infectious diseases society of america, human rights campaign, national alliance of state and territorial aids directors, national multiple sclerosis society. finally, mr. chairman, there is one more letter i would like to submit, and it is one of the first letters i received on this issue way back in 2011, and started this journey. ..

i kept up with me for the past five years and it has motivated me every day on this journey into so i ask unanimous consent all of these letters be included in the record and with that, i yield back. >> i will hold the record open for any members would like to submit a written statement and will now recognize the witnesses we are pleased to welcome the panel. the president chief executive officer of the pharmaceutical care management association. doctor janet with the center of drug evaluation and research at the drug and research administration. she's accompanied by mr. keith flanagan director of the office

of generic drug policy at the united aids food and drug administration whose expertise might be needed during questioning. by prior arrangement we are going to excuse her at roughly ten times for 30 a.m. as she testifies in another committee to accommodate this we appreciate your participation in those hearings but you will be excused if 1030s as we previously agreed-upon and she will be replaced by mr. keith flanagan. the interim chief executive officer of pharmaceuticals international, thank you for being here. the chief commercial officer returning pharmaceutical and we have mr. martin the chief executive officer we appreciate you being here pursuant to the committee roles all witnesses are to be sworn in before they testify and we will also be swearing in mr. flanagin if you would all rise and raise your

right hand. [applause] do you solemnly swear or affirm the testimony you are about to get will be the truth, the whole truth and nothing but the truth? >> what the record reflect the witnesses all answered in the affirmative. to allow time for discussion we would appreciate limiting your statements to five minutes. you are now recognized. >> thank you esther chair and other members of the committee. i'm the president and ceo of the management association representing america's pharmacy benefit managers. pdm is administered for more than 260 million americans with coverage to employers, unions, state government plans and other sources. over the next decade your project to save 654 billion or up to 30% on drug costs while still offering broad choice and

access. we reduce drug costs in several ways, they negotiate price concessions from drug manufacturers and discomfort from drug stores and offer more affordable for pharmacy including generics and affordable brand medications and manage high cost medications improve accountability of the supply chain. pbm is most notable for the administering part d. plans. since the launch, part d. has come under year after year with countless choices to patients and perhaps the most popular program in america as the gao reports one way the plans reduce cost is their ability to negotiate prices with drug benefactors and pharmacies. they do that by putting competing drugs and drug stores against one another and using differential co-pays and other tools to encourage patients to choose the more affordable option. competition is the key as you can see from the example for the

drugs to treat appetite to see. the price of the drugs has been cut nearly in half over the past year as new brand competitors enter the marketplace. pbm's will demand greater discounts as other competitors and other states. the pricing tactics discussed today are just one piece of the larger puzzle and that's important to note they highlight how you can't separate the strategies to promote those drugs. many companies use marketing strategies to reduce awareness and resistance in higher prices but ultimately increases the cost of care. one of the most prevalent is the use of the date and debate and switch co. assistance to ignore generics and start on the most expensive brand instead. unlike programs for the poor and uninsured come assistance programs specifically target patients with drug benefits and encourage them to bypass is this expensive drugs for higher cost brands. the coupons are different than

normal coupons for groceries and other products to pay 100% of the cost and get 100% of the benefits benefit because they pay only the cost of the co-pay comes a 25 or $50 in order to make the third-party offer coverage the employers unions and others pay hundreds of thousands more for the most expensive brands on the formulary. such practices are considered illegal kickbacks and they've long been_conceived by the office of the inspector general. however, the co-pay marketing programs are spread in the commercial marketplace and play a few roles on increasing cost. to outline the problem, what can policymakers do about it? first we need to accelerate the approvals of the brands against competitors but face no competition. second, accelerated approvals of generics to compete with the brands that faced no competition and of of course of course i would defer to doctor woodcock on how to do this, and i know that is not an easy task. for congress should create a

government watch list of the off path and brands that don't face competition for potential buyers are aware the policymakers are monitoring the situation's. finally, co-pay coupons should be considered illegal kickbacks in any federal program that receives federal subsidies. thank you and i look forward to any questions you might have. >> thank you, or woodcock you are now recognized. >> ranking member and members of the committee i'm janet woodcock of the drug center we regulate generic drugs as well as brand drugs. the legislation established the generic drug program has been extraordinarily successful. today about 88% of prescriptions that are given out and spend in the united states are generic drugs saving the public its estimate of almost $1.7 trillion recently. in the last decade the generic drug industry group very rapidly

and globalized its operations. the fda generic drug review program did not grow significantly and fell behind those in the review and the inspection capacity and a large backlog of crude. to resolve this in 2012, congress enacted the generic drug user fee act and a negotiated agreement between the generic drug industry and the fda. this was a five-year program during which the industry would pay $300 million per year in fees and fda would attempt to meet a progressively more difficult series of performance measures over that time. in the three years since it was enacted, they met or exceeded all of the performance goals. this has been a formidable task and in these three years we have been managing over 6,000 generic applications. the 2500 hour piled up at the

start of the program it almost 3,000 have been submitted in the three years since the program started. the good news is over 90% of the applications have received the review at the fda or the review communications and over 1700 have been approved or tentatively approved. tentative approval means they are waiting for the patent or the exclusivity to expire. over a thousand have been sent back to the industry because they had deficiencies. this means there's only about 600 applications out of the 6200 awaiting review and many of these have been submitted recently. the generic drug backlog was a big problem caused by rapid growth in industry submissions not matched by corresponding investment in the fda generic review program. this was ultimately fixed by the user fee act passed by congress.

it takes some time for us to dig out of this hole and it would take a bit more time before we are fully caught up. nevertheless, applications have been some editing the last two years, 2014 in fiscal year 15 have a 15 month review clock that we expect to make and buy this october, we will have a ten month review clock so an application submitted this october or beyond we would expect to completely finish the review and get back on in ten months. it's the older application that we need to clean up and we are working very hard and very successfully at doing that. the purpose was to introduce high-quality fda approved competition into the market to improve access for patients. 65% of drugs have generic competition right now and another 24% are still protected by patents or exclusivity so they are not yet eligible for

generic competition. 10% have no protection either patent or exclusivity that gate of a lack they lack generic competition and application submitted. 2% have applications with the fda awaiting approval. those were all expedited. we expedite all first generics and those are all moving through the process and getting reviewed and so forth. under the system, we have a potential to get on the market very fast because the first generics are prioritized and all applications will have a ten month review clock. now i am as he as you said is scheduled to testify at a second hearing this morning beginning at 10:30 and i may need to depart before all questions have been answered so mr. keith flanagin who's the director of the office of generics policy

will be able to answer any technical questions about the generic program after i leave. so i think you very much for your attention and i look forward to answering any questions. >> you are now recognized to answer any questions. congressman cummings and members of the committee, thank you for the opportunity to testify. i've been with valley -- valeant since 2012 if we've grown substantially. today we are a large innovative company that employs 22,000 people around the world including 6,000 in the united states. we have a team hundred products including 200 prescription drugs in the u.s.. we are leading dermatology, ophthalmology, consumer healthcare. our brands are known to many americans.

we have a large u.s. presence including 16 manufacturing sites and we are making significant investments in the united states. in rochester new york alone we've invested more than a quarter of a billion dollars to upgrade the plant and added nearly 200 jobs and we expect to invest $500 million more over the coming years and that 630 million jobs. we have heard very clearly congress and the public's concerns about the drug prices in the industry generally and valeant increases in prices including for two of our drugs and we are responding to those concerns. we created a volume-based rebate program providing up to 30% discount and we just launched a 20 year partnership with walgreens that will provide a 10% average price reduction for grand dermatology ophthalmology products and a price reduction for up to 95% on certain brand drugs where there is a generic.

these steps are in addition to the existing programs that help ensure that out-of-pocket expenses don't prevent eligible patients from receiving the medicines they need. we expect to spend more than a billion dollars in 2016 on patient assistance. i'd like to specifically address the cardiac drugs used in hospital procedures which there's a fixed rate of reimbursement by the payers. these are not drugs purchased by patients in a pharmacy, only when we acquired them a commission be outside pricing consultants review the market. they are valuable to the hospitals and patients and that's a fixed reimbursement rates for the significant increases without eliminating the hospitals profit. based on these findings we implemented a significant price decreases. since then we've experienced about a 30% reduction in volume as hospitals move to alternative drugs. avoiding discounts implemented

will address the needs of those that are large users of the drugs. now let me say a word about the commitment to research and development. valeant results make us the leader in the industry. our productivity drugs approved for the dollars spent is seven times higher than the average of the 15 companies with the most new drug approvals. in just the last two years for have valeant launched 76 new prescription drugs to generic drugs, medical devices and other products in the united states and there's more to there is more to come from the robust u.s. pipeline which has more than 200 active programs. we expect approval this year of a significant novel treatment for glaucoma and a biologic for the moderate severe plaques or diocese. we believe that r&b should focus on outputs and shouldn't be judged by spending alone. nonetheless, the spending is significant and we expect to exceed $400 million in 2016.

we have 43 facilities with a thousand employees worldwide. in addition to the internal development we followed a successful model of the technology industry by acquiring valuable r&d assets. mr. chairman, where we've made mistakes we are listening and we are changing. our walgreens partnership is a key step forward but we have more to do. through internal development and acquisitions we developed a portfolio of world-class franchises. like other pharmaceutical companies we will sometimes adjust our prices and/or price increases in the future will be well within the industry norms and much more modest than the ones in the legitimate concerns. mr. chairman thank you for the opportunity to appear today and i look forward to answering your questions. >> you are now recognized for five minutes. >> thank you chairman, ranking member cummings and

distinguished numbers of the committee. i appreciate the opportunity to provide perspective on the issues before the committee today. turing is a large or mystical 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. dara -- dereprim is used to treat a infection most often affects patients with compromised immune systems. daraprim was on the market for years and in the decades there was no significant innovation in the treatment of toxoplasmosis and daraprim remains the only fda approved treatment for this disease.

perhaps that isn't surprising since only about 3,000 patients are prescribed daraprim each year. a daraprim presents an investment opportunity because it was priced far below its market value in comparison to other similar drug treatments for rare and serious diseases. after considering the pricing of comparable jobs, the value daraprim provides in the treatment of a potentially life-threatening disease, the small patient population for daraprim and the mandatory discounts and rebates that apply to many that receive the drug, turing made the decision to raise the price to $750 per pill. as the chief commercial officer, officer, i was comfortable with that decision first because of our company's commitment to ensure access for every single patient who needs the drug regardless of ability to pay and

second, because of our commitment to invest a large portion of net revenue generated from daraprim for new and improved drug treatments. let me address patient access. most fundamentally in terms of cost it is important to realize that 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 patient needs to kick $750 per pill for daraprim. in fact, about two thirds of patients get the drugs through government programs that receive a discount price of 1 penny per pill. beyond the discounts available in the program, turing has taken several additional steps to ensure affordable access to daraprim. we find fund a patient assistance program that offers daraprim free of charge to

qualified uninsured patients with incomes at or below 500% of the federal poverty level, well above industry standards for patient assistance eligibility. we provide copayment supports to help meet copayment obligations and we fund a bridge program to give those with commercial insurance a supply of daraprim at no charge if there are delays in coverage. in response to concerns about cost and after consulting with key stakeholders, turing announced we would discount the price of daraprim to hospitals by up to 50%. it is especially important because hospitals are the first to treat 80% of patients with the most common form. we also begin offering daraprim to hospitals and a smaller 30 pill bottle that can help ensure availability and lower the cost burden for hospitals.

there have been challenges with patient access particularly in the first weeks after turing acquired the drug. to the best of our knowledge, most of the challenges involved efficiencies and distributions that were unrelated to the pricing. since then we worked hard to improve and expand the system including through the engagement of a new specialty distributor providing streamlined access to more than 90% of hospitals. of course turing expects to generate profits from daraprim but the income isn't simply passed on to shareholders. a turing is committed to bring innovation to the treatment of neglected diseases. we invest nearly 60% of the net revenue into a percentage far higher than most other companies. 36 of the 139 employees are dedicated in our pipeline of research includes candidates for innovation. we are proud of our investment

in innovation just as our commitment to patient access and i believe the decisions made by the company have been appropriate and strike the right balance between patient access, innovation and shareholder values. thank you. >> mr. shkreli you didn't provide the committee any written testimony. do you wish to make an opening statement? spec on the advice of counsel i will not be giving an opening statement. >> i want to ask you a few questions. what do you say to that single pregnant woman who might have aids, no income, she needs daraprim in order to survive. would you say to her when she has to make that choice would you say to her? spin >> i invoke my fifth amendment privilege against self information and declined to answer any questions. >> you were quoted as saying on

fox five in new york 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 shouldn't be in the drug business. we take all of our cash, all of our extra profit and spend on research for other patients with terrible life-threatening life ending disease is. did you say that? >> by advice of counsel i invoke my fifth amendment privilege against self and commission it respectfully decline to answer the question. >> 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 the question. >> i would like to yield time to the congressman of south carolina. >> is it pronounced shkreli?

>> yes, sir. >> so you can answer some questions. i want to make sure you understand you are welcome to answer questions and not all of your answers are going to subject you to information, you understand that don't you? >> i intend to follow the advice of my counsel, not yours. >> i just want to make sure you are getting the right advice you do know not every disclosure can be subject to the fifth amendment only those that you reasonably believe could be used in a criminal prosecution or could lead to other evidence to be a disconnect i intend to use the advice of my counsel. >> do you also understand you can waive your rights. you gave an interview to a television station in new york where if i understood correctly, you could end eight to come educate the members of congress on drug pricing and this would be a great opportunity to do

that. do you understand you can waive your fifth amendment right? >> on the advice of counsel i invoke my fifth amendment privilege against self and commission and respectfully decline to answer the question. >> mr. chairman, i am vexed. he's been willing to at least answer one question this morning that didn't subject him to incrimination. i don't think he's under indictment for the subject matter of this hearing. so, the fifth amendment actually doesn't apply to answers that are not reasonably calculated to expose you to incrimination and even if it did become he's welcome to wave it and i will listen to his interview and he didn't have to be prodded to talk during that interview and he doesn't have to be prodded to tweet or show his life on the webcam so this is a great opportunity if you want to educate members of congress about drug pricing or the

fictitious case against you and we can even talk about the purchase of visit wutang clan is that the name of the group? on the advice of the council i invoke my privilege on respectfully answering to decline the question. >> i am stunned that a conversation about an album that you purchased could possibly subject him to incrimination. it is not the intention to ask him questions about the topic. >> so if i understand correctly, we are not going to ask them questions that are going to be in the subject matter of his current pending criminal charges and if we were to get close to one, he is welcome to assert his fifth amendment privilege and if

we stay away from the subject matter of the indictment, he, he is some he's some argue is a legal obligation to answer under >> under the house rules you have not been sworn in. you are not recognized. you are not recognized and you will be seated. we are trying to have a candid discussion related to drug pricing. let me say for the record i completely support your decision to bring mr. specie -- shkreli

and. >> on the assertions of the witnesses attorney that his or her client is going to take the fifth. but in this case, and a number of public comments himself, raising legitimate questions about his intentions honestly i didn't know whether he was even going to show up today, so it's nice to see you. now that he has invoked his constitutional rights 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 to -- 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 like but i wish you could see the faces of people, no matter what ms. retzlaff says who cannot get the drugs they need, and by the way, it's a taxpayer. somebody is paying for these drugs. it's the taxpayers could end up paying and those around constituents, peoples lives are at stake because of the price increases you imposed and access problems that have been created. you are in a unique position, you really are. rightly or wrongly you've been viewed as the so-called bad boy

of pharma. you have a spotlight and you have a platform. you could use that to come clean, to 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 peoples lives. i know you're smiling but i'm very serious. the way i see it, you can go down in history as the poster boy for greedy drug companies executives or you can change the system. yes, you. you detailed knowledge about drug companies and the system we have today, and i truly believe -- are you listening? >> yes. >> you can become a force of

tremendous good. of course you can't ignore this if you like but all i ask is that you reflect on it. no, i don't ask, i beg that you reflect on it. there's so many people that could use your help. may god bless you. thank you. >> mr. shkreli is your intention to decline all answers to the questions and invoke your fifth amendment right? >> yes. >> given that the witness does not intend to answer any questions out of respect for his constitutional rights i ask now the committee excused the witness from the table without objection so worker. we will pause for a moment as he was escorted out.

we will continue and recognize the gentleman from florida for five minutes. >> thank you mr. chairman. mr. chairman and mr. cummings has been around this committee for a long time. i don't think i've ever seen a committee treated with such contempt. in fact mr. chairman, i would like to know if based on his response today and his actions if he could be held in contempt. >> it's not my intention to hold anybody in contempt. we have heard multiple

statements prior to this hearing everything from i can't wait to school congress to i will invoke my fifth amendment rights. it's important for us to have a person like that come and explain that an answer those questions in person. i wish he would have answered those questions. we had no intention of asking things under which he was under indictment but i will entertain any suggestions there might be at this point, no. >> at the appropriate time i am a move to hold the gentleman in contempt. it's very sad, you know. mr. cummings said he may be the poster child for greed and unfair pricing and it's a very serious matter and while he is the focus he's the focus of attention and he's 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 this price is more than doubled for 60 drugs in the past year and then a survey of about 3,000 brand-name prescription drugs found the prices more than doubled for 60 and lasted for at least quadrupled for 2014; is that correct? >> congress hasn't really invested any authority -- >> we do not follow that. >> you said about 88% of drugs consumed are generic? >> that are dispensed or generic that is correct. >> end of the situation with the pricing hasn't increased or decreased? what did you testify to?

>> hhs released a report that showed for medicare about two thirds of the drugs over the last several years the generic drugs decreased but there's a few where the prices have increased so there is a group that has increased and 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 the price can come down and you've made some progress to say today. ms. retzlaff come is the company that you run owned by mr. shkreli? >> e. is a he is a shareholder. >> does he own -- what share do you know? >> i'm not sure that i can check that.

>> you described a little bit different scenario on what's been publicized as daraprim's cost. it's pretty sad that you are shareholder would take that attitude. at least you did explain to the committee some of the pricing. but again there are other companies and drugs. the 1860% increase is that correct? , anyone know and that's not your drug is it? so another manufacturer who is just as guilty, maybe not as arrogant but just as guilty. millions of americans depend on medication.

i brought mine and i'm pretty fortunate i've got coverage but a lot of people's lives depend on it. mine is not that situation but what we have seen here is unprecedented arrogance and what we see is a situation where people who need these drugs are denied the drugs because of pricing and lack of competition and i think we will see more of this because people take advantage of the system. i yield back. >> i recognize the gentleman from new york for five minutes. >> when you read the e-mails between valeant and turing come after you finish, you wouldn't 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 and then jack up the prices to reach revenue goals. you set a revenue goal and then jacked up the price. ms. retzlaff, when you talk about discounts it's really disingenuous when you rise the prices by a thousand%. so my first question to mr. schiller is when you were jacking up the prices and sending e-mails back and forth, did you ever think about the impact on patients in hospitals, public health fears -- payors and can you justify raising it by thousands% on life saving orphaned drugs for which there are no competing manufacturers, no generics, no manufacturers,

people are going to die if they can't get the drug. did you ever think about how hiking up the price on daraprim, which is important in treating life-threatening infections and aids, did you ever think about the people that wouldn't be able to afford it did you ever think about it or the impact on the hospitals and the payors? the internal memos said this is the price we need to make, this is the goal of the profit we need to make. >> i can't comment on daraprim, it's not our drug but -- >> then let me ask you another question since you mentioned that it's from someone on this. how is valeant's conduct any different than the conduct of mr. shkreli's company? is the conduct of your company and business model any different? >> i'm not that familiar with

their company other than reading newspaper articles but as far as valeant is concerned, valeant is a global company. we operate in 100 countries and have over 1800 products -- >> we are not looking at the company, we are looking at the strategy which from your own memos i would like to place in the record to show the business model was to set a goal, a prophet he would make and that was all you did. now yesterday, in response to questions that were put forward by the committee in the knows about valeant's price increases, your company said mr. pearson made an inaccurate statement during the first quarter of 2015 earnings conference call where they were clearly setting the goal and must raise the price to that goal and in light of this, why should the committee have confidence in the accuracy of

your testimony today? >> the statement you are referring to i think related to an e-mail that i sent to mr. pearson which was 100% correct. the filings were 100% correct. i can't tell you what mr. pearson's intent was what question he thought he was answering but as a company yesterday we chose to clear fight and make sure that it was clear and we put out a press release. >> he talked about increasing prices on isuprel in july of 2013 to meet the goals of revenue. did you increase the price of isuprel july, 2013? >> i believe so, yes. >> so on may 21 for 2015, you wrote an e-mail stating and i quote, last night one of the investors asked about price

versus volume. excluding thereupon the price represented about 60% of our growth. if you include marathon price represents about 80%. so, mr. schiller come it represented 80% of your company's growth for the first quarter of 2015 is that correct? >> that is correct. >> and most of the growth is attributed to one of strategy and that is increasing the price of your drugs and all of your memo was the only strategy i saw was let's increase the price of the drugs and increase revenue. that was your strategy, correct? >> there were examples where we blocked older drugs -- >> i would like you to place that in the record any strategy that was different from just increasing prices. >> i think the gentleman for her

time. >> i just would like to say increasing revenue and profit for profits for the strategy regardless of cost and impact. it is a terrible example of american business and i would say the american people are tired of paying the price. >> thank you for hearing mr. chairman. >> we will not recognize the gentleman from tennessee for five minutes. >> thank you mr. chairman. doctor woodcock, i have the report here from tufts university center for the study of drug development and it stated to be is dated november 2014 and business cost of developing when mark approval for the drug is 2.6 billion the average out-of-pocket cost is 1.395 million. what do you say about that?

>> 2.6 billion this is a takes an average of ten years to get a drug to market. what do you have to say about that? is that any place close to being accurate? >> the economics community has very s. estimates of the cost, so the costs are in dispute but it's agreed it takes a lot of time to get innovative drugs to the market. some of the recent advances in science are shortening the timeframe for targeted therapies and to breakthrough therapies however in general, that's timeframe is accurate and it does take a large investments investment to first find and then develop a new drug. >> don't you see that if a small company comes up with some drug that they would be forced to sell out to some big drug giant.

so that's what many people have led to this over consolidation of the drug business and how it ended up in the hands of a few big giants. >> the industry is changing rapidly. a number of them came from small companies so it is doable and the drug development paradigm is in flux because of the new scientific findings. >> what do you say about that? >> the market has been changing towards more specialized drugs that are developed differently than traditionally have been and from our perspective we know the best way to get the cost down is through competitions of them are products we can get on the

market whether they are competing the brands or the generic competitors the better it is for the consumers and employer unions and government programs we served. >> we all believe there should be testing to make sure drugs are safe and you can go ridiculously overboard on anything and it seems to me that it's taking ten or 12 years to get the a drug to market and it's costing 2.6 billion as the study says that's going a bit overboard. i have a very detailed letter from one of my constituents that i would like to place in the record that she sends her cost of the drug that your company put out and her costs went for 30 pills in december of 2013 a. total annual cost of $13,566 cost per pill was $37.

less than two years later the cost for the same had gone to 106, $106.74 from, an increase in two years time and also i have a letter from an other individual state representative in tennessee that says the average pharmaceutical company average is spending over 20% research and development at the company average is less than 3%. what do you say about the 224% increase in less than two years time and 3% on research and development? >> when we price the drugs we try to take into account the clinical value and the therapies and patient access among other factors. it's not an exact science. the number of cases we have been too aggressive and we are also

trying to manage a bottom line to be able to invest in our research and development pipeline and make the investments and expand their manufacturing. i mentioned rochester new york where we will put another half a billion dollars to increase the capacity in that facility as well as patient access. >> let me just add i think you need to do more but i would also like to say. i've never seen someone at such arrogance as mr. shkreli. they would pose for pictures while the ranking member was speaking and i think this was totally ridiculous.

they would love to conduct some of the of the act that same way on trial. >> we will now recognize ms. martin for five minutes. the antics that in the kind of attention. let me say this about pharmaceuticals i think pharmaceuticals and the work of the companies are most extraordinary.

it's often given as reason to be the reason we get the reason we do understand rnd. we do understand that it is done here is done abroad and then of course across less abroad. to make it clear that the government understands it, that understood let us go to the kind of paradigms here. a drug that is used for the parasitic or what could be fatal

to. it's used by cancer patients and patients with hiv. it has a relatively small patient market. now, ms. retzlaff, turing purchased the drug and i just said i give all credit to the industries but it is true, is it not, that you did not do the rnd for daraprim, you purchased it. >> it is true yes we purchased daraprim. it was on the market for 60 years and even then it's still the only approved treatment for the toxic processes. >> isn't it interesting that for 60 years somehow a company has been able to manufacture this drug for $13.50 per tablet but

when you purchased it, the tablet overnight went to $750 per tablet to do the math? that is a 5000% increase. is there any justification that have nothing to do with the rnd. it's out of reach for the patients and even some hospitals what is your justification. they are reinvesting much --.

not talking about the future users but who are now using the drug you need it to increase 5000%. >> we are also investing in other serious and neglected diseases. >> you're putting it all on this one life-saving drug. spin it gets not on customary for companies to use revenue from one product to find multiple products. >> but why is it when the committee ruled that some of the documents obtained indicated

that in response to this very widespread concern about this huge increase to the patient assistance programs and research development efforts and in other words instead of keeping the price so that it can be purchased by patients and hospitals you went to what i think even some of your testimony was about and that is the patient assistance programs to try to obscure the price. is that your strategy for raising prices and the than a century trying to obscure them by asking or telling people that's all right we will give you a 50% increase, i'm sorry, discount but the rest of you are using the money is that your

strategy? >> no it's not. our intent was to correct any miscommunication. two thirds of patients can access for a penny a pill. that is two thirds covered by commercial insurance. for those patients we cap the copayment at $10 we are absolutely committed and always have been to an sure every single patient who needs a daraprim gets it. >> that's not true that we will but we will talk more about that. we will now recognize the gentleman from michigan for five minutes. >> thank you mr. chairman for having this hearing i think we can all agree on the importance to pursue life-saving treatments and cures the onus is like cancer etc. that affect the

communities and neighbors and families and friends we can also agree we want individuals to have access to the treatments at an affordable price. the question of course is how do we do that? under the healthcare law we have seen the prices spike. congress needs to push back and create an environment that increases competition which will bring down costs and increase access to prescription drugs that we have our fault in the process. but so far we have acted to approve more than $2 billion in additional funding. the first big raise in over 12 years. to boost medical research and additionally, we the house acted responsibly to pass the act to

the process that would accelerate the discovery and development of treatments and cures. the senate hasn't allowed that to go through yet were the president pushed for it. so, it's my understanding and i guess i just want to delve a little more deeply into your responses so far it's my understanding there is currently a backlog of over 4,000 new drug applications and a medium process for 42 months. can you explain to the committee by your agency is so far behind? >> we were far behind when we started the generic drug user fee program. at this point the number of applications where the manufacturer hasn't heard from us or haven't picked them up is 600. we have approved -- >> with the understand if they haven't heard from you but i guess we are talking about

approvals. >> in the past before we reformed it, generic drugs went through four cycles of review and back to the company. this is a very inefficient process. we are trying to streamline the process we can get it right the first time. the company sends an application and it is approved. under that scenario as i said, this year 15 months starting in october, ten months. we still have to deal with the backlog which we are cranking out approval of the backlog but if they were -- they started in 2012. when the program starts they are already 40 months old. they are not going to get any younger so for the backlog applications, when we approved them to the time to approval will be more than 40 months but the newer ones we've approved drugs in ten months under the

new program. >> i wish you well on that and that's the direction we want to see it going because we have clearly seen here the efforts in the pharmaceutical as well to try to get away from the perception that we've also seen that the view this backlog to capitalize on a system that allows them to pillage the market. >> the drugs under discussion have been on the market for decades, times when there are no backlogs and there were still no generic competition to them. there's other reasons but for a very small segment of the generic drugs, the 88% is out there but for a small segment there is no generic competition. when we at the end of the first program will have eliminated this backlog, and being a study

state type of activity there .-full-stop the problems with drugs that don't have generic competition because there's other reasons for that. >> expediting that will also help have more competition. with the ask do you think that bayou similars can play a part in addressing affordability in a patient's access to the drugs they need? >> absolutely. that's what they are intended to do and we are enacting the program and we have had a vigorous response to the legislation congress passed. ..

thank you and i yield back . >> now recognize the gentleman from massachusetts for five minutes. >> i want to follow up on that line of questioning. the costs are prohibitive in terms of trying to develop some of these drugs. massachusetts and the boston area we have been blessed, we had 29 ipos, far -- small pharmaceutical companies in the last two years. we do have some growth in that industry and those few big players are not dominating like they were before. that is good for change but in the case of turing they bought the drug, did no research, and as the gentlelady from the district of columbia pointed out, the next day at went from

$13.50 a pill to $750 a pill overnight. that is disgraceful. there is not a lot of shame at the table today, but it is disgraceful and well-known that the impact would be great harm on the public. after you in august increased the price of the drug by 5,000% for people who had no alternative on august 18th, an employee send an e-mail regarding the increase in price and she wrote quote mack there

are patients waiting for products that have a $6,000 co-pay and you are under oath and subject to perjury charges if you don't answer correctly. these patients had a $6,000 co-pay and you say they never paid more than a penny for a kill. >> let me provide context, she did say there was a $6,000 co-pay however we paid the majority of the co-pay, the patient did not that is we paid the co-pay to $10. >> i would like to get you on the record about that. you were aware that your daraprim pricing grease was resulting in incredibly high co-pays. >> that is correct which is why we introduced a very generous co-pay program to ensure the pricing -- >> and another e-mail, the director special pharmacy development at walgreen's asking

whether turing would grant an exemption for those with co-pay over the approved amount of $10,000. >> and our policy was to assure that the price increase did not impair access for patients so yes, we subsidize that co-pay. >> you didn't want to impair accessory raise the price to $750 a pill. >> the access issue is with daraprim had nothing to do with the price. they were based and gaps in the distribution network which by the way we inherited. >> i reclaim my time. she asked a question because there was a patient in north carolina with a co-pay of $16,830. that is what the patient was being asked for. >> and we paid that down for the patient. >> four days later on august 24th the same outrageous co-pay was reflected in an internal turing presentation on access and this is your presentation, patients with commercial private insurance

experiencing co-pays and delays in claims approval and rejections, one has 50% co insurance resulting co-pay of $16,830, that is your own company, your own presentation, what the patient is being charged. >> we put that in the presentation to inform leadership that those were the subsidies -- >> i think we have a solution here. congress has the power -- i would suggest in our pharmaceutical regulatory procedures, our regulations that we adopt a poison-pill amendment that whenever anybody acts like turing is acting, increasing to $750 a pill congress can suspend the exclusivity period for you to produce that drug, we can eliminate it the next day and

contract with barbara --darpa to produce your drugs at no cost to the consumer. that is what we can do. the problem is it will impact the good companies that are actually doing research. not the hedge fund that come in and buy a company and pump up the prices. i didn't ask you a question. i am telling you what we can do. if congress has the willpower we can do that but it will hurt a lot of good companies and you are trashing, you are trashing pharmaceutical industry's doing a great job on a lot of drugs from organ transplants to cystic fibrosis, good research doing great work, you are trashing that industry and you are going to cause us to have to put heavy regulations on good companies and you are probably going to choke off of the drugs that will come into the pipeline. look at the impact you are

having. >> thank the gentleman. thank you. we are going to excuse dr. woodcock and allow her to hopefully make her next hearing without any hesitation as we change the name plate, we have mr. flanagan and join us, and he too is under oath. and now we have dr. desjarlais. >> how did you determine the new prices? >> after we signed a contract to purchase the assets, we we engage the pricing consultant, engage previously by the prior

owners and made a presentation to the head of our neurology division where this product is going to split. the conclusion was given the reimbursement for the procedure is where isopril was used which was $14,000 in some cases there was significant opportunity to increase the price without impacting, without making it unprofitable for the hospital. >> why neurology? >> it is in neurology and other divisions. it is our neurology and we have a number of other smaller therapeutic categories. >> both these drugs are generic, right? >> they lost their patent but there is not sure competition the >> this isn't a drug people can go to their doctor and i need

some isopril. is that correct? >> is a hospital setting, part of a procedure. >> it is not the patient getting out their wallets, they are in a hospital, their blood pressure is going through the roof and the doctor has no other choice but to use your drug in several cases this comes in a vile and you raise the price 252%. is that right? $257 for a 2 mm vial. the doctor just as to use it and they have to pay it, right? >> that is correct. it is use in emergency situations. >> isopril the same way? is not a pill, it is a vile and you raise it 120% to $215 to

1,036 a vial and you don't ask the doctor, i need some isopril, you have something in your heart, circling and training in a hurry, the doctor doesn't have a choice, over a barrel because there's no other competition so he has to get that drug, has no other choice. >> there are substitutes and volumes have gone down 30% since we acquired those drugs. >> you raise one, 212% and one 125% that you are so gracious as to drop the price 30%? >> we have gone to the hospitals with the largest users, large cardiac department to would be the most impacted to make sure they got a significant discount. also when you look at our overall portfolio we tried to address the issue of price by reducing prices on our dermatology and ophthalmology products by 10% and dramatically increasing the amount of patient -- >> i did pick up something your

opening statement where you said patient doesn't pay this so they don't pay the sting but anyone who comes home from the hospital knows they get really big bill and somewhere in that bill is isopril if it was used so the patient does end up paying for that drug in the end, correct? >> it is paid as part of the procedure. somebody at the end pays it. i would add that these types of transactions in the past we have purchased some drugs like this where there was no generic competition, we raised the price as you mentioned, we were too aggressive. >> way too aggressive. >> we will not look for those kinds of acquisitions going forward. >> you also did the same with your drug, a unique drug, people don't have much choice but in your opening statement sounded like you doing people a favor giving it to them for a penny or getting it free, you are making

a lot of money. mr. shkreli would not answer a question he was so ashamed of himself and you are doing these people of favor, knocking off their $10 co-pay but bottom line is your company made a heck of a lot of money on this drug and only a handful of patients needed please don't you think you can do a little better? >> we didn't make a lot of money on the drug actually. i believe the committee has our financial statements. i don't want to share that information because it is confidential, but you will see turing is operating at a loss. >> people are seeing increased premiums, increase deductible, this type of thing doesn't help. if one gas station has gas and the others run out that gas station project price and people have to pay, they won't pay much at the gas station, you are at risk of the same thing. >> now recognize the gentleman from vermont, mr. welch.

>> thanks for calling this hearing. to go over this astonishing and unsustainable situation of the price of prescription drugs, a couple things. miss retzlaff, if springfield hospital in vermont wanted to buy daraprim what would they have to pay you? >> we have introduced a hospital discount program. >> give me a number. what would they have to pay? >> for a 100 count bottle it would be roughly $35,000 for a fairy count bottle, $11,000. >> how much does that come to a pillo? >> $750 -- is 50% off of $750. >> if springfield hospital

wanted to buy a pill it would be $350. what about blue cross blue shield and it was covered? what would they pay? >> that would depend on what the coinsurance was, about 25% of patients on daraprim have commercial insurance, the examples that were mentioned above, the patient would be asked to pay a co-pay of $5,000 in which case we would pay down that co-pay so they didn't have to pay more than $10 out of pocket. >> you are saying if i had to buy that, i had a $5,000 co-pay you would pay all of this except a penny. >> except $10. >> we can confirm that. >> yes you can. >> what if they are on obamacare, what would be the

cost? >> a medicaid patient -- >> tell me medicaid. >> for medicaid patients that are treated through the program. and that represents two thirds of daraprim's business. >> who pays the rest of that if the patient gets it for one penny? >> nobody pays it. >> why isn't it possible to just have a price where anybody who wants to know what the price is can go to a website to see? do you do that? do you provide that? >> we provide a list price, the list price does not reflect the price patients pay hospital pay and other government programs have. there are often mandatory statutory -- >> reclaiming my time. most people how our -- what the

price will be few go through the gymnastics you just described. we have a lot of outrage at the outrageous conduct. we have a broken market. and they're getting hammered with this to get the broken market. mr. duncan has -- to streamline you should do that but on the other hand, you got market power without competition and is resulting in rip-offs, most glaringly represented by mr. shkreli. i hope we can have an action plan including what mr. duncan is talking about, it would streamline getting the drugs to the market, it would deal with

these rip-off approaches where the companies are oftentimes extending the life of the patent for generic competition. to imitate drugs on the market. with slight changes that don't really increase the efficacy but increase the cost, work on the bill to get generics to market faster. let's have some transparency in pricing. there is all this talk about how much cost goes into research and that is a legitimate cost and taxpayers, $30 billion we mutually support, that is our contribution, the bottom line here is we know prescription drugs are light extending and pain relieving. we are getting killed with the price. >> five seconds. hospitals are getting killed too big time. >> and employers trying to do the right thing. my time is up but i think we

have a lot of work to do and the ranking member and chairman of the committee, thank you for setting up this hearing. >> thank the gentleman. >> one item to submit to the record if i can. >> without objection. not sure what it is. >> it concerns regarding the pharma benefit -- pharmacy benefit by side policy. >> without objection so ordered. we recommend a gentleman from florida for five minutes. >> i will yield back my time. >> mr. walker, let's recognize mr. walker for five minute. >> thank you, appreciate the time today, thank you folks for being here and testifying on this panel. i want to go back a little bit and talk about what you said about shareholders. as far as mr. shkreli, you said

he is a shareholder but you are unaware how much he owned in the shares. >> can't remember off the top of my head. >> according to our information he is your largest shareholder of turing. would you dispute that or not aware of that? >> he was a major shareholder. i was not aware he was the largest shareholder. >> as far as code of conduct most organizations, the l.a. clippers, donald sterling, because of the way he behaved, i was a minister for 20 years, there are codes of conduct we have to follow. is that ever part of the discussion as far as the outrageous conduct he has represented? do you have anything your bylaws that would prevent somebody from being so outlandish in his behavior? >> thank you for the question. as you know mr. shkreli is no longer the ceo of the company

and subsequently our chief compliance officer published a code of conduct for the organization which is customary for pharmaceutical companies. >> you see just published it. when was the date he published it? >> she published it a few weeks ago. i can't remember the exact date. >> was that code of conduct published to pushback a little bit on mr. shkreli's the duty >> mr. shkreli is no longer a part of the organization. the code of conduct was in place to ensure current employees behave in a manner that reflects our values. >> i find it odd that all of a sudden you have a code of conduct but you say as far as you know there's no link with her institution of this code of conduct with the behavior of mr. shkreli. >> turing is a very young company, we are a year old, we brought our chief compliance officer on not what ago, we are still in the process of putting together all of or policies and

procedures and we got the code of conduct out a few weeks ago. >> amir five days after acquiring daraprim mr. shkreli was sending e-mails about timing of the pricing, dated august 12th the as when the price of daraprim will be updated in redbook which is a compendium of drug pricing by health care. he said i need an answer asap. three days too long last time i did what he was referring to. when he says the last time i did this was referring to the 2,000% price hike that he implemented in his former company? >> i am not sure but i would be happy to check that out. >> could you get that information back to me? maybe by the end of week next week. i would appreciate that. i want to come back and make sure i am clear of something with the fda if i could. doctor woodstock said there were 600 manufacturers waiting to hear back from the fda for

approval. my question is, it is that part of the backlog, are those all new? there's 40 month backlog to get to in your trying to reduce it from 15 months to ten months but can you explain the new manufacturing versus the old ones? use the microphone too please. >> the answer, most of the question, basically two big buckets of work and incoming submission comes in right now is going to get a 15 month bold date starting in october with a ten month bobblehead and then there is that big pots of much older submissions that had been at fda before the user fee agreement started. >> when we say big pod give me a number of value for that. >> it was 2,866, abbreviated new

drug applications in october of 2012. >> those rank back as far as 40 months or three years. >> in october of 2012. those are long pending before the user fee agreement. 2010-2009. when we clear out the backlog the way everyone wants, any time we approve one of the old ones that is sitting around the approval time is very high. >> what makes you think you go from 15 months to ten month? my time is expired but i will yield back. >> we made substantial improvements to the program like rebuilding the factory described in dr. woodcock's written testimony. >> recognize the gentleman from

virginia, mr. connolly. >> lord almighty. just to try to understand how pharmaceutical research works, basic research is done by the government, isn't it? >> yes. representative, i am here -- >> i understand but your understanding of where research is done as a precursor to the development of approved drugs is usually done by the government, is it not? >> i am a technical expert concerning the generic user fee act. i am sorry. i am not the right person to answer that kind of question. >> this red's , have i got that name right? retzlaff, in testimony in response to miss norton's

question about how could you go from $13.73 to 750 in your new company and you had a helluva first year, model for every one. you said we need to use it, that revenue, to help finance research on other life-threatening conditions, address other kinds of diseases with life-threatening conditions. that was your testimony. >> the conditions as well. >> is it your testimony that the company you bought this drug from was not doing that? >> the company we bought the drug from was not doing any research, pharmaceutical innovation research. >> are you doing basic research? >> yes, we are doing early

research. >> you said other conditions as well. >> yes. >> can you provide the committee with a list of basic research efforts that this revenue is financing? >> i believe we can. i'm not involved in the day-to-day operations of research and development but i can check. >> your testimony on behalf of your company that that is what you are doing with this revenue and that was the rationale or part of the rationale for jumping the price up 5,000%. >> we provided the committee with research and development. >> i am being a little more specific. in answer to ms. norton's question i would like to see that correlation, where that revenue is going in terms of from this increase because that was your testimony, funding other good things and the only way to do that is this $5,000

price increase. let me ask you a question. according question. in your company did the public interest never come up in terms of by jacking up the price we really could affect access? we could have unintended consequences on people's health especially since the sacred trust we have to, it is the only drug for this condition that exists on the planet and we just bought it, we control it and just increase the price 5,000%. was there any discussion at the corporate level about the morality, the ethics of that in terms of impact on people's health and lives? >> as i said in my testimony i was comfortable with the price increase, first because of the company's commitment to invest generously in patient access

programs. those are important, we didn't want the price increase to disadvantage patients in any way. second the company's commitment to reinvest and research and development and i will just say there is the need for a new and better treatment. >> would you agree, whatever your motivation and your altruistic instincts that from a public-relations point of view it didn't work out so well? >> we had challenges from a public-relations of view and i believe there was a lot of misinformation and there continues to be a lot of misinformation out there. >> i would suggest to you, he is no longer your ceo but when you have an individual behavior of the way mr. shkreli did when he was ceo, and in the public appearance today and in his tweets, he has put a pretty ugly

face in front of the public in terms of the industry, its motivation, its profit motivation, its concern for patients, any sense of ethical responsibility. it has infinity damaged the whole industry because of the practice of one ceo at one company and i think, i would hope it would cause a profound re-examination of the practice of jacking up prices away turing did this one. >> i thank the gentleman and not recognize the gentleman from georgia, mr. carter. >> isn't it true that your organization, three your member companies's control over 70% of the market? >> i don't have the exact numbers. >> i have. it is 78% to be exact, controlled by three different companies. >> discounts for their

customers. >> are you aware of the term maximum allowable cost, you are aware that you understand that is a pd and generated list of drugs that determines the maximum amount an insurance sponsor will pay for a medication. in other words they tell the pharmacy what you're going to pay. that is what it is. >> created -- >> there are no two that are the same. each one generate their own separate list, correct? >> right. they have their own list. >> they choose the product they want and they are going to dictate that. on the other side ppms also have a list on how much they will charge the insurance company and that is a different list, is that correct? >> sometimes all the different companies that different. >> all the different companies are different but they have one list here is that they will reimburse the dispense -- they have another list each year than they are going to charge insurance companies, that they are representing so you have two

different lists here. don't you find that somewhat awkward and don't you find that to be a situation where ppm could distort the market greatly? >> no because that is a decision negotiated in a contract between client and ppm and there are a million different kinds of contracts including those and the client thinks it is their interest -- >> the point is you are deciding what you are going to reimburse and deciding what to charge the insurance company for. therein lies the difference. are you familiar with the term spread pricing? >> yes. >> you understand what spread pricing is. that is when the price of the drug goes up, it costs the pharmacy more to buy it and reimbursing at a lower rate. in turing, if you had it on the back at $13, if you didn't increase that and she went up

for second $50 the bill, they are still reimbursing that dispenser a $13.50 and you would be charging the insurance company said and $50. that spread pricing, that is what is happening, you are not updating the pd ms. that is accurate. if that is inaccurate let me ask you, why is it that just recently, at a recent hearing of the judiciary committee, one of your largest member companies i noticed here today and i am disappointed by that and i am sorry you have to represent them. and the largest member companies, teams of people who constantly update, is that correct? >> i don't know about a specific company but industrywide, it is updated regularly. >> that is the testimony in the

judiciary committee. if that is true isn't it somewhat odd that they found it necessary to mandate, to require that they be updated every seven days and 26 states have passed laws requiring ppms to update their lists? don't you find that somewhat odd if you have teams of companies doing this? >> we don't know why that happens. they lobby for those changes and got them. >> drug stores just want to get paid what they are paying for. when companies go up from $13.50 to $750, that is a problem when we are only getting reimbursed and they are only getting reimbursed $13.50. that is where spread pricing commission. i notice the profits of a p.m.s increased enormously over the past few years. almost doubled. i find that disturbing particularly when you are

talking about spread pricing. let me ask you something. i want to switch gears, let me ask you something. as you know i formally known three independent retail pharmacies. i have a family member who got prescription filled at my pharmacy, she got it filled at my pharmacy, later on that night she got a call at home from the insurance company encouraging her to use mail-order pharmacy. at mail order pharmacies that is owned by the pbm. don't you find that a conflict of interest when a pbm not only owns the pharmacy, but they are reimbursing here? they are setting the reimbursement to give is that not a conflict of interest? how can it not be a conflict of interest? >> the federal trade commission looked into that. >> that is a conflict of interest. i have had experiences where i have adjudicated a claim, those who don't know, my computer

calls his computer, tells me what they're going to pay me, and it told me they were not going to pay for it. this patient was still in my lobby, they got a call from the pbm saying you can use our mail-order pharmacy. that is a conflict of interest, thank you, mr. chairman. >> recognize the gentleman from pennsylvania, mr. currey for five minute. >> i thank you for calling this hearing. i am obviously concerned about these price increases on a number of levels but one of the levels as a former hospital director myself and mr. schiller, because isopril is a hospital administered drug, hospitals, hospitals are bearing the biggest burden of your price increases. am i correct in that? >> that is correct.

>> the last year cleveland clinic reported that price increases for daraprim added $8.6 million to its budget. they are both heart medications. am i correct in that? >> correct. >> given the choice between paying higher prices and risking the lives of their patients most hospitals choose to knuckle under and paid the price. and i correct in that? >> i assume that is correct. >> by raising the price of these medications exponentially you are forcing hospitals to make that decision between their budgets and their patients's lives and well-being. almost like holding a hospital's own patients as hostages against them. valiant was not the first company to raise prices, valiant actually bought isopril from marathon pharmaceuticals, correct?

>> correct. >> marathon pharmaceuticals acquired the drugs in 2015 from another manufacturer. marathon also raised prices in the two years it toned isopril by about 400% each. marathon's price increase and at net impact on the cleveland clinic at that time of $2.8 million. and the cleveland clinic is not alone in bearing the burden of rising prescription drug prices johns hopkins hospital in baltimore sustained and impact of $20 million last year of which $4 million was attributed to price increases for injectable drugs like isopril and nitropress. these increases hurt hospitals in ways that reach far beyond the immediate care of patients. it also diverted 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 a live. there is no greater impact to your health care than when you're a local community hospital has to close. i have seen this. they trimmed their budgets, they absorb these price increases, absorb the cost of uninsured care, they absorb it until they can't absorb it anymore and they can't cut back nursing and staff anymore, patient's lives become endangered and they have to close and there is no greater impact to use and when your local hospital closes so that when you are having a heart attack is not a 10 or 15 minute drive to the hospital. it is a 40 or 15 minute drive and that indeed the difference between life and death. i understand from information your company has provided this committee that valiant has this a, quote, nominal of ounce of money on research and

development for isopril and nitrofor s. that is the usual vindication of these exponential for advice increases, that we need to do this because it is funding research but you have admitted there is a nominal amount of money on research and development for isopril and nitropress, the very drugs experiencing this price increase. let me ask you this. isn't it also true that one of a, quote, key elements of your company's operating philosophy is, quote, do not bent on science, bet on management. have i quoted that correctly? >> that is a quote from mike pearson. i don't know what the data is on that but i would say this company has changed quite a bit. >> your company? >> yes. >> you have turned over a new leaf since then? >> if mike were here you look at

is quotes over the last year or two he has changed the way he described the company and our focus and emphasis on research and development are also add it is rare to trace the revenue to 1 caller of r&d. >> i understand shareholder return is your primary concern and objective but i say is unconscionable to deprive hospitals of the resources that they need to fulfil their primary objectives caring for patients and developing new and better treatments for the future. again, mr. chairman, appreciate your bringing this hearing and calling this information to light. i yield back. >> now recognize the gentleman from texas, mr. farenthold. >> miss retzlaff, you testified your $750 drug, nobody pays that, some people get it for a

penny, some people get it for $20. how much am i paying for that? the rest of that is either coming from the federal government, medicare medicaid, state government or is coming from an insurance company that is being funded by the premiums that i pay and hopefully will never indeed that drug. you make it sound like nobody is getting hurt by this but anybody in this room is actually getting hurt by these prices, are they not? >> only 3,000 patients in the united states are treated with daraprim, 25% are covered by commercial insurance. >> that is my insurance rates which have gone up under obamacare. >> the overall impact in terms of the budget for any health care plan is very very small. >> you guys are potentially setting another trend in the industry by these orphan drugs, jack a price, go and buy a generic manufacturer that is the

only manufacturer of a generic drugs which brings me to the fda. you are saying you're getting down to 10 to 15 months but you created a 10 to 15 month monopoly for anyone who is a single source of a generic drug to do that kind of price increase and name their price for that drug. is that not correct? mr. flanagan? >> can you ask the question a different way? can you clarify please? >> the amount of time it takes the fda to approve a generic drug manufacturer, if there's only one manufacturer in the generic market, they basically got the 15 months it takes and i will argue that number with you. they have an exclusive ability to sell that drug for 15 months at $1 million a pill if they choose to do that. what takes so long to do that. i am not an expert in what is

involved in approving a place to manufacture drugs, i assume if you can manufacture x why is the drug in a place, no roaches on the assembly line, if you want to add another product why should it take 15 months to get that approved. i assume you can test whatever drug they make and see if it is what they say. what else is involved, and if they do screw up making it, 1-800-bad-drug will impact the company. >> to review a generic drug, scientific and technical review, manufacturing and stuff like that. >> how much it this is necessary and how much of it is regulations, what color is the toilet paper? >> the reason we have 88% prescription penetration in the united states is because when you or your family go to the

pharmacy to get a generic drug, you can be confident it is the same as the brand. >> why does it have to take 15 months? how difficult is it to get their output, analyze it and see what it is? i can't believe it takes 15 months, the t s a did it in a matter of seconds whether i have an explosive in my bag by just swiping something on it. isn't there technology that will make it faster and better? why aren't we using it? every day we delay getting a competitor on the market is a day companies can screw the consumer. let me ask you one other question on your numbers before i am out of time. dr. woodcock was testifying, my d s detectives said she got a number of applications we down, she also mentioned a great number of them, and returned due to technical defect which are

you artificially decreasing your numbers and wait times as a result of somebody turning something in without t. cross or i dotted? >> no. >> these me an example of this technical defects? i see it with the va all the time in the case for that to where you don't have this piece of paper or that, you go to the back of the line. my fear is we have a bureaucracy at work here that is costing the taxpayers money and the amount we have to reimburse medicare and medicaid for indeed is costing the insured money based on higher rates they have to pay for their premiums and taxpayers having to pay premiums supplements under obamacare? >> mr. chairman, can i -- >> you have time to answer. >> you ask for two examples. one example would be if the application doesn't show the

generic drug would be bio equivalent to the brand so we want to make sure it is going to work the same as the brand. another example would be if the facility is manufactured, substandard, can't produce a quality drug. >> in the amount of time this takes, criminal, add to the nut torte system with plenty of attorneys willing to go after any company that screws up even the slightest, it has got to be fixed. >> find new questions on this. mr. cummings for five minutes. >> when turing, i remind you you are under out oaf, more than 5,000% in 2015, hoping to avoid attracting attention from the media and the public, is that right? despite your best efforts the

price increases and became a major news story, an outside consultant send an e-mail to a member of turing's board of directors laying out a pr strategy for turing to respond to this unwanted attention. suggested that the board removed mr. shkreli as ceo, quote, as early as next week. and also suggested that turing reduced the price of daraprim. is that correct? >> i believe that is correct. >> you don't know? you are getting these memos, do you have an answer? >> that is correct. >> he wrote and i quote, the price drop has 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. you remember that? >> yes i do.

>> recommended that turing has a press release announcing a, quote, package of patient assistant programs for patients, remember that? did you follow those instructions? >> not all of them. >> we will talk about that. it also recommended that turing, quote, specifically tie profits from daraprim to the research and development of a new and more effective treatment for daraprim patients. that is exactly what you are doing today and the consultant also suggested long-term strategy, forcing focus on turing as a research and development company, not of pharma hedge fund hybrid. do you remember that. now this was afforded you buy a

board member. the recall receiving it? >> i believe i did. >> it seems turing followed most of the consultants's advice with one glaring exception. you never lowered the price of daraprim.

that we need a solution as >> we did learn price was an issue which hospitals. in november we announced a discounting program for hospitals and 50% and based on feedback from hospitals we introduced smaller counts battle to alleviate this >> glad you said that. let's move on. let me read an excerpt from an e-mail, investor relations from the director of business development in 2015, mr. painter asked if there was a lower price announced that would discourage generics from entering the

market and generate positive pr. he replied, quote, it is best we don't pr something like that unless it is something we are willing to commit to doing. he added, quote, only thing to pr is a patient assistance program in the r indeed. mr. painter replied jokingly, this is a quote, maybe you can interpret this to me, maybe it is millennial talk, my are is bugging the be and can't rap, do you know what that meant what he was saying? >> i do not. >> this was sent to you. you didn't read it? >> i read it but i don't know what that means. >> there are very real issue is for people with compromised immune system this and this e mail indicates despite the promises of lowering the price, are turing has no desire to fix

what it has broken. the thing that really gets me, mr. shkreli who just sat there, your former ceo walked out of this hearing a few minutes ago and before he probably got out the door, he sents a tweet calling everybody on this committee in the seals. did you know that? >> i was not aware of that. >> so instead, you spend all of your time strategizing about how to hide your price increase behind positive pr and coming up with stupid jokes while -- no, no. other people were sitting there trying to figure out how they were going to survive. >> that is not true. >> i said it before, this is about blood money. one question for mr. schiller. you said, quote, a few minutes

ago, you said in some cases we have been too aggressive in increasing prices. remember saying that? >> i did. >> so we can be effective and efficient in what we do are you going to be reducing prices? >> we have looked across our portfolio and we have reduced prices. >> i you going to continue to reduce prices? you learned your lesson, you said there is the new attitude? i want people watching this to know that they are not being ripped off. >> with across the portfolio, we took a 10% reduction in two of our largest business units, are dermatology division and ophthalmology division, we reduced up to 30% nitropress and isopril, increased patient assistance programs and we will look at ways to improve access at affordable prices and at the

same time manage our business a week and invest in r&d, manufacturing in places like rochester and greenville, south carolina. we have made mistakes, we are acknowledging those mistakes, we are going to genes, we are going to be a responsible corporate citizen in the health care community and we have made changes. >> you will continue to make those changes? >> we are always going to look to do the right thing but we have made significant changes. >> thank you very much. >> i recognize myself. miss retzlaff. the proper role of congress is not to micromanage a private company. it is not my role and i do believe in right to profit. that is a motivator that does a lot of good. but i also believe it is imperative that people tell the truth that they are ethical, did they not mislead the public,

that they properly represent the truth. would you disagree or agree with that? >> i agree with that. >> let me show you a video a couple weeks ago, on channel 5, mr. shkreli. >> this is political. >> right. >> it is up to the company. if you raise prices and don't take that cash and put it back into research i think it is despicable, you should not be in the drug business. we take all of our cash, all our extra profits and spending on research for these patients and other patients who have terrible life running like ending illnesses. >> is that true?

>> we invest 60% of our net revenue into research and development. >> that is not all of it, is it? >> he may have meant profits. he may have -- >> we take all of our cash, all of our extra profits. what is extra profit? >> i'm not sure what he meant by extra profits. what he could have meant is once we deal with expenses, operational administrative expenses and we take that money -- >> are you testifying you are losing money? >> yes. you have seen our financial statements. >> you are not losing money. you are raking it in hand over fist. let me ask you about that. are you planning another price increase? >> no i am not. >> that is not what documents show. we will release them to the media you confide that one with the public. do we know who adam stone is? >> he is an investor. >> he wrote to mr. martin

shkreli wanting the public relations to calm down, what the politicians to slow down a little bit and he said, quote, we can wait a few months for sure. sounds like a planned price increase. >> what was the timing of that e-mail? >> december. >> that was subsequent to that. mr. shkreli is no longer the ceo so i have final call on those business decisions. >> we will see what happens with that. the company has been in business how long? >> we start operations in february of last year. >> so about a year. >> close to a year. >> within the first year you are giving out raises? >> yes we have the >> giving out bonuses? >> i don't believe we give out bonuses as of yet. >> your spreadsheet said 30% across-the-board everybody gets a bonus. >> we haven't paid out any bonuses. >> we have a document from the agenda of october 14th, 2015, one person at a pay increase of $250,000 to $6,000, correct?

another person had a pay increase of $275,000 to $600,000, correct? >> correct. >> another person at a pay increase of $160,000 to an annual salary of $800,000, correct? >> what was that? >> an additional $160,000 to $800,000. >> i am not aware of that one. >> you can look at it. it is from your agenda in october. again, people can make a profit, pay exorbitant salaries, don't come before the american people and shed a tear and say we are not making any money and don't have the person who is a major investor in the company come and say we invest all of our cash into research and development. we have e-mails that show they are not even sure they're going to invest in research and development as a person wanted to check out to see if there was even part of the plan. it sounds like a contrived pr plan in order to do that. do you know who metro yacht

charters is? >> yes i do. >> why would you know them? >> i believe we rented metro yacht charters for a sales force meeting. >> for a party, $23,000. you spend money on fireworks? >> yes. >> you spend money on a cigar roller for yacht night, $800? >> yes we did. >> don't tell me you are losing money. don't try to pretend and tell us $750 is justified when you have a woman who has aids. what is she supposed to do? is she supposed to tweet martin and try to get that for a penny? >> that doesn't work, that is not out -- that is not how it works. >> so who pays the $750? >> $750 is paid primarily by commercial insurers who represents the minority of

patients by 25%. that is a very small number of patients. >> but it generates a lot of revenue, doesn't it? and who pays those insurers? are the big bad insurance companies raking in all these profits? who are these insurers? who pays their money that you have to pay you? >> those are big companies, that are insuring their employees. ..