While U.S. lawmakers agree that something needs to be done about prescription drug prices, the agreement breaks down over the government's role in that effort.

The disagreement came to the front Thursday in a House Ways and Means subcommittee hearing when Rep Lloyd Doggett (D-Texas), the Health Subcommittee chair, touted a bill he introduced last month that would allow direct Medicare negotiations for Part D drugs. Under the bill, the government would enforce compulsory licensing if a drug manufacturer refused to negotiate. Then the manufacturer would be paid a royalty, based on the comparative effectiveness and safety of the drug.

Doggett said the government already directly negotiates for drugs through the Department of Veterans Affairs and it has used compulsory licensing for defense purposes. Since patentholders would be paid a royalty, the compulsory licensing would not be a government taking.

But Republicans on the subcommittee expressed concern that the bill goes too far in asserting government control of drug prices. "The free market system is the tool that should be used to drive prices down" – not a takeover of the biopharma space by government fiat, Rep. Tom Reed (R-N.Y.) said.

A free market doesn't consist of government price setting through "take-our-price-or-leave-it" negotiations, Reed said. He questioned why drug companies would innovate under such a system when companies could just sit on the sidelines and wait for the government to march in, giving them access to someone else's intellectual property.

"On what planet is this a free market?" Rep. Earl Blumenauer (D-Ore.) asked in response. "There's no free market anywhere in the world for pharmaceuticals." He called the idea that negotiations amounted to a government takeover "poppycock."

The American Action Forum's Douglas Holtz-Eakin, one of the more conservative policy experts asked to testify at the hearing, agreed that the U.S. health care system is not a perfectly free market. "There's an enormous amount of government intervention," he said.

Use the market

With both Democrats and Republicans wanting to address drug prices, there's an "opportunity to move toward better use of market forces, which have historically delivered better quality, better prices across the globe," Holtz-Eakin said.

"That's the debate we should be having," he added. "Where can we do that?" He suggested reforms to Medicare Part D and doing away with the anti-kickback safe harbor for the rebates drug companies pay to pharmacy benefit managers for a preferred spot on Medicare formularies.

Robin Feldman, director of the Institute for Innovation Law at the University of California Hastings School of Law, also urged the subcommittee to look for free market solutions. "Government can't be everywhere," she said. "You need the market. You need the eyes of the market, and you need to let the market function in a fair and transparent and efficient manner."

Feldman's solutions included a "one-and-done" patent system that would prevent drug manufacturers from extending their patent monopolies by limiting them to one period of exclusivity per drug. The companies could decide which one they wanted to claim at the time of a drug's approval, she said. She also called for transparency on pricing and the now-secret deals that are part of the system.

What innovation?

Responding to concerns that his bill would hurt innovation, Doggett said most new drugs aren't innovative to begin with. Doggett cited a 2017 Government Accountability Office report that found only 13 percent of newly approved drugs were innovative. "They are masters of innovation when it comes to extending monopoly prices for decade after decade," Doggett said of drug companies, but they have a "pretty sorry record" on innovation when it comes to new therapies and cures.

The wellspring of innovation today "is really the federal government funding public sector research institutions," said Ameet Sarpatwari, assistant director of the Program on Regulation, Therapeutics and Law at Harvard Medical School.

While he acknowledged the risks companies face when they develop a new drug, Sarpatwari said much of the biopharma industry is sustaining itself through price increases rather than innovation. Markups on existing products accounted for 60 percent of U.S. drug revenue from 2014 to 2017, he said.

In concluding the hearing, Doggett said, "We have a system where the taxpayers fund much of the research, the government grants a monopoly in defiance of the free market and then there is no restraint against price. It's whatever a sick or dying person will pay for a little more time or a little more relief. That system . . . is not innovative [and] is not meeting our need. . . . I think it will take more than just tweaking in order to solve these problems."

But Doggett didn't hold out a lot of hope that a divided Congress would come to an agreement on how to lower drug prices. Taking a final dig at his Republican colleagues, he said, "We could write a nice letter . . . to big pharma and ask them to please lower their prices. . . . We could say pretty please with sugar on it." That's pretty much what President Donald Trump did last year when he got Pfizer Inc. to step back from price increases for six months, Doggett claimed. (See BioWorld, July 13, 2018.)

"Anyone who believes that pharmaceutical monopolies will yield their monopoly profits, which are extraordinary, just for the public good has not observed with any level of objectivity the performance of this industry over recent decades," Doggett said.