This was the 3,500 word statement of Senator Bernie Sanders during Senate HELP committee markup of the PDUFA legislation. The statement covers a lot of ground, and illustrates why consumer groups love Bernie Sanders, while making one wonder why other Senators have not been more supportive of the consumer protection issues that Sanders discusses. Here are some highlights:
- The proposal for a new extended monopoly for antibiotics and antifungal drugs is a “huge giveaway” that will lead to high prices and harm consumers.
- The bill does not provide for adequate regulation of medical device companies.
- The FDA is given more freedom to grant conflict of interest waivers.
To remedy some of these flaws, Sanders made a number of interesting proposals.
Eliminate regulatory exclusivity when firms commit fraud. Sanders’ Amendment #1 was on the topic of “Pharmaceutical Fraud Accountability,” and was designed to effectively deter pharmaceutical fraud by making government-granted monopolies contingent on good corporate behavior, by penalizing “any instance of pharmaceutical fraud resulting in a civil or criminal judgment, or a settlement with an acknowledgement of fault, by revoking any applicable data or marketing exclusivity for the particular drug(s) or product(s) involved in the fraud.”
Transparency.. The government needs to have a clue about the economics of the medicines market. Sanders proposed:
The best way to improve our current system without a complete overhaul would be to tailor the exclusivity incentives more closely to the benefits we receive for them, but to do that we need more information. Right now, Congress is making decisions about exclusivity periods (monopoly periods given to drug companies), without any information about what these companies are spending on their research and development. Congress must require that companies submit cost information to the Secretary such as the amount a drug sponsor received from public sources and the amount expended on pre-clinical research and clinical trials. Companies should also disclose, using de-identified data, the number of individuals participating in clinical trials.
Use Prizes for Incentives for Antibiotic R&D. Sanders proposed, as an alternative to the (current and proposed extended) monopoly for new antibiotic and antifungal drugs, that a $2 billion a year prize fund be established.
The full statement follows:
Statement of Sen. Bernard Sanders (I-VT) on the Mark-up of FDA Reauthorization Package
April 25, 2012
Mr. Chairman, thank you for your work in developing this legislation. I know that items we are considering today are the result of a lot of hard work by you, Ranking Member Enzi, other members of our committee and their staff. I also understand that some key parts of this bill are necessary for the Food and Drug Administration to continue to do its work. However, this package has also grown to include items unrelated to the general functioning of FDA, including policies that I believe perpetuate a system that continues to fail the American people. Our country’s model of government-granted monopolies, astronomically-high drug prices, and a greedy and reckless drug industry is depriving people of access to the medicines they need and is costing us too much in the process.
Unfortunately, this package gives industry additional incentives to charge increasingly high prices for medicines, while weakening consumer protections. For example, it contains a huge giveaway to pharmaceutical companies in the form of new marketing monopolies for antibiotics and antifungals; it allows more drugs to come to market without adequate testing for safety and effectiveness through the use of an accelerated approval process; it continues to permit medical device companies to put untested and unsafe devices on the market; and it weakens consumer protections by letting the FDA grant even more waivers for individuals with financial conflicts of interest to serve on drug approval boards. And on it goes. For these and other reasons, I cannot support it.
Voting in favor of this bill would mean a stamp of approval on an agreement that will fill the pockets of pharmaceutical company executives at the expense of middle-class and low-income Americans who can no longer afford the medications they need.
Stopping Pharmaceutical Fraud
As I have said many times before this committee, I am firmly convinced that a culture of fraud permeates the pharmaceutical industry. Over the past decade, virtually all of the major private pharmaceutical companies have been involved in significant health care fraud. Simply put, it’s a business model and the penalties incurred – if and when they are incurred – are viewed as a cost of doing business.
In fact, in 2010 the pharmaceutical industry achieved a dubious distinction – it surpassed the notoriously corrupt defense contracting industry in defrauding the government. The pharmaceutical industry accounted for nearly half — $1.8 billion of a total of $4.1 billion — of the penalties collected in 2011 by the Department of Justice/Health and Human Services Health Care Fraud and Abuse Control Program. In 2012, pharmaceutical companies are expected to pay out up to four times the amount of last year’s penalties, or $8-9 billion, due to pending fraud settlements with the DOJ.
While $8-9 billion in penalties certainly seems significant at first blush, the fact is that it pales in comparison to the revenues generated by illegal and fraudulent practices such as off-label marketing and price inflation – if it didn’t, why else would the industry allow this behavior to continue? Mr. Chairman, the top twelve pharmaceutical companies made $44.6 billion in profits in 2010, with Pfizer making $8.3 billion and Johnson and Johnson making $13.3 billion. The penalties these companies pay when they are caught and prosecuted – as commendable as the recent increased enforcement by the Administration is – simply aren’t big enough to deter these companies from being repeat offenders.
There are so many examples over recent years that it is a true challenge to get a sense of the scope and scale of the problem, but I want to just mention a few before I offer my amendment to combat the problem:
Johnson & Johnson:
- 2012: Johnson & Johnson paid a total of over $2 billion in fines for the dangerous practice of illegally marketing Risperdal, an anti-psychotic, to nursing home patients and for other unapproved uses. Some of these fines were a product of civil judgments in state courts. Worldwide sales of the drug from 1994-2010 totaled over $34 billion. In other words, the penalties constituted a mere 6.3% of sales revenue. Johnson & Johnson held two exclusivities for Risperdal.
- 2010: Two subsidiaries of Johnson & Johnson paid more than $81 million to resolve criminal and civil liability arising from the illegal promotion of the epilepsy drug Topamax. The Government alleged that Ortho-McNeil Pharmaceutical promoted the sale of Topamax for off-label psychiatric uses through a practice known as the “Doctor-for-a-Day” program. Using this program, Ortho-McNeil hired outside physicians to join sales representatives in their visits to the offices of health care providers and to speak at meetings and dinners about prescribing Topamax for unapproved uses and doses.
- 2009: Johnson & Johnson subsidiary Scios paid $85 million to settle a criminal misdemeanour charge of misbranding its drug Natrecor, used to treat heart failure. The charges stemmed from a Justice Department probe into allegations brought by a whistleblower that Scios was promoting Natrecor for off-label use as a routine, outpatient infusion, when it is only FDA approved for use to treat congestive heart failure patients in hospitals and emergency rooms. Scios admitted that there was insufficient evidence to support the outpatient use it had been aggressively marketing for over five years.
Pfizer:
- 2012: One year ago, Pfizer disclosed that talks are under way with the US Department of Justice to settle charges the drugmaker committed fraud against government health programs by failing to report discounts and rebates for its Protonix heartburn medicine. At the time, Pfizer also disclosed the DOJ alleged its potential liability is more than $2 billion. Nearly three dozen states have joined whistleblower lawsuits or filed their own alleging Pfizer knowingly failed to report certain discounted prices as required by laws governing the Medicaid program. As a result, the drugmaker allegedly avoided paying hundreds of millions in rebates due to state Medicaid programs for Protonix. Pfizer holds four different exclusivities for Protonix.
- 2009: Pfizer pled guilty to a felony of “misbranding Bextra with the intent to defraud or mislead” and agreed to pay $1 billion to resolve allegations under the civil False Claims Act that the company illegally promoted four drugs — Bextra; Geodon, an anti-psychotic drug; Zyvox, an antibiotic; and Lyrica, an anti-epileptic drug. The civil settlement also resolved allegations that Pfizer paid kickbacks to health care providers to induce them to prescribe these, as well as other, drugs. At the time, this was the largest civil fraud settlement in history against a pharmaceutical company.
- 2004: Warner-Lambert, a division of Pfizer Inc., pled guilty to two felonies and agreed to pay $430 million to settle charges that it fraudulently promoted the drug Neurontin for a string of unapproved uses. Included in the award was a criminal fine of $240 million, at the time, the second-largest such fine ever imposed in a health care fraud prosecution.
- 2002: Pfizer agreed to pay $49 million to settle charges that a subsidiary defrauded the Medicaid program by overcharging for the cholesterol-lowering drug Lipitor.
GlaxoSmithKline:
- 2011: GSK announced that it has reached an “agreement in principle” with the US Government to pay $3 billion to conclude the Company’s most significant ongoing Federal government investigations, specifically:
- illegal sales and marketing practices in Colorado and Massachusetts;
- inappropriate use of the nominal price exception under the Medicaid Rebate Program; and
- illegal development and marketing of Avandia, a diabetes drug that was severely restricted last year after it was linked to heart risks. Federal prosecutors said the company had paid doctors and manipulated medical research to promote the drug and to discredit assertions that the drug was linked to health risks.
- 2006: GSK agreed to pay $14 million to settle allegations that it engaged in patent fraud, antitrust violations and frivolous litigation to maintain a monopoly and block generic versions of its antidepressant Paxil from entering the market.
- 2005: GlaxoSmithKline PLC will pay $150 million to settle claims it overcharged the government for two anti-nausea drugs. Glaxo engaged in a scheme to inflate the price of Zofran and Kytril for the Medicare and Medicaid programs, which reimburse health care providers based on the manufacturers’ prices, the government said. The drugs, typically administered in doctors’ offices or hospitals, are used mainly to counter nausea brought on by chemotherapy and radiation.
- 2003: GSK signed a corporate integrity agreement and paid $88 million in a civil fine for overcharging Medicaid for its antidepressant Paxil and its nasal-allergy spray Flonase.
Abbott Labs:
- 2012: Abbott Laboratories has set aside $1.5 billion for a potential off-label marketing settlement with the U.S. Justice Department. Whistleblower lawsuits joined by the DOJ allege Abbott pushed the epilepsy drug Depakote, which is also approved for bipolar mania and migraine prevention, for a variety of unapproved uses. The company touted Depakote as a treatment for autism, sexual compulsions, agitated and aggressive dementia patients, and other conditions, the whistleblowers claim. The unapproved uses were promoted in a variety of U.S. healthcare settings, including long-term care and assisted-living facilities. The company had also been granted pediatric exclusivity for Depakote.
- 2010: Abbott and two smaller companies collectively agreed to pay $421 million to settle charges that they deliberately misreported drug pricing in order to hike reimbursements from Medicare and Medicaid. Abbott was accused of inflating prices by as much as ten times the actual cost. “By offering their customers one price and then falsely reporting a greatly inflated price to the lists the government uses when determining how much to pay for the drugs, we believe pharmaceutical companies created an incentive for the purchase of their drugs, since buyers could obtain government payment at the inflated price and pocket the difference,” said Tony West, an assistant attorney general for the Justice Department’s Civil Division.
Merck:
- 2011: Merck pleaded guilty to a criminal misdemeanor charge for a violation of the FDCA for illegally promoting Vioxx for rheumatoid arthritis before that use was approved by the Food and Drug Administration in 2002. Merck also paid a $950 million settlement. According to the government, Merck representatives made inaccurate, unsupported or misleading statements about Vioxx’s cardiovascular safety, in order to increase sales of the drug. The government also said Merck made false statements to state Medicaid agencies about the drug’s safety. Merck recorded more than $11 billion in Vioxx sales during the drug’s years on the market from mid-1999 to September 2004.
- 2011: Merck will pay Massachusetts $24 million to settle claims that former subsidiary Warrick Pharmaceuticals reported inflated and false prices for asthma medications, causing the state’s Medicaid program to overpay.
- 2008: Merck reached a $670 million settlement for a fraud on patients and the Medicare/Medicaid involving a conspiracy with hospitals to give the elderly cheaper drugs but charging them for the more expensive product prescribed by the patients’ doctors. Merck agreed to a Corporate Integrity Agreement, which meant good behavior was required for the next five years.
And on and on it goes. The bottom line is that the pharmaceutical industry is making money hand over fist while it systematically defrauds our taxpayers, all the while individuals in the United States (let alone the developed world) are not getting the medicines they need because they cannot afford them. To the best of my knowledge, Mr. Chairman, no major pharmaceutical company executive in the United States has ever faced jail time for his or her company’s crimes.
Since it is obvious to anyone paying attention to the prevalence of pharmaceutical industry fraud that our punishments are not enough to address this problem, I am proposing the “Pharmaceutical Fraud Accountability” amendment today. Sanders’ Amendment #1 is designed to effectively deter pharmaceutical fraud by making government-granted monopolies contingent on good corporate behavior:
It would penalize any instance of pharmaceutical fraud resulting in a civil or criminal judgment, or a settlement with an acknowledgement of fault, by revoking any applicable data or marketing exclusivity for the particular drug(s) or product(s) involved in the fraud – giving pharmaceutical companies another factor to consider when weighing whether or not to violate the law in their sales or billing practices.
For example, if a company violated federal or state law by illegally marketing a medication or inflating the price of a drug in Medicare or Medicaid billing, that company would lose the remainder of any exclusivity period for that medication.
Companies would be required to self-report qualifying violations to the FDA within 30 days.
This amendment would send a strong a clear message to the drug industry: Illegal behavior will not be rewarded with government-granted monopolies. There are some things – patient safety, the devotion of scarce public resources to provide health care to needy patients – that must be recognized in our laws and regulations as more important than profits. I urge my colleagues to vote yes.
Patient Safety
We must improve patient safety – rather than continue to pass legislation that weakens patient protections resulting in harm and sometimes death and that fails to close gaps in current policy that we know lead to harm. This issue is especially critical in the area of medical devices, which, when flawed, can cause the patient significant pain, years of recovery, and huge medical bills while increasing costs to our entire health care system. In recent years there have been many examples of devices that were approved or cleared by the FDA without adequate testing.
There is no excuse for the fact that the standard for approving devices is much lower than the standard for approving drugs. The public has a right to expect that FDA will only approve a new device if it is reasonably safe. Appallingly, this is not the case. There is a major loophole in the law that leads to unsafe devices coming to the market just because they are similar to earlier models – even when those earlier models have already been found to be unsafe. This loophole must be closed now. The American people should be outraged that FDA continues to knowingly approve unsafe medical devices, in large part because the medical device industry pays their lobbyists to make sure this loophole remains in place. This loophole exists at the expense of our health and the health of our families.
The GAIN Act Perpetuates our Flawed Pharmaceutical Incentive System
As our country continues to struggle through the worst economic crisis since the Great Depression, let’s think about the fact that we spend over $300 billion a year (as of 2010) as a nation on prescription drugs! Think for a minute about the insanity that a popular AIDS treatment, ATRIPLA, costs over $24,000 dollars per year for an American patient, for example, while at the same time the United States government’s PEPFAR program pays under $200 per year for the same treatment from a competitive generic supplier to get those medicines to people in developing countries. This is what we’re doing today, and it makes no sense to me, morally or economically.
One of the most troubling pieces of this package is the Generating Antibiotic Incentives Now (GAIN) Act. I recognize the underlying goal of the GAIN Act is to encourage the development of antibiotics that treat highly resistant pathogens and emerging “superbugs.” Having antibiotics to treat these serious infections is an important public health issue. However, I believe the solution put forth by the committee will not only exacerbate our public health crisis but will also increase the cost of necessary medications. Rather than continue our current flawed market monopoly, high price model, I have proposed a new medical innovation model – a prize fund.
The prize fund model has been touted by business leaders and policy experts in other fields, such as space exploration, green technology, and automobile development, as having the capacity to address problems the market or government cannot address alone. Prescription drug development has also fallen victim to a failed system; rather than companies focusing their research dollars on solving the most important public health crises, pharmaceutical companies have gotten so large that they instead focus their research on potential blockbuster drugs that will satisfy their shareholders’ demands for larger and larger profits. Although still making huge profits, medications that require a short course of treatment, such as antibiotics, do not usually have the same types of profit margins as drugs that someone takes every day, such as a statin.
Exclusivity periods were designed as a government award to companies for making drugs that Congress thought should be incentivized. However, the flawed system is now fundamentally broken. We must (1) take steps to improve the exclusivity & patent system we have now, and (2) begin work to overhaul the system entirely:
(1) TRANSPARENCY: The best way to improve our current system without a complete overhaul would be to tailor the exclusivity incentives more closely to the benefits we receive for them, but to do that we need more information. Right now, Congress is making decisions about exclusivity periods (monopoly periods given to drug companies), without any information about what these companies are spending on their research and development. Congress must require that companies submit cost information to the Secretary such as the amount a drug sponsor received from public sources and the amount expended on pre-clinical research and clinical trials. Companies should also disclose, using de-identified data, the number of individuals participating in clinical trials.
By way of comparison, in order for a company to get an IRS tax credit, the company must submit information to the IRS about how much they spent. The spending on research, which the government wants to incentivize, is correlated with an award. The more spending on research, the higher the award. If a student wants a federal grant they must prove their income and assets – Congress does not simply hand out the money no questions asked. This is not true when it comes to exclusivity periods. Yet for some reason Congress takes companies’ word for it when they say they need three, five or seven more years to make developing a certain type of drug profitable enough to investors to be worth it. Especially in this recession, Congress must think critically when asked by corporations for newer and larger taxpayer-funded awards and must ask for information in return. Exclusivity awards should be correlated with investment, and the way to do this is through a transparency initiative.
(2) THE PRIZE MODEL: In a step towards changing our current monopoly-based system, I propose replacing GAIN with a Prize Fund for Antibiotics, which would reward true innovation, eliminate the market incentive for copy-cat drugs, and get all drugs to the people who need them at generic prices. This committee should not pass another period of exclusivity into law.
The Prize Fund would fix our broken system so that the only positive financial reward for a drug developer would be for meeting the needs of people for a meaningful treatment. It would dramatically increase access by subjecting all antibiotics to generic competition immediately upon Food and Drug Administration approval of a new medicine. This would result in generic prices for all antibiotics right away, not after ten or more years of astronomical prices.
I believe that by breaking the link between drug prices and the rewards for medical R&D, we can provide virtually universal access to medicines as soon as they are available on the market, we can end rationing and restrictive formularies, and we can manage overall research and development incentives through a sanely-administered fund that provides significant rewards, but only for new antibiotics that actually offer new value.
Here is how the Antibiotics Prize Fund would work:
- The legislation would separate the markets for products from the markets for innovation.
- Products would have generic competition immediately after FDA approval – that is, the bill would eliminate today’s high-priced marketing monopolies as the reward for patented medical innovations.
- Instead, innovation would be rewarded in a separate market out of a substantial Antibiotics Prize Fund.
- The Prize Fund would make awards to developers of medicines based primarily upon the added benefits of the new treatments.
- These pay-outs would take place over the first ten years a medicine is on the market, mirroring today’s approximately 10-year patent life for new drugs and allowing for actual use by patients and negative effects to be taken into account.
- The payments from the Prize Fund would always go to the developer of the new medicine, regardless of who actually sells the product to consumers.
- The Antibiotics Prize Fund pay-outs would be set as a percentage of the U.S. GDP annually, about $2 billion in 2010.
How do we pay for it? It pays for itself, and then some. While a $2 billion per year fund for this may sound like a lot, when you compare it to the savings we would realize by paying generic prices for the over $7 billion we spend every year on antibiotics, it is a bargain.
That is why this bill would require all private health reimbursement and insurance programs to contribute to the Prize Fund in an amount proportionate to their share of consumption in the antibiotic drug market.
I have proposed a new model based on a prize fund and an all-generic market for medicines for years, and I will be holding a hearing in the Subcommittee on Primary Health and Aging on May 15 to discuss my legislation proposing a Prize Fund for HIV/AIDS medicines, S. 1138. Thank you.