WASHINGTON—U.S. Senator Chris Murphy (D-Conn.) on Thursday spoke at a U.S. Health, Education, Labor & Pensions Committee hearing on the high cost of prescription drugs in the United States. In his questions to Johnson & Johnson CEO Joaquin Duato and Bristol Myers Squibb CEO Chris Boerner, Murphy pressed the executives on why the prices of lifesaving medications are so high for Americans as pharmaceutical companies dole out billions of dollars to shareholders.

Murphy pushed back on Boerner’s claim that the U.S. health care system prioritizes patient choice, highlighting the story of a constituent on Medicare who has no choice but to pay $350 a month for a drug she relies on: “I have a constituent who needs Eliquis. This is a blood thinner that is critical to her survival. She has priced a Medicare plan that gets her the best possible price. And that price is $350 a month. The average Social Security benefit in Connecticut is about $1,700 a month, and of course someone who is on Eliquis is likely on other drugs as well. So, here's her choice. Her choice is to pay the $350 and go without food or pay her rent late, or not take the drug and risk heart attack or stroke. Is that the choice you're talking about when you refer to a health care system that prioritizes the important role of choice?”

Murphy asked Duato why Johnson & Johnson spends billions more on stock buyback and dividends than research and development: “What do you say to Americans who look at the way that you allocate revenue and wonder why, in your case for instance, you are spending $6 billion on stock buybacks, $11 billion on dividends, and $14 billion on research and development? You spend all of your advertising time talking about the research and development spent, but I think most Americans would be pretty surprised, given how much the industry talks about research and development, that you are actually spending more money shelling out money to investors and buying back stock than you are on research and development. What do you say to folks who look at that and come to the conclusion that you care much more about keeping your investors happy and keeping your executives happy than you do in researching and developing the next class of drugs that's going to help regular people?”

A full transcript of Murphy’s exchange with Duato and Boerner:

MURPHY: “Thank you very much, Mr. Chairman. Thank you for holding this really important hearing. Mr. Duato, looking at your arthritis drug — and we've talked already a little in this hearing about the difference in price between the United States and other countries — annual cost is around $80,000 in the United States, $20,000 in Canada, $12,000 in France. Are the prices that you receive from a country like Canada or France, which look to me to be about one quarter of the price that you get in the United States, are those prices covering your costs?”

DUATO: “Just to clarify Senator, the price in the U.S. is discounted by 70 percent. So, the appropriate comparison would be $25,000 in the case of the Stelara, if you are considering that price.”

MURPHY: “Are the prices you're receiving from these other countries, so let's say France – I'll give you the benefit of your argument – France is still 50 percent of the U.S. cost that you're claiming, are those countries' prices covering your costs?”

DUATO: “They do. The difference is that, for example in Canada, which was the first company quoted, Stelara, which is mainly dedicated for inflammatory bowel disease, Crohn's disease and ulcerative colitis, not for arthritis, is not yet reimbursed in the public system. So Canadian patients that want to access Stelara, they cannot do it in the public system, because eight years later, it’s not yet reimbursed there.”

MURPHY: “So you don't identify any free rider syndrome today in which the United States is paying higher prices, allowing other nations to receive lower prices?”

DUATO: “I agree with you that the prices in the U.S. are generally higher for medicines, more aligned than what you are describing as the rest of the healthcare system prices. The percentage of pharmaceutical expenses over the total healthcare expenses in the U.S. is 14%, and that is lower than most of the advanced economies. The real difference is that in the U.S., patients get access to therapy, life-saving therapy years before they do in the countries that you mentioned.”

MURPHY: “If the United States were to restrict the prices we pay, would that create a different negotiating dynamic in countries that right now, for instance, are paying 50 percent of what the United States pays? Would it allow you in your negotiations to get higher prices from other nations that right now are paying far less than the United States?”

DUATO: “We believe that price caps are not the way that innovation is going to be fostered. We have worked with the United States State Department and U.S. embassies around the world to try to reject the price caps that some countries as the ones you're mentioning impose. And we welcome the support of the U.S. government in avoiding that these governments ultimately impose price caps on us that are not benefiting their patients neither.”

MURPHY: “What do you say to Americans who look at the way that you allocate revenue and wonder why, in your case for instance, you are spending $6 billion on stock buybacks, $11 billion on dividends, and $14 billion on research and development? You spend all of your advertising time talking about the research and development spent, but I think most Americans would be pretty surprised, given how much the industry talks about research and development, that you are actually spending more money shelling out money to investors and buying back stock than you are on research and development. What do you say to folks who look at that and come to the conclusion that you care much more about keeping your investors happy and keeping your executives happy than you do in researching and developing the next class of drugs that's going to help regular people?”

DUATO: “We care deeply about patients, Senator, and we care deeply about being able to discover the next medicines that are going to address major problems like Alzheimer’s—"

MURPHY: “But explain to me how you justify that division of dividends and stock buybacks versus future development. You could just choose, instead of using $6 billion to buy back stock to put that into more research and development, but you don't.”

DUATO: “Our level of R&D investment in the two years that refer to the $6 billion program buyback, which were 2022 and 2023, is six times higher. So, in that period, we invested $30 billion dollars in R&D and $6 billion in stock buybacks. So, we spent six times more in developing cures for patients than we did in stock buybacks.”

MURPHY: “Well, I'm looking at 2022 profits and spending by Johnson and Johnson and it shows me $11 billion in dividends, $6 billion in stock buybacks, $45 million in executive compensation, and $14 billion in research and development. Can you understand — let me ask a different question — can you understand that one of my constituents in Connecticut would look at those numbers and think that you care more about padding the pockets of the folks that work for you and invest in you than in research and development?”

DUATO: “Our priority is investing in R&D. We have spent $77 billion since 2016. And yes, we have to pay dividends because it's the only way that the company can remain operational and sustainable. Otherwise, if we are not operational and sustainable, we are not able to fulfill our mission of developing medicines for patients and making them affordable.”

MURPHY: “Mr. Boerner, you talked in your testimony about how the United States has a health care system that prioritizes the important role of patient choice. I just want to present you with the case of one of my constituents and ask you about the choices that she faces. So, I have a constituent who needs Eliquis. This is a blood thinner that is critical to her survival. She has priced a Medicare plan that gets her the best possible price. And that price is $350 a month. The average Social Security benefit in Connecticut is about $1,700 a month, and of course someone who is on Eliquis is likely on other drugs as well. So, here's her choice. Her choice is to pay the $350 and go without food or pay her rent late, or not take the drug and risk heart attack or stroke. Is that the choice you're talking about when you refer to a health care system that prioritizes the important role of choice?”

BOERNER: “Senator, absolutely not. And in fact, I would say on behalf of all of our employees at Bristol Myers Squibb, that is a choice that no patient should have to make.”

MURPHY: “But she makes it. She makes it because you have chosen to price a drug at a point that is unaffordable.”

BOERNER: “Senator, we have priced Eliquis in the U.S., in our estimation — in fact, we try to do this for all of our medicines — consistent with the value it brings. We're very happy with the fact that Eliquis is the leading anti-stroke drug.”

MURPHY: “Why not take — You put $8 billion into stock buybacks. Why not do $4 billion and instead take the rest of the money and bring the price of the drug down?”

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