Drug Industry Pricing Practices ‘Unjustified and Unfair,’ House Investigation Finds

The pharmaceutical industry has raised drug prices in the United States far faster than the rate of inflation, using practices that are “unsustainable, unjustified, and unfair to patients and taxpayers,” according to a new report released Friday by the House Oversight Committee detailing the findings of a nearly three-year investigation led by the panel’s Democrats.

The report is the result of a review of more than 1.5 million pages of internal company documents that, it says, “provide significant new insights into the tactics drug companies use to raise prices and keep them high by suppressing competition.” The congressional investigation also included five hearings with drug company executives, patients and policy experts.

The report finds that, in the five years from 2016 to 2020, pharmaceutical companies raised the prices of brand-name prescription drugs by 36%, almost four times the rate of inflation. And the 20 most prescribed brand-name drugs in Medicare’s Part D prescription drug program saw their prices rise by more than 12% a year from 2012 to 2017, or about 10 times the rate of inflation.

“Drug companies have raised prices relentlessly for decades while manipulating the patent system and other laws to delay competition from lower-priced generics,” Rep. Carolyn Maloney (D-NY), chair of the committee, wrote in the preamble of the 269-page report. “These companies have specifically targeted the U.S. market for higher prices, even while cutting prices in other countries, because weaknesses in our health care system have allowed them to get away with outrageous prices and anticompetitive conduct.”

The report adds that the drug industry’s strategy has been driven in large part by the law prohibiting Medicare from negotiating drug prices: “The Committee’s analysis found that taxpayers could have saved more than $25 billion over a five-year period for just seven of the drugs investigated—Humira, Imbruvica, Sensipar, Enbrel, Lantus, NovoLog, and Lyrica—if private Medicare Part D plans had obtained the same discounts as other federal health programs that are empowered to negotiate,” it says. “If Medicare Part D plans had received the same discounts as other federal health care programs for the three frequently used insulin products investigated by the Committee—Humalog, Lantus, and NovoLog—Medicare could have saved more than $16.7 billion in the period from 2011 through 2017.”

Democrats hope to lift the prohibition on Medicare negotiations for some drugs as part of their Build Back Better Act.

The report also challenges the drug industry’s claims that high drug prices are necessary to fund innovative research, finding that industry spending on research and development is “dwarfed by revenues year after year” — and that “when drug companies did invest in R&D, those expenditures often went to research designed to protect existing market monopolies.”

A Republican response: Republicans on the Oversight committee issued their own 19-page report Friday looking at the role played by pharmacy benefit managers (PBMs), the companies that administer prescription drug benefits for Medicare and other insurers. Drug companies point to benefit managers’ practices as a reason that prices keep rising.

The GOP report says that Democrats , “seeking to cast [pharmaceutical] companies as the sole villains in the drug cost debate,” are disregarding the benefits the drug companies provide and ignoring the role in pricing played by PBMs, which it says drive drug list prices higher and “use their market leverage to increase their profits, not reduce costs for consumers.”