The High Cost of High Prices for HIV/AIDS Drugs and the Prize Fund Alternative

Opening Statement of Chairman Sanders
Subcommittee on Primary Health and Aging Hearing

May 15, 2012

Thank you all for attending this important hearing, which as far as I know is the first Congressional hearing ever held to discuss the possibility of ending monopolies for medicines and offering a serious proposal to replace our broken system with one that would accelerate innovation while providing virtually universal access to life saving medicines for HIV/AIDS as soon as they are approved for sale. 

Let me be very clear, for the United States Congress this is a very radical idea and one that will most certainly not be passed in the short term.  However, it is a concept that is absolutely right, that must be passed, and will be passed when the American people demand it.

I start my approach to health care from a basic premise: that health care is a human right, and that poverty should not be a death sentence, neither in the United States nor anywhere else.  Yet it is, much to our disgrace. 

To me, one of the great moral issues of our day is that there are people in our country suffering and in some cases dying because they are not able to afford a medicine that can be produced for pennies per treatment.  In other words, it is one thing - and tragic -when someone suffers and dies because we have not yet developed a treatment or cure for their disease.  But it is another thing entirely when we have cure or treatment and it can be manufactured and delivered to them for a couple of dollars, and yet they suffer and die because the price is set so high that they cannot afford it.  To me, that is the equivalent of finding someone drowning in a swimming pool and not jumping in to save them.  Who can defend it? 

The U.S. has - by far - the highest prices in the world for prescription drugs.  According to the Canadian Patented Medicines Prices Review Board's annual survey, average prices for patented medicines in the United States in 2009 were 85% higher in the U.S. than in its neighbor Canada, and approximately 150% higher than in France, Italy, Sweden and Switzerland.  Price differences on certain drugs are far greater, some of which I will talk about in a minute.  The simple fact is that the prices of patented medicines are a significant barrier to access to health for millions of uninsured and underinsured Americans (let alone people in the developing world), and people die because of it.

A March 2008 survey by researchers at the Kaiser Family Foundation and the Harvard School of Public Health, found that forty percent of Americans reported experiencing "at least one of three cost-related concerns in their family: 16 percent say it is a ‘serious' problem to pay for prescription drugs; 29 percent say they have not filled a prescription in the past two years because of the cost; and 23 percent say they have cut pills in half or skipped doses in order to make a medication last longer.

This is what we're getting out of our system today and it makes no sense to me, morally or economically. 

Stop and think for a moment what these numbers mean.  While we now take it for granted, one of the great advances of the 20th Century was the advent of modern medicines capable of treating a range of debilitating and fatal illnesses.  What does it mean that a significant portion of population is unable to use them?  How much suffering is created, how many people unnecessarily die, and how many additional health care expenses we incur because millions of people in this country cannot afford to buy the medicines their doctors prescribe?

The concept we are discussing today is relevant, of course, to all kinds of diseases and I have introduced broader legislation in this regard.  But one of the things that drove my decision to offer a new prize bill last year, one that is focused on a single disease, is the price I learned about for one HIV/AIDS medicine.  It simply blew me away not only that one drug - Atripla - costs over $25,000 per person, per year, for a course of treatment, but that a generic, FDA-approved version of the very same drug is being purchased from a competitive supplier by a US government program, the President's Emergency Plan for AIDS Relief (PEPFAR), for under $200 per patient, per year, for distribution in developing countries. 

Let me repeat, the same exact drug that people in the state of Vermont or the state of California pay an average wholesale price of over $25,000 for, according to the NIH, is being purchased by a U.S. government entity for under $200.  I cannot say for sure what each state program, federal program or insurance company pays for this or other expensive HIV/AIDS treatments because of a lack of transparency in the insurance and pharmaceutical industries, but I can tell you that if you do as my staff did and call a local pharmacy, you will be quoted a price of over $25,000 for a year's worth of Atripla. 

What could tell the story of how much we are paying in the United States to support our inefficient model better than that?  In the case of Atripla, we are paying more than $24,000 per patient, per year to support the monopoly model of rewarding innovation.  Some newer combination therapies are even more expensive - for a virus that infects over a million Americans and growing.

According to the CDC, approximately 1.2 million people are living with HIV in the United States.  Each year, approximately 50,000 Americans are infected with HIV, and approximately 17,000 people with AIDS died in the United States in 2009.  Globally, the numbers are staggering - according to the WHO, there are more than 34 million persons living with HIV/AIDS worldwide, and 2.7 million more are infected each year.  90% of the 34 million HIV+ persons live in developing countries - over 30 million persons - yet only approximately 7 million of them are receiving treatments.

Although medicines can slow or even halt the advance of HIV, many Americans diagnosed as HIV positive are not taking the medicines they need because they simply cannot afford to buy them.   The increased demand has overwhelmed federal financial support for the AIDS Drug Assistance Program (ADAP) administered by the states.  In FY10, ADAP served a record 229,000 people, reflecting an increase of 24,000 people over FY09, and a 40% increase since FY07.  However, during that same period federal funding only grew by 9%. 

Funding shortages caused ADAP waiting lists that had been whittled down to 361 people nationwide in 2010 to grow to a high of 9,217 people in 12 states as of August 11, 2011, and they are still at 2,759 as of May 10, 2012.  That's 2,759 Americans last week who need to be on treatment who are not.  And that only tells part of the story: many more are simply being kept off or thrown off the waiting lists due to stiffer eligibility requirements.  For example, if your income is just a little too high or your state has set a cap on the number of people who can enroll, you may not even get on a waiting list.

The Prize Model

That is why we are here today to talk about a new approach that makes certain that all people afflicted with terrible illnesses - in this case, AIDS - can get the drugs they need at prices they can afford: a prize fund proposal targeted to HIV/AIDS medicines, S. 1138, the "Prize Fund for HIV/AIDS Act."  

Under this bill, innovation would be rewarded annually from a $3 billion Prize Fund for HIV/AIDS.  The Prize Fund would make awards to developers of medicines, based primarily upon the added therapeutic value a new treatment offers and the number of people it benefits.  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.

In other words, as some of our witnesses will discuss, companies receive a prize today for bringing a new drug to market: it's called a monopoly, which is the ability to charge whatever price they want for the medicine.  Under my bill, instead of making their money by charging their patients outrageously high, monopoly prices - in the case of Atripla, $25,000 - innovative companies would be making their money by receiving prize fund payments for producing important medicines that ease suffering and save lives.  Once that medicine is approved for sale, that company can receive prize payments, but the medicine goes to the market at an affordable price because of generic competition.

There are many other aspects that we will discuss today, but in essence, it is designed to accelerateinnovation and expedite access to its products at the same time - as if patients and their well-being are paramount - not one that traps different pieces of medical knowledge up in the lockboxes of patents and keeps life-saving medicines behind the barricades of high prices.  It would reward true innovation, eliminate the market incentive for copy-cat drugs, and get all HIV/AIDS treatments to the people who need them at generic prices, which some have estimated to be under 1 percent, on average, compared to brand name prices for HIV/AIDS medicines. 

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 medicines that actually offer new value.  The bottom line would be better products sooner, and generic prices for all pharmaceutical products right away, not after ten years of astronomical prices. 

How do we pay for it?   It pays for itself, and then some.  While a $3 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 approximately $9.7 billion IMS Health estimates was spent in 2011 on the top 15 brand-name HIV/AIDS drugs last year, before rebates or discounts, it's 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 the number of HIV/AIDS patients covered by private plans. 

The bottom line is that the goal of our laws and policies for medicines must be to develop drugs as quickly as possible, drugs that are the most effective we can find for the diseases people are facing, and to get them out to every person who needs them as soon as possible.  That is what I have tried to do with S. 1138 for HIV/AIDS treatments.  We should reward innovators for developing these new medicines in a way that does not force any of those who need the drug to wait, suffer and in some cases die. 

We have an excellent panel of witnesses today and I look forward to the testimony.