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.

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[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.