Health and Science

Sen. Grassley says probe of 'secretive' drug industry pricing won't stop with drugmakers

Key Points
  • Senate Finance Committee Chairman Chuck Grassley invites seven drugmakers to testify about drug prices.
  • Executives from seven pharmaceutical companies — AbbVie, AstraZeneca, Bristol-Myers Squibb, Johnson & Johnson, Merck, Pfizer and Sanofi — will testify Tuesday before the Senate Finance Committee.
We need more drug price transparency, says Senator Chuck Grassley
We need more drug price transparency, says Senator Chuck Grassley

The Senate Finance Committee's probe into high drug prices won't stop at pharmaceutical companies, Chairman Sen. Chuck Grassley told CNBC on Tuesday.

The Iowa Republican spoke hours before his committee members get a chance to grill executives from seven drugmakers — AbbVie, AstraZeneca, Bristol-Myers Squibb, Johnson & Johnson, Merck, Pfizer and Sanofi. Grassley said there needs to be more transparency about how drug prices are set.

"I think there is not enough information available about how prices are arrived at," Grassley said on "Squawk Box." "There seems to be a great deal of secrecy. For me, on a lot of legislative issues, particularly my oversight works, transparency brings accountability, so we need to get some transparency into it."

He wants explanations on how list prices are set for drugs and what's actually being paid for the drugs. Pharmaceutical companies negotiate discounts, called rebates, with pharmacy benefit managers. Rebates are a favorite target of the pharmaceutical industry, which blames PBMs on hoarding the savings instead of passing them on to patients.

Grassley said the committee's investigation won't stop with drugmakers and will include PBMs, as well as other players in the supply chain.

On Tuesday, six CEOs and one top executive will appear before the committee: AbbVie CEO Richard Gonzalez, AstraZeneca CEO Pascal Soriot, Bristol-Myers Squibb CEO Giovanni Caforio, Johnson & Johnson's Janssen unit Executive Vice President Jennifer Taubert, Merck CEO Ken Frazier, Pfizer CEO Albert Bourla and Sanofi CEO Olivier Brandicourt.

Food and Drug Administration Commissioner Scott Gottlieb shares Grassley's concerns about rebates, telling "Squawk Box the "wacky" system keeps prices high for patients at the pharmacy counter.

Grassley and ranking member Ron Wyden, D-Ore., earlier this month invited seven of the largest pharmaceutical companies to testify about drug prices. Grassley stepped down as chairman of the judiciary committee after the 2018 election in order to head the finance committee with the stated goal of tackling drug prices.

Last week, the chairman and Wyden launched a bipartisan probe into insulin prices. The pair sent letters to the three leading insulin manufacturers, Eli Lilly, Novo Nordisk and Sanofi, asking their executives to explain why prices for diabetes drug prices have soared dramatically in recent years.

"He is somebody who has been as a Republican the go-to guy on prescription drug reform," said former Sen. Heidi Heitkamp, D-N.D. "He has been willing in the past to sit down and actually introduce bipartisan legislation."

Earlier this month, Grassley joined with Sen. Patrick Leahy, D-Vt., to reintroduce the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, which would allow generic drug makers to go to court to obtain samples for developing biosimilar drugs, or copycat versions of complex biologic treatments. Last fall, he also co-sponsored drug pricing bills with Sens. Amy Klobuchar, D-Minn., and Dick Durbin, D-Ill. Klobuchar is among those running for president in a crowded Democratic field.

"Republicans are angry. Democrats are angry — it's really everyone at this point," said Ipsita Smolinski, managing director at Capitol Street, a health policy consultancy. She added that pharmaceutical companies "are very aware of the environment."

Health care was the top issue for voters in the 2018 election. While Democrats and Republicans remain divided when it comes to the Affordable Care Act, Medicare for All and other health insurance policies, analysts say drug prices are one area where there is increasing bipartisanship.

Wells Fargo analyst David Maris sees a possibility of bipartisan regulatory and legislative action on drug prices this year as a real threat for the drug industry.

"The Republican Party is really interested in this topic, more so than they've been in previous cycles," Maris said. "There's a new openness on both sides. A lot of that has to do with the president and his administration trying to attack root causes."

Correction: This story was revised to correct that the Senate hearing is Tuesday.