Congressional investigation shows Celgene, Teva plotted to keep drug prices high

WASHINGTON — The House Oversight Committee released two major reports Wednesday that expose the internal strategies used by drug makers Celgene and Teva to repeatedly jack up the price of their blockbuster drugs revlimid and copaxone.

The reports, which are the culmination of an 18-month investigation based on internal company documents, outline in vivid detail how both drug makers raised their prices at will and plotted to  keep lower-cost alternatives off the market.

The CEOs of Teva, which markets copaxone, and Celgene, which marketed revlimid until late 2019, will testify before the Oversight Committee this morning. The CEO of Bristol Myers Squibb, which acquired Celgene in Nov. 2019, will also testify, although the majority of the Oversight Committee’s report focuses on the behavior of Celgene prior to the acquisition.

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The reports detail a pattern of mercenary price hikes, particularly from Celgene, many of which were driven primarily by a desire to hit revenue goals for shareholders.

In one case, in March 2014, Celgene CEO Mark Alles, then an executive vice president for the company, demanded that the company immediately jack up the price of revlimid by 4% because the company had not met its first quarter sales goals. Alles was explicit about the strategy: An internal slide presented to the company’s drug pricing advisory board showed that the increase would yield $24 million in new net sales.

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“Can we take the increase tonight so that it impacts sales beginning tomorrow?” Alles asked in an internal email.

A number of the presentations made to Celgene’s pricing board that were obtained by the committee made similar reference to revenue targets, according to the report.

Both reports also attempt to refute the reasons drug makers often give to justify price hikes. The committee notes, for example, that both companies were not using increased revenues to pay for new clinical studies: Teva only spent $689 million on Copaxone-related research since 1987 — just 2% of the roughly $34 billion it took in net revenue for the drug over the last two decades, according to the report.

The reports are likely to reignite calls, particularly from Democrats, to pass substantial drug pricing reforms. In a Dear Colleague letter accompanying the report, Oversight Chairman Carolyn Maloney (D-N.Y.) emphasized the need to pass H.R. 3, House Democrats’ signature drug pricing bill, which would let Medicare negotiate directly with drug companies over the prices of their products.

“My hope is that these hearings and staff reports will shed additional light on this problem and spur the President and the Senate to finally act on H.R. 3,” Maloney wrote.

The report, and the high-profile hearings, will also give Democrats an opportunity to show themselves the party most serious about lowering drug prices ahead of the November election. Recent polling from the Kaiser Family Foundation has shown that voters believe Trump is more serious about lowering drug prices than Biden. While Trump has made lowering prices a signature initiative of his first term, and has rolled out at least half a dozen policies to achieve that goal, he’s struggled to enact lasting reforms.

“As the November election draws near, President Trump is scrambling to create the impression that he is addressing a problem he has failed to take on for the past four years,” Maloney wrote.

The reports also provide the clearest substantiation to date that both companies engaged in anticompetitive behavior to keep competitors off the market.

Among the most striking revelations: Teva launched a new, more potent version of copaxone as part of what they dubbed a coordinated “generic defense strategy.” The strategy, according to internal powerpoints, included contracting with middlemen to block generics’ market access and aggressive campaigns to lobby both doctors and patients to stay on the more expensive version of the drug.

The strategy stands out because 55% of Teva’s 2019 revenues came from selling generic drugs. This wasn’t lost on company executives: Internal documents obtained by the committee show that an executive suggested scrubbing the words “barrier to generic entrance” from an internal powerpoint discussing the strategy because “we don’t want to be seen as ‘creating’ barriers to generics as this is Teva’s core business.”

Executives privately admitted that the more potent version of copaxone would not work better or be markedly more convenient, the investigation shows.

The report also notes that Celgene referred to an FDA-mandated safety system for revlimid as a way to prevent “generic encroachment.” Celgene has been repeatedly accused of using REMS programs to prevent generic competitors to Revlimid, but the report doesn’t provide much new evidence substantiating that claim.

The reports also contain a fair bit of embarrassing dirt. In one case, the committee obtained internal Teva documents showing that when its own employee couldn’t afford copaxone, the company pulled strings to get her free samples.

In another, Celgene executives boasted about how their high price would keep competitors from developing new treatments. In one particular case, Jansen had asked to buy samples of revlimid at a discount to use in a major cancer clinical trial they were running. Celgene officials urged against the sale, though the report does not make it clear whether the deal was eventually refused.

“[M]aking them spend a lot more on their trials puts financial constraints on their ability to simultaneously fund lots of trials,” one executive wrote in an email.

“Anything we can do to hamper their development would help,” another executive added.

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