based on education quality-of-life. we are at the point where greed is not acceptable in america. i'm very concerned about that. >> thank you. your time is expired. i recognize the gentleman from north carolina for five minutes. >> thank you mr. chairman. thank you for holding a hearing. further thinking the staff for bringing this to the attention of the american people. it was obviously the work of this committee about majority and minority where we have highlighted this issue but it is

truly the issue be addressed. the best way to address it is to put companies that do the kind, to use the tweeted out word, imbecile pricing strategy, strategy, to put you out of business. so the barrier putting you out of the business obviously mr. flanagan, the fda plays a role in that. let me tell you why i am concerned. i hear from a number of stakeholders that they are afraid to even give me the details review retribution from fda in terms of the potential approval process that we go through. the reason my companies like this can compete is because there is no one to compete against them. they're small little drugs, orphan orphan drugs, things that for the average company don't pay, for big pharmaceutical

company doesn't pay. but there thousand, to have 20 million-dollar sales, $97 million in, lots of companies that would be willing to take that on, smaller companies. so doctor woodcock gave her testimony, did you agree with all of her testimony? >> yes, sir. >> said he agreed with her. she her. she testified also in the senate just a few days ago and are you familiar with her testimony there. >> yes, sir sir. >> so with that senate testimony we talk about the practice where making and how we are 90% we have made great progress, but i look at her testimony looks like you have only approved 25% of the applications over a three-year period. do you call that a you winning percentage?

>> so right now -- >> yes or no, winning percentage 25% over three years. >> i can answer can answer the question yes or no. it usually takes on average for review cycles to approve generic drugs. it's not that way for the brand side. on the brand side there's about a 90%. >> i'm talking about generics. so let's look at this. if you put up the first five or me one of those concerns i have is with the ambiguity and we have this particular letter which is actually a letter from doctor woodcock says the terms of the application process, that with certain types they will go ahead and allow the application to be filled out with less than 12 months of stability data, says generally we will allow it to happen with six months. on other drugs we will allow the application process to be

started with three months of stability. would you agree that. >> i'm not the expert on stability. that the pharmaceutical. >> so. >> that's a different office for me. >> okay. i thought you were the technical expert is what you said a few minutes ago. so would you agree that this is typically the way the fda does business? >> , that they get faster approval for generics in the application process? >> i don't think -- >> limited to the to the chase. put up the other slide which actually when the k2 spy. here's my concern, i have a number of stakeholders throughout north carolina across the country who are willing to compete with these two companies. they're willing to provide the drug to compete with the and they have been told by the fda,

we have to get a little more information, we have to wait for 12 months for stability data. instead of going with their own internal data, if you look at says the company initially submitted three-month long term accelerated process for three batches. can you do that consistently produce about these that want to compete with these, companies? >> i understand your question, the the same issue. it's a stability issue. is out of the office of pharmaceutical quality which is a different office. >> is there anything the fda can do to make sure we can speed up the process so we can compete with companies who are willing to price gouge on a regular basis. can you speed up your process? >> mr. chairman, can i answer, and another rules work. so two things.

first, if the submission comes into the door and it's for product for which there is not in her for which there is a drug shortage we consider those to be priorities and we expedite the review. >> is interesting because i have a letter that says from doctor woodcock that would suggest that shortage is not part of your decision-making process. >> so you're saying her letters right? >> i need to see the letter. we for sure consider -- >> will follow up questions on be on my time. we'll now recognize the woman from new mexico. >> thank you mr. chairman. i really appreciate you holding this hearing. quite frankly i share my colleagues outrage.

i think outrageous to soft of a word given what we have heard today, what we knew before today, what we still don't know after today, about what's really going on to make sure there is fair pricing, protected access from the patient x to life-saving drugs and treatment. so i want want to talk a little bit about my statement think it's my question about fda approval make sure we do everything we can hear to give the right opportunity so that we are focused on the right thing here. that is patience. that's the right thing to focus on. and all the e-mails that you have, members review and i have an e-mail mild, they make it very clear, particularly from touring that fda approval in that r&d, that none of those

issues were issues that cause the price gouging that we are talking about today. so as we are figuring out what we can do better i'm interested in what we should be doing to make sure there's accountability into the entire industry that is made at their practice to put profits and not small profits, outrageous profits to the patient. actually you certainly indicate it is not patients who pay, it's hospitals. its insurance companies, there's a lot of companies people that don't love insurance companies. amount try to shift the focus. pretty think the majority of their reimbursements come from? >> again, as i i said there so few patients treated with the drug a very few are covered by commercial insurance. >> when you're dying.

>> the impact is very small into. >> i'm going to interrupt you, so in the 3000 people have their hiv drugs shifted somewhere else and my out-of-pocket cost goes up, my hospital access goes up and you know was pan am? medicare, medicaid, veterans, tricare, medicaid, veterans, tricare, guess who pays for those? i do. every member in this audience does. every member of this committee does. i cannot believe that your indication here is that the cost really, in terms of the number of people who are impacted is so small that that is not really the issue. it is is the issue, let's talk about some other drugs. let's talk about gilead, the hepatitis c drug. other drugs that retail at $84,094,000 for 12 week course. we can treat, but because the

profit we are not going to cure. instead will create an environment where people will have to have liver transplant. i see a pattern here that is incredibly frightening for the overall aspect of getting a handle on healthcare costs, and clearly is a shift from moving from protecting patients in this design and it isn't the result of r&d. we we have many e-mails that would indicate that directly. we just passed 21st-century cures which is another indication. congress is interested in making sure innovation and research, development and fda approval without minimizing patient safety is a streamlined as we can. yet that is not an indication, at at least that is the result of this hearing. that's really an issue of how we determine what drug costs are,

and greed is how we determine the cost. given what you have stated today and give them the questions, the e-mails that you provided during this hearing about touring, would you say the practices that touring the same practices for all pharmaceutical companies? this is really, really just an issue for your company? >> touring pharmaceuticals is a research-based pharmaceutical company that invests. it's committing to developing drugs for rare diseases. >> said this is not the practice of everyone of this is your. >> i cannot speak on behalf of other companies. what i can tell you is we are not to go pharmaceutical company. as i said in my testimony i was with the price increase of the drug provided the company was willing, and it was to invest. >> i'm going to reclaim my 5-cent. >> this is how this works in i get to reclaim my time. the issue is i think it's clear

today that that is not your intent or motor. we have provided information that we not to suggest that clearly identify the opposite of that. >> i recognize the gentleman from georgia for five minutes. >> and mr. chairman. i want to go quickly to mr. flanagan regarding the generic backlog when mr. meadows was talking about. can you provide clarity as to how the fda is prioritizing applications to expedite the review process? >> yes, sir. there is a policy that's available online, you can find it on the website basically certain categories of submissions like first generic second essentially open the market to competition drugs and to mitigate shortage, hiv drugs

and a couple of other specific categories. >> so it's based on disease, disease, the prioritizing, so what you're saying? >> summer based on the disease, the shortages just based on whether there's a shortage out there and providers. first generic the pens on whether the market has already been opened up. >> there's no real standard policy. >> all there is a standard alliance were review cycles? >> is hard to answer that question because it depends on how long it takes the applicant to respond back to. >> okay targeted action dates are assigned and yet they're aspirational, noncommittal, what's the point of having a targeted action action date if it basically means nothing? >> industry very strongly requested them.

you avenue user fee program beginning in year three you get a cold day which tells you when were going to act in your submission. everything prior there were no gold dates. industry needed some kind of information so they could plan product launches and conduct other types of business planning, they strongly requested that we disclose them what her aspirations. >> is a true that they are virtually meaningless because there's no commitment there? >> no. >> will corning 20 said there aspirational but noncommittal and it appears that we have month, 50 months plus before we ever get these prioritized and get something going to the targeted should be basically meaningless. >> beginning, congressman industry strongly requested that we did the. >> were all requesting something be done, that's the problem.

you have targeted dates but the backlog is not getting any better, getting worse. >> the target action date say when were going to take action on each of the submissions on the backlog. but the way of organizing the backlog and disclosing to the companies who have submissions in there, here's what we think we will move on your submission. >> okay mr. chairman, i'd like to yield the remainder of my time to my colleague to georgia. >> thank you. was it a medic special medications then? >> does not. >> i describe one that's only available through specialty pharmacy. you said yourself that access to the drug was a problem problem when the price went up. i reclaim my time. when the price went up it became distributed only through specialty pharmacy, i cannot, my

it did, you created a specialty medication and you did it intentionally because you had a limited limited market with only 3000 patients. you knew you were not going to be able to make a profit let's you went up on the drug and it became a specialty medication. you abuse the system is what you did. the pbn owns the specialty pharmacy and now you use it only through specialty pharmacy. let me tell you, i've been practicing pharmacy for many years. i've spent my adult life dispensing medication to help people get well. i find it repulsive what you have done. i've seen advances in medicine that had been amazing to me. sometimes are practicing, we have advances that are just amazing, and i have always been amazed at the pharmaceutical companies. when amazed at the pharmaceutical companies. when you come in and you rape the public and you give this a black guy, i find it repulsive. mr. jamie and i want to thank you and your staff for bringing

this hearing and for all those involved. you have been most cooperative and i thank you for this. >> mac recta statement statement. >> sure, go ahead. >> when we purchased the drug it was always in a close distribution model. subsequent. >> then why did you say that access to the drug was a problem when the price went up. you said that yourself. >> access to the drug was a problem because of the distribution model we inherited from the previous distribution. subsequent to that we have taken action,. >> you said when the price went up and wait became a problem. >> i do not believe the price was a problem with the access problem. >> that's not what you said earlier. >> i think you. we now recognize the gentleman from new jersey. >> thank you mr. chairman. i want to follow up on mr. carter's line of questioning

i don't quite understand now. before you acquired the drug was there a problem with access to a? >> yes, there was. >> your desire to acquire this drug for which there was supposedly a problem with access, does that mean those people who are suffering from infectious associated with hiv and aids did not have access to it the way they needed it. >> in june, that was three months before we acquired, the previous manufacture did they went to a specialty distribution model, the close distribution. >> three months before you purchased it. what was going on before those three months? was it still that close distribution.

>> no it wasn't there is a broader distribution. >> was that a result of perhaps conversations with your company in anticipation of your company buying it. >> absolutely no not speemac, we believe that. >> there is plenty of proof that the arrangement with a specialty pharmacy originated, it back now with the previous manufacture but the manufacturer before that. >> walgreens which is the close distribution, right, they said in a form to all they're concerned about access to the drugs and access to their patients, other pharmacies. what did you do in response to that. >> we have added a specialty distributor that eliminates a lot of the red tape. if they distribute the product to roughly 90% of hospitals we are in the process of adding additional specialty pharmacies to the network. we have worked with a different state to make sure the processes are in place so they can access seamlessly. these these are the most vulnerable patients who are

covered. >> so once you acquired this drug and you increased the cost associated with this drug, it still eludes me why this was done, other than to make someone very wealthy. you all anticipated that there is going to be pushed back from human rights organization, advocacy organizations. from what i have read then from internal memos it did not seem that your company with at all concerned about ensuring that people who needed this drug can have access to it. it is about managing the message for your company. >> that is not true. the action we took reflect differently. we put in place multiple patients. >> it seems like you all ensure

and respond to a bunch of pressure and you have serious issues that you have to contend with now. your company is a very bad physical, public image right now. if you care to know that. i come from they, new jersey, we have large pharmaceutical companies, large universities, we do a lot of r&d. the people who engage in research and development are not trying to make someone a bill, they're trying to cure people. that is not even the issue here. you all weren't trying to do r&d, you, you were manipulating access to a medicine that already showed the benefit of treating a very dangerous disease and with that i yield my time back to. >> i now recognize from

illinois. >> thank you mr. chairman. i would think both you and the ranking money for your collaborative efforts to resist you. want to set up by talking about a couple in my district. there 7374 years old respectively, they're stressed everything a month to cover stressed everything a month to cover their expenses. the wife is diabetic and she has a number of medical conditions, for 2016 it will will probably turn out apart prescription possibly 600 dollars. her husband out-of-pocket expenses for prescription will be about $1900 per year. since they retired their seriously anxious about their finances, how will they continue to work for their healthcare. the wife feels endlessly guilty because her medication are the most expensive. even with some coverage they together face overwhelming pressure of having to manage the family's budget which after medical expenses only about $20000 per year. this is to pay their home loan,

property taxes, food, utility, this is, this is a crisis that is too common across the country. when i hear this raised and then i hear about 200,000-dollar bonuses for executives and a pharmaceutical company that purposefully shutdown distribution distribution of life-saving drug so they could make that money, it disgusts me. it's absolutely disgusting. the witnesses that testify today use many different tactics to downplay the harmful effects of their price increases. they want to ship the the blame and shift the attention and say the patient population is so smile on tran small. they're not being effective and

it's actually the large insurance company, not individual patients that their burden. let me tell you every one of us pay the insurance company. maintain offices in the obama care, we pay those insurance companies. this hearing has shown that this is hardly the case. isn't it true that during the price increase lead to astronomically higher co-pays for many of your privately insured patients? >> yes it did, but through her co-pay program we cap add $10. >> really? your internal memo identifies that one patient has insurance co-pay raise up to 50% increase, up to $16000. others have co-pays up to $6000. as a true some doctors treating patients in hospital settings were forced to switch to secondary alternative therapies because they cannot access the drug? >> i suppose that's true but in

response that we have discounted the drug by 50% and introduced a smaller bottle to better meet their needs and that seems to have resolved the issue. >> doctors are saying they had to switch and it was not there preference for what they would treat their placement. >> we are offering discounts now so the drug can be available for this patient. >> making firm that before turning own did it was widely available. >> yes it was covered by most insurance. i don't don't know what you mean by widely available. >> is it true that your price increases on ice up really nice repressor cut into hospital budgets. >> it certainly would have hit into their budgets, the the price increase was meant to stay underneath the reimbursement for the bundled rate. it would have had their budgets.

>> it absolutely did, back to the hospital there said they do plead important savings and result in less funding for research, programs and technologies that improve care. he further says that the high cost threatens patient access to critical treatment and creates financial burdens on low and middle income patients. these are only two of the many drugs your company owns and increase the price that is that correct. >> yes. >> how many other drugs have increase the price. >> i don't know if a.m. >> so you have so many that you don't even know how many other drugs the object of the prices on for everyday hard-working americans who are suffering from diseases. that's bothersome. your test by before tyrus tyrus and you don't even know how badly socket to the american public. >> we have 1800 products around the world. we certainly raise the price on

some and a number that you have mentioned. we acknowledge mcstay, we acknowledge going forward that we would not be looking for those opportunities to purchase these older drugs. when i took over at the beginning of this year we froze all price increases. >> have you returned to third price increases back to where they were before you raise them. >> ideal back. >> time has expired, there is a vote on the floor the committee will go into recess and we will come back no sooner than 1215. within a recess. [inaudible] [inaudible] [inaudible]

>> we will resume now, thank you for your understanding both rapidly. doctor woodcock has returned us. testified with us another committee and now you're back. we appreciate you going back and forth. consultation with the minority we will go ahead and start. we are now going to recognize the gentleman from texas. >> think mr. chairman. my first question, when you made the decision to go from $13.50 to $750 per pill, who made that decision? >> the final decision was made the former ceo.

>> all by himself? >> yes he made the final call. >> there's no conversation? you know in advance he found out after the fact that he made the decision. >> know there is conversations about it. >> was involved in those. >> the sr. leadership team. >> which would be? >> myself, president of r&d, doctor selena, the chief officer which would've been peter mild, i'm not recalling all of them. >> can you furnish a a list of all who are involved in that. to be frank i think you should be the only one enjoying the fun of answering these questions. did did anyone raise their hand and say this may not be a good idea? >> i think with the we had were around ensuring if the price went up that we would have the appropriate programs in place to ensure no patients were left behind. >> so nobody thought an increase of 5000 present was a bad idea. >> provided that we had the mechanisms in place to make sure patients do not suffer from the

price increase in second that we were committed to investing in r&d for the next generation toxoplasmosis treatment which we're doing currently. >> so help other people on the backs of the folks that have a 5000% increase. interesting. when you made the decision to go from $215 to $1356, 525% increase on the drug, who made that decision? >> the neurology another division of these products initially did the review and the review of the pricing, the market market for the drug. >> where those people. >> steve sandler was a gentleman who ran the division of that time. >> did he make the decision by

himself. >> no, he organized a meeting with senior management which my person and myself are included in that meeting. it was decided them. >> to anyone raise their hand and said increase of 525% my not be a good idea. >> there's always discussions and dissent but the bottom line is the decision was made. >> was the decision made an actual meeting, everybody vote all of those in favor say i, supposedly. >> definitely not a meeting when there is about. i can't recall how the final decision was made. as i mentioned we acknowledge that it was too aggressive. >> can you send me a list for next week of all the people that were involved in making the decision. >> i can try if that list exists. >> best effort. and again in the next week would be great to have a list of who was involved in a.

mr. schuller, wayne $257 to 800 dollars, with the same individuals involved in making a decision. >> it was the same meeting. >> excellent. i yield the balance of my time. >> i would actually like to recognize the gentleman from alabama for five minutes. >> mr. schuller, how large is trip for workforce. >> roughly 1000 people in r&d speemac, she's been on your own in-house r&d. >> this year we will spend in excess of $400 million. >> company products are in your development. >> we have over 200 active programs, programs, 100 of which we would consider significant and we would expect and hope to get a biologic for the treatment

to modern severe. >> i don't need a list, just wanted get an idea of how much you are investing in r&d versus how much you buy another branded drugs. there's some suggestion that you operate your model more along the lines of a hedge fund in that regard. how would would you respond to that. >> ..

where there is no competition, prices are high. we all understand that. do you agree that you have got all these generic drugs in the pipeline pending and if we can get those generic drugs into the marketplace they would have an impact on pricing? >> yes. >> to be let me ask you this, the fdr prioritizes reviews command issue about -- that the fda blames applications for the backlog. have you considered compiling a preferred provider list try to loosen some of these up? get them approved quicker? >> we fast-track all 1st generic.

they move them through, recognize the consequences. it might be 14 applicants it would be the potential 1st generic. >> ten years ago the planned immediate approval. announce 42 months. generic drugs are coming from. >> as i said in my oral testimony we were a victim of our own success. 88 percent of dispensed prescriptions are generic. thousands of generics on the market that have been

successful. the industry grew in response like a factory that had a great product. we have many more applications that the resources against that workload did not grow. we were able to negotiate the user fee program to provide resources to get it done, but we had that backlog. forty-two months is a reaction. 2500 applications waiting me start of the user fee program that are not going to get any younger. the new ones have a much shorter clock. >> the 1st generic? the new applications? >> the new applications. the 1st generics and that 2500 are few command we are expediting those. >> okay.

of the current backlog can you tell me what percentage of 1st generics? >> i am very -- it depends on how you define the backlog. >> 1400 submissions in fiscal year 2014 that only approved 409. your adding to that. >> that has a 15 month clock for getting back. get back to the sponsor and complete the review and 15 months. now because generics typically have multiple cycles of review the time to approval maybe longer.

in my testimony you see in the prescription drug world a new drug world up to 95 percent last year for a cycle approval. that took a lot of work and effort to get right. that's what we need. right the 1st time application. then starting in october we will approve them in tenten months. >> you expect to do that and what timeframe? >> ten months approval. >> the application submitted october 12016 and beyond if they are right 1st time will get approved and ten months. if they are deficient they will get an answer and ten months. tell them what they have to do. we get somewhere we go out and find that the buyer equivalent data has been falsified for some of the manufacturing so we have time to make sure that these meet the standards for the us.

these people will be forced to take these. if we prove them they have to be right. >> my time is expired. is the fda catching up or falling further behind? >> were doing a great job. >> my time is expired. >> thank you. unanimous consent requests. first one is a statement from governor collins of georgia. we also have congressman duncan it is the letter of december 152016 that he had received from joy. i asked unanimous consent internet into the record. congressman also has statement for the record. without objection we will enter is as well. i have a few questions as we start the 2nd round. and thank you for joining us.

the intention here was to generate roughly $1.5 billion. the money coming out. in the office of generics. >> across the program they hired over thousand people. >> the approval process for generics. >> a follow-up. >> what they are doing, to direct that down. >> i want to get into

priority review vouchers intended to incentivize treatment for rare pediatric and tropical diseases. badgers were supposed to shorten the review time to roughly four months. the frustration with the fda and the timing. recently there were sold for $350 million. roughly they wereroughly they were willing to pay. they thought it was a good business transaction to pay roughly $2 million a day just to get in line a little bit quicker, and i am concerned that not everyone can buy their way to the top in the front of the line, but this does demonstrate how backlog and problematic the demand is. does the fda have the

necessary authority to prevent the alleged abuse? do you think that there is any? should they be sold the way they are? >> again, this is an economic issue. recent vouchers apply to products. >> they don't have to actually market those drugs, correct? >> they need to be approved. >> they could be used for a variety of different things. you can use it for something other than that category. >> i have to comment on what you said. that program is completely on time.

move in front of competitors and reach the market faster. because for new drug being 1st on the market, and, and i know nothing about this but apparently must have a great deal of value. so it does not apply to a generic drug process. >> do you see any manipulation? >> about your with no real intention? >> the companies that we have awarded vouchers to have fulfilled the requirement of statute for being eligible to be awarded >> the lori is that the statute is inadequate. this provided a market way that people can get in line

sooner. we are concerned about spurring innovation and actual drug development. >> it was supposed to -- the existence of the prb the supposed to spur of the developersthe developers of tropical diseases a rare pediatric diseases to enter that space because they would get this reward at the end. >> actually spurring innovation again, when you have a difficult disease that affects such a small population it is difficult. not everyone can act all through his degree. this rises gone from tens of millions of dollars to hundreds of millions of dollars just to get the four-month edge.

that catches a lot of people's attention. i'm just asking the fda if it's fulfilling its original mission. >> two sides to it. stimulating developmentit. stimulating development and rare pediatric diseases are tropical diseases, it is too early to say because it takes a long time to develop one of these products. >> i'm sorry to cut you off. john jenkins, director of fda's office of new drugs has publicly criticized the program saying the program has already time and resources away from potentially serious conditions. and in your opinion is he right or wrong? >> salvaged by congress.

for drivers with accident forgiveness. >> basic concern is touring our values were any other company has the right to come manager the marketplace. so when you have the rapid rise in price edge of panic present pricing natural economics would suggest that creates opportunities for others to come in and create more of a balance to the true market pricing. into the marketplace and compete with somebody i think it is incumbent upon us. elasticity.

>> what i don't want to do is of government controls or government price controlling , but is difficult when you see patients that are suffering. they look at that equation. not taken stuff for myself? >> have gone well beyond my time. >> first off. >> the layoff. >> thank you both to the chair and the ranking member for having this hearing. i just want to say history of this industry is fascinating.

the gentleman given his a professional experience but as laser 30 or 40 years ago people invested because it was a low rate of return. i certainly don't think the addition is a bad thing. people in the public sector cancer cardiovascular disease. the concern i have is that although your companies in the individual, as a transition in the marketplace this is more a symptom of an overall cultural problem. and if i was a free-market year which i can be, you would be a symbol of what is wrong with my philosophy.

>> ask you to comment. examples us price over 100 drugs. the "washington post" prescription drug prices jumped from bloomberg. everyone is hiking drug prices. so you have puerto rico that the ranking member talked about. e-mails from your former ceo who refuse to speak on the record. it is my impression your doing what -- companies do. but itbut it seems like you are on track to repeating the same mistake.

that is also indicative to the whole industry. tell me that you have learned your lesson and there is a place where shareholders can be satisfied. this is an going to repeat itself you may retire but we are set up for failure in. >> you are not here. hundred 39 employees, six a dedicated to research and development. increased revenue, 60 percent in research and development invest very aggressively and generously. >> they don't incur any incremental out-of-pocket

cost. >> the patient's from government program pricing, those are your most vulnerable proud of the work we're doing 150 patients so that each year and to the dormant stage many people go blind. don't think there's anything wrong. i believe the decisions we made struck the right balance between the need to ensure patient access and innovation as well as

shareholder value. >> i don't think you answered my question. i will start with you. practice market pressures committee of a higher return on investment. tell me out. absent a you look back, we did a lot of good things. in the past we have looked for situations where older drugs there was a competition, increase

revenue by increasing price. we should not expect those are opportunities we look for in the future. we are taken aggressive steps career reducing prices by 10 percent on average in two of our largest franchises,, prescription drugs. who went to a 30 percent volume -based discount structure and significantly increased our patient to system programs. going forward our focus will be on developing a franchises. ophthalmology comeau of itself, bringing innovative products to the market.

thank you. >> thank you, mr. chairman. i appreciate those responses. although i understand why although i understand why you respond that way it does suggest to me i hesitate to have confidence that you have actually learned the necessary lessons that i think you need to. with that. >> the gentleman from georgia. >> follow up on a couple questions. >> i would like -- the application, the new application to help of the drug shortage problem. i understand right now your putting more emphasis on the approval and quality standards, you can in fact

approve a drug if indeed there is a drug shortage which has been done before. now you can address an issue of drug shortage with compounding. >> we would not normally do that. >> you control the list of ingredients they are allowed to compound. you could add one to that if there wasit was a drug shortage. you have done that before in the past. if you will, 2012 the fda wave the authority of an enforcement action against a compounded version of a hormone cream that is prescribed to lower the risk of women from premature birth. for the improved version became too expensive.

this could have helped us in the situation. this could have helped the american public. >> through compounding we could have addressed this issue of drug shortage because of significant price increase which has been done before. just one other thing, through the omnibus that was recently passed by congress we instituted a rule on office use compounding. another was language in the bill that directive the fda to issue guidance. i you still working on that? >> we are working on a set of guidances to implement the recent statutory changes.

i would hope that they would come out with them this year and draft. >> thank you. another question that was asked by colleague from new mexico and you just repeated it again. she asked your questionyou a question and he stated touring is a research pharmaceutical company. how many drugs have been taken from research to development? microphone. microphone. >> thirteen products in development. >> you have had none, but you are calling yourself a research pharmaceutical company. i think that's a stretch. i will tell you that when a company that calls themselves a research pharmaceutical company only puts in 5 percent of the profits back into research and development, that proves the point that they are not. i know what you have said.

when things went south your increased it to 60% to increase your public relations but before that it was only 5 percent. you said that your drug was being distributed through specialty pharmacy. are any of those owned by pbm? the answer is yes. which brings us to the pbm problem which is a great problem that we have in our country and particularly in the medical field. i want to ask you, over the past week or so there has been much in the press about a problem between one of the largest health insurers and one of the largest pbm's in our country, if they cannot reach negotiations were deal in a $3 billion settlement, if that is the case with one of the largest, how do you expect a small independent pharmacy to stand a chance

when one of the largest insurance companies in the world can negotiate with you? >> on that particular issue is a contract dispute, but -- >> can you imagine a contract dispute? one of the smallest and one of the giants? >> independent drugstores typically work with psa is that our. >> i'm concerned. i believe it creates rivers incentives. and i say that because his competition decreases prices increase. it is oneit is one of the worst things about the affordable care act. that is what is going to lead us to destroy what i believe is the greatest healthcare problem in the

world. i know your not specifically the problem but i can tell you they have to have transparency in the world. rep. collin just entered something into the record and has a bill that deals with transparency. i hope this is something we will continue to deal with. it is vitally important. i want to thank you, the ranking member command all your staff. >> we now recognize the ranking member. >> on the witnesses to know that i fully support mr. carter and his efforts because i have had a lot of people in my district that are very concerned about that issue. i plan to join you in your efforts. marathon pharmaceuticals. increase their prices.

the hospital budget was significantly impacted by marathon price increases. jacked up the prices even more. 525 percent in 212 percent. stretch the budget even further. the discount to some hospitals. 30 percent discount on 500 percent price increase.

>> the issue from a portfolio.of view. he realize how much that hurts. i don't know whether you heard the testimony. these hospitals are suffering big-time. that means some of them, they are not like johns hopkins, best in the world, but they are suffering big he says somebody is going to pay. somebody has got to pay. in the hospitals are paying big-time. ..

hiv patient advocacy may react to a patient inc. -- it is highly organized sensitive and action oriented. significant price increases that could result in a backlash from patient advocacy group particularly if with patients -- i'm concerned about this because in the district that i live in,

the zip code has one of the worst hiv situations in the world, in the world. so that is why you are going to hear me talk about this. it would be legislative malpractice for me yet the company still increased by 5000%. you are raising the price, so did anyone stop and think about the effect this price increase would have on such -- yes we did and we took action on that, that is why again, it's important that we participate in medicaid

340b, we offer it to the most vulnerable patient for 1 penny. >> but you are worried about aids committee absolutely. >> yes you are worried about the pr,. >> we were worried that there would be misinformation in the public domain and that is exactly what happened. so our effort from a pr perspective was intended to correct the information and make sure that patients understood that we have these programs in place that they could access it at a very affordable price. >> another memo from octoberoct, 2015 and it should give the groups like the human rights campaign -- i'm sure it will invigorate them to continue to fight for the people they represent. this is a quote. the human rights campaign has been vocal in the media about pricing issue and is potentially

most vocal organization to garner media coverage. while they primarily political, given their action we feel it would be important to get a meeting with ceo ted griffin and to work with them to better understand the company. so you thought it was political that they were trying to make sure that people suffering from aids get the proper medication that they need. >> we thought we needed to engage all important stakeholders to make sure that they were aware that the most vulnerable patients, over two thirds can access that penny at that drug at a penny per pill. >> it is been reported that in 2014 volume led the industry

raising prices on 62, so you had just a few drugs that you raise prices on. sixty-two of its its drugs by an average of 50%. in 2015 they continue that pattern with the highest average increase in the industry, 65% across 50 drugs. according to the data, five of the ten brand-name drugs that had the largest price increases are those drugs. of those five to increase by more than 500%, one increased by 600% and one by 800 percent, percent, once skyrocketed over 1000% just 15 months. one drug in particular, drug used to treat patients with type two diabetes increased by 800% over a six-week period. is that true? >> i'm not not familiar with all

of those numbers, but directionally that is true. >> the massive price caused pharmacy benefit manager to announce on january 29, 2016 that it is intended to remove that drug from its formulary. this is what they said. they said, to protect clients and patients from wasteful and unnecessary drug, express scripts will exclude this drug from our 2016 formulary with fda approval of a generic approval. i asked you earlier and you danced around very nicely, you did a great dance. what were you going to do, you admitted under oath that you had gone too far. i'm asking you, are you going to tell the people which is watching this by the way, what

are you all going to do further? you talk about what you have done, what are you going to do. as far i'm concerned we saw problems. >> first of all your right. we have made some mistakes. >> you said that before, got that. >> we have frozen all price increases other than for gastrointestinal drugs this year. >> well, how long will that price freeze last? until the end of your? >> i can't commit. we raced at the board level and at the board level we decided to freeze any price increases that have been proposed for 2016. we also rolled out our walgreens program where we took a 10% average price discount off ophthalmology and dermatology drugs. the 30% discount on two other drugs for any significant users

of that will be availing themselves of a 30% price increase. i'm sorry price decrease. going forward we are not going to be looking for those opportunities such as isa prelate nitro nitro press, our focus is going to be on our core franchises as it always has been a round to rheumatology, ophthalmology, women's health, consumers healthcare. that is where focus is going to be. on our pipeline, manufacturing and delivering innovative drugs. we have to do a better job at getting the balance right between being friendly and good corporate citizen and good partner in the healthcare system. we will work very hard to get that balance right. >> thank you very much. i appreciate. i have have to say this, i really, i cannot tell you how much i appreciate the searing. >> thank you. >> i now recognize the woman from new york. >> thank you, joined the ranking member and thanking you. mr. schiller, how much compensation have you received

since joining the valiant, including salary, bonuses, stock -based compensation? is it more than 20 million including your current stockholders? >> it is. space. >> how much is it. >> i have not added up, 2014 is 27,000,000 dollars. i $27 million. i am incredibly fortunate well compensated. if you could get it back to us in writing i would appreciate it throughout this hearing, everyone is citing consultants as the cover i would say is increasing prices. would you please identify those consultants. >> first of all, while we mention consultants, we do not want to cast blame on anyone. we

want to accept responsibility for our own action. the consultant we refer to for nitro press and isopropyl was a firm called mme. >> could you get back to us in writing the consultants that you used in all of these price hikes and in your business? also what consultant did you use? for these price hikes. >> we do not use any consultant. >> i was stunned by the internal documents that the majority secured. in particular in exchange with mr. pearson where he shows in three different graphs that the increase in earnings for your company was almost completely and totally price increases.

i referred to the q 15, he cites everything except the u.s. grew a total of 26,000,000. these other firms overseas did not grow your growth according to his graph. the remaining 305 million came in totally from united states. he goes on further and says out of this 61 million of that growth came from volume whereas the remaining 244 million of growth came from price increases. my question is, how do you justify these price increases, particularly on drugs that are the sole source of treatment, there's no other manufacturer. how do you justify these price increases and did you ever think of the impact on patients, hospitals, other providers, on

the government, on the taxpayer? you say that this is going to be covered by health care, or medicaid, or or medicare, or whatever. that comes from the american taxpayer. that and the copayments. mope many people tell me that there copayments have gone to thousands of dollars which they cannot afford. how do you justify that? how does your company justify that? >> when we decide on prices for drugs in the past we took in a number of factors including clinical value, alternative therapies and patient access. that's obviously critical. >> may i add that in our memos that we got from you that patient access was decrease after these price increases, that major hospitals cannot even

get access to these drugs, they were not covered by any other form. people could not get treatment. >> i am not aware that people were not able to get access. >> ascended the memos. i started reading last night and i can go to sleep. i tell you i don't even think this is a hearing, this is a scandal, an absolute abuse of power, abuse of the pharmaceutical industry, it's a scandal. i would like the permission to put into the record additional questions in writing for you to answer for us, both of you. i'll back to balance my time. >> as we wrap up, tell me again the factors that you take into consideration when pricing a drug? >> it's a number of factors

including clinical value, alternative their peas, patient access, obviously it's quite subjective. in some of these situations we have talked about we have clearly gotten it wrong. >> anything else, anything else on that list. >> what consideration does turing take into place when considering the pricing of the drug. >> i think first they take into consideration the value of the medicine, we took into consideration the size of the patient population, other in the category, the need to invest in innovation, the assessment of whether not there mandatory rebates and things like that with the product. that i think i mentioned innovation and to fund patient access programs. >> i'm a conservative it guy, i

want people to make a profit. you know i feel like you're both lying to us? >> you do not say prophet and if you don't include that as a factor in how you price a drug, your line. you are not telling the full and complete truth. you can tell me about access and all the other thing, but profit is a motivator, i happen to not think it's an evil thing but i think you're purposely avoiding it. i don't think you're telling the full and complete truth. we want people to make money, you can't be in business and not make money. >> of course we expect to make a profit. >> then when you price a drug is a part of the consideration. >> the white you listed out. >> again, we we expect to make a profit, think what's critical

and we mentioned it in the need for innovation. >> i don't believe you. that is not the history of turing. >> touring is a brand-new company. >> exactly and is a better model to understand because valiant has literally over a thousand different items, they have long history. we could be fairly critical of certain things, but when you have a drug that is acquired, that's that's been on the market since 1953, then you start to understand what happened here, again, when it gets abused and it goes too far and you're taken advantage of and you lie to the public, you go on television and i'm not saying you personally but when the person who owns the plurality of the company here it appears that their cheating the american people. i think your boat being disingenuous and incomplete in your answer. i want want you to

reconsider in the future, profit is of course part of your calculation and motivated. you're not in a sit there and not calculate out the profit lines. you don't rent yachts and fireworks and all that kind of stuff and lester able to jack up the price. you're out there marketing a drug that is now $750 in your tell me what the majority of the people they discount that down to a dollar, who's been the $750? suckers. you know who they are? the american public because we all pay our insurance premiums, we pay our bills, we we go to the hospitals, and your extravagance is something we all have to pay for. >> pennies its pennies. >> and that makes us sick. >> don't tell me its pennies. you have a drug that affects less than 3000 people out of 330 million people but if you

multiply of what you're doing out of the long course of everyone else in your taken advantage of the system. that's why the pressure goes back to the government of the fda to increase the competition so there's a proper balance here. if you can find the right amount of profit, not have congress set a price control and that's why we will continue to do this. this is been a very fruitful and enlightening hearing. does the ranking member want to speak. >> ever researched a permit? >> a research department department. >> yeah you said year spent all this money on. >> no research. i'll get to development in a minute. how many scientists you have in your scientist department. >> we have 36 of the 139 employees. >> you have 36 scientist? >> 36 people in research and development.

generally having a science background is a requirement of working in r&d. >> so you you have 36 science types folk doing research. so the money you are spending on r&d, how much of that, what percentage is development? again we are separating development. >> i don't know if i have that exact number. i think we can go back to the president of r&d and get that information. >> houston can i get that. >> as soon as possible all column when were finished. >> note just one question for you, do you all ever meet with the hospital associations because there's a lot of hospital probably most every hospital in this country that need those drugs that we're talking about that you were talking about their suffering. you meet with hospitals? i know it affects hopkins.

do you meet with them? >> i have not personally, the head of the division were those drugs have reached out to all the major users and had discussions, we have also reached agreement with large group purchase organizations that by for the hospitals to make sure that those who need the discounter getting the discount. >> so those that need the discount are you saying some are saying we don't need the discount is that we are trying to tell me. >> that is a poor choice of words. >> will tell me what you mean. >> we wanted to make sure that the heavy users of those drugs did not have a big burden from the price increase so that's why we teared it toward heavy volume

users so the largest users will get a 30% discount, lighter users users will get a smaller discount. >> love you have a hospital that's a small hospital that need those drugs desperately them they don't get as much of a discount. maybe some small town in south carolina, wherever as opposed to hopkins, right? in other words that might hurt them even more. hopkins is a big international hospital. they are complaining. big-time. so they would qualify for the big hospital discount right. >> i would assume so but i can't really specifically. so my point is, and i'm finished with this mr. term, i think you made some good points about these hospitals, our community hospitals, hospitals are in the best they can with what they got, this is all cutting into

their bottom line. but the chairman is absolutely right, i absolutely have no problem with folks making money. when it gets to a point where you're basically is about greed so that you can make what he make 26 million? >> 27 million. >> what about you, how much money do you make. >> i'm with a private company i don't know if i have to disclose that. >> okay well i'm sure you're met making a nice sum. >> not as much as him. >> will guess what the people in my district are making like 30,000 dollars a year. $40000 per year. probably the money that you spend in a day or a week, they make in a year. yet they have to get drugs to stay alive, so you know i hope.

>> are you in contact with each other. >> with mister's gorelick. >> on occasion, yes. >> again i want thank you for being here. >> this committee stands adjourned. [inaudible] [inaudible] [inaudible] [inaudible] [inaudible] [inaudible]

[inaudible] [inaudible] [inaudible] [inaudible] >> on the next "washington journal", the history of new hampshire primary with adam smith, co-author of the first primary. a book book about the states world when presidential election. former new hampshire state senator carrie lambert on his support for jeb bush. later, bert oh and on his support for bernie sanders. "washington journal" is live and you can join the conversation with your calls and comments on facebook and twitter.

>> village town and city, folders brain brave winters to cost the road. thanks to the people of new hampshire it's good to be back here new hampshire. >> first in the nation primary. it's great to be back new hampshire. >> they have called new hampshire's primary the most cherished of american political right. >> governor, thank you so much for coming in.

>> this is a place where you can observe a candidate and the heat of a dialogue, and the heat of getting tough questions about their position on an issue, it's not just a place where there's scripted speech. >> new hampshire takes its first in the nation primaries very seriously. this is a series of town hall meetings will be having. this is my 20th town hall meeting. welcome to our 100 20th town hall meeting here new hampshire. >> world leaders met today and london to discuss relief effort by syrians affected by the civil

war. they pledged 10,000,000,000 dollars in a, the most ever raised in a single day for humanitarian cause. following the meeting participant talks to reporters, we'll hear from british prime minister, the german chancellor, prime minister, the german chancellor, turkey's prime minister and un secretary. this is 45 minutes. >> thank you. thank you very much and good afternoon. today's conference passing the largest largest amount of money ever raised in one day in response to humanitarian crisis, with well over $10 billion pledge. [applause]. today has been and is a day of hope, a day about saving lives, a day about tolling futures, a day about giving people the chance of a future, the chance of a life. i want to thank everyone that has, and been so generous with their time and with their resources to help with this

desperate situation. we have combined a renewed efforts to address the shortfall in humanitarian funding with a new approach to provide the education and jobs that will bolster stability in the region. all of this is vital work, vital for those suffering inside syria, vital for the refugees, vital for the countries in the region that are doing so much, taken together, what we are delivering today can play a crucial role in preventing refugees from feeling they need to risk their lives on the treacherous journey to europe. so on funding we have secured approaching $6 billion for 2016 alone and a further 5,000,000,000 dollars over the longer term until 2020. it means millions of people will receive life-saving food, medical care and shelter in syria and beyond. the police that britain has played its part doubling what we committed last year with an additional 510 million to pounds

for 2016 and taking our total crisis over 2,300,000,000 pounds. the leaders of jordan, lebanon, turkey have jordan, lebanon, turkey have pledged to ensure all refugee and vulnerable children in their countries will have access to education. international community is back in them with resources which will allow them to ensure there is no lost generation. as a result, 1,000,000 children currently not in school will have access to education by the end of the next school year. this is not just morally right, it is vital for long-term stability. we we cannot have a generation of refugees left out of school unable to get work vulnerable to extremism and radicalization. third, the countries in the region have also made a courageous commitment to open up their economies to create new jobs. again today the international community is supporting them

with the resources to turn this commitment into reality. along with funding for the un appeals, this includes around $40 billion of loans from international financial institutions. the opening up of european markets to encourage growth and investment in the region. as a result result there will be over 1 million new jobs in the region for refugees and residents. of course today's achievement is not a solution to the crisis, we we still need to see a political transition to a new government in syria that meets the needs of all of its people. aid workers still need access to hundreds of thousands of innocent syrians and besieged times. we must redouble our efforts to prevent the intolerable levels of violence against civilians. ensuring all parties bring in a median into median into the ongoing violations of international humanitarian law.

we look to russia to use its influence with the regime to end its attacks especially barrel bombing. they should support steps of deceased to cease-fire and mandated by the united nations secure to counsel. the difficult negotiations of recent days only show how challenging the road ahead will be. with today's commitments combined with the un's agreement to drive forward planning for recovery, our message to the people of syria and the region is clear, we will stand with you and we will support you for as long as it takes to secure peace in syria, to secure stability to the region and to give syrian refugees a chance to go back and rebuild their homes and their country. the crucial point of today is the money raised will save lives, will give hope, will get people the chance of a future. that, i think is a good a good and vital d