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Drugmakers Blame the System for High Prescription Prices

At Senate hearing, lawmakers point to high profits and call on industry to take responsibility

spinner image A Senate hearing on drug prices
Executives from seven pharmaceutical companies testify before a Senate hearing on drug prices. 
Associated Press

Top executives from seven giant pharmaceutical companies refused to guarantee to the Senate Finance Committee on Tuesday that they would make their products more affordable to American consumers by lowering their list prices.

One by one, the leaders of the drug manufacturers blamed runaway prescription drug retail prices on the rebates they say they must pay to pharmacy benefit managers and insurance plans or run the risk that their products will not be included on the lists of medicines that Medicare Part D prescription drug and private insurance plans will cover. They said the incentives in the system have led to list prices that they conceded are unaffordable for many Americans. They also said that if they didn’t have to pay those rebates they might be willing to reduce prices — but they refused to promise to do so.

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“I think you and others in the industry are stonewalling on the key issue — which is actually lowering list prices,” said Sen. Ron Wyden (D-Ore.), the senior Democrat on the panel. Lowering prices, Wyden said, “is the easiest way for the American consumer to pay less at the pharmacy counter.”

Tuesday’s hearing was the panel's second session on pharmaceutical prices. Similar investigations are being conducted in the House of Representatives, and administration officials have proposed regulations they say would help lower costs for millions of Americans.

Senate Finance Committee Chairman Charles Grassley (R-Iowa) told the industry executives that “every link in the supply chain has gotten skilled at finger-pointing. But, like most Americans, I’m sick and tired of the blame game.” Grassley made clear that his committee is looking for legislative options to keep drugmakers from engaging in practices “that keep drug prices high for patients.”

The seven executives called to testify represented manufacturers of some of the most popular — and expensive — prescription drugs: Richard Gonzalez, CEO of Abbvie, which makes the arthritis medicine Humira, the top-selling prescription drug in America; Kenneth Frazier, CEO of Merck & Co.; Olivier Brandicourt, CEO of Sanofi; Albert Bourla, CEO of Pfizer; Jennifer Taubert, executive vice president for pharmaceuticals at Johnson & Johnson; Giovanni Caforio, CEO of Bristol-Myers Squibb; and Pascal Soriot, CEO of AstraZeneca.

The drugmakers said they recognize the need to make their products affordable but also pointed to what they said were large investments they make to bring new drugs to the market. “We are witnessing a historic era in biomedical innovation,” said Caforio of Bristol-Myers Squibb. “American research-based companies are leading the next wave of biomedical innovation to help patients whose diseases cannot be adequately treated with today’s medicines. We should work to ensure policies that support and reward these investments.”

But Sen. Debbie Stabenow (D-Mich.) said taxpayers have paid for that research. Funding from the National Institutes of Health, Stabenow said, contributed to every single one of the 210 new drugs the Food and Drug Administration approved from 2010 to 2016. Taxpayers “feel they ought to be able to afford the medicine after they have helped to develop it,” Stabenow said. All seven executives acknowledged that their companies spend more on advertising and administrative costs than they do on research and development. 

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“We were heartened by today’s hearing, in which both sides raised important questions about companies’ profits, advertising and pricing practices,” Nancy LeaMond, AARP executive vice president and chief advocacy and engagement officer, said in a statement. “AARP reiterates our call for action on policy solutions that actually lower drug prices instead of simply shifting costs around within the health care system. To do that, we must deal directly with the root cause of high drug prices: price gouging by drug companies.”

A regulation proposed this month by the Department of Health and Human Services would require that the rebates drug companies provide to Medicare Part D private insurance plans instead go directly to some consumers. But it’s a proposal that the administration acknowledges could lead to across-the-board increases in Part D premiums, as well as higher costs for Medicare. And it would not require drug companies to lower their prices.

Wyden asked all the drugmakers to put in writing that if the rebate rule were adopted, they would guarantee reductions in their list prices. “After the happy talk is over,” Wyden said, “that’s what really is going to help people at the pharmacy counters from sea to shining sea.”


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