Company profits and executive bonuses, not research and development, drove Bristol-Myers Squibb Co.'s Celgene Corp. unit and Teva Pharmaceutical Industries Ltd. to significantly raise the U.S. prices of two key medicines, a congressional panel reported.

The U.S. government's Medicare program for older and disabled Americans is a profit center for many companies, incentivizing them to keep their prices high, the House Oversight and Reform Committee said in a series of reports.

Celgene, which was acquired by Bristol-Myers in 2019, has raised the U.S. price of its cancer medicine Revlimid 22 times since it was first approved in 2005 — from $215 per pill to more than $700.

The annual cost of Teva's multiple sclerosis drug Copaxone rose to $70,000 from $10,000 in 1997, the panel found. The company has raised Copaxone's price 27 times since it was approved in 1997 by the U.S. Food and Drug Administration.

At a Sept. 30 hearing, the committee grilled the former head of Celgene, Mark Alles, and Bristol-Myers CEO Giovanni Caforio and Teva CEO Kåre Schultz about those increases.

The committee launched its 18-month investigation in January 2019 — a probe initiated by Rep. Elijah Cummings, D-Md., who died 10 months later, before he could bring the drug company executives before his panel.

The probe also involves the rising costs of medicines made by Amgen Inc., Mallinckrodt PLC and Novartis AG. Executives from those companies are slated to testify before the Oversight Committee at an Oct. 1 hearing. The committee is expected to release additional documents related to those companies.

Committee Chairwoman Carolyn Maloney, D-N.Y., said the panel had examined more than 1 million pages of information as part of the investigation, including many of the companies' internal corporate strategy and communications documents.

The investigation revealed "deeply troubling facts about how these companies price the drugs we all rely on," Maloney said at the Sept. 30 hearing.

"The documents reviewed by the committee show that these massive price increases are based on generating windfall profits for these companies, their shareholders and their executives," the New York congresswoman said.

Alles had orchestrated an emergency price increase for Revlimid in 2014 to ensure that Celgene met its quarterly revenue targets, the congressional committee reported.

To justify that increase, Alles told his colleagues in an email that he had to "consider every legitimate opportunity available to us to improve" Celgene's first-quarter performance.

Drugmakers often cite research and development into newer, innovative medicines for the need to raise prices or they blame middlemen, like pharmacy benefit managers and insurers, for the increases in costs. The companies also have argued they are committed to helping patients who cannot afford their medicines and provide assistance programs.

But those claims "are utterly bogus," Maloney said. "They do not hold water."

Alles acknowledged the efficacy and safety of Revlimid had not changed, but it had gained six additional indications since it was initially approved.

"So you discovered more patients who might benefit from paying $763 a pill, but being able to use a drug for more patients doesn't necessarily justify more price," said Rep. Katie Porter, D-Calif.

Competition

Celgene's documents revealed it used its high prices to fend off generic competition by "making them spend a lot more on their trials," which the company said "puts financial constraints on their ability to simultaneously fund lots of trials."

"Anything we can do to hamper their development would help," a Celgene executive responded in an email, the committee reported.

But a number of Republicans on the committee condemned Democrats for convening the hearing, stating it was a distraction from biopharmaceutical manufacturers' efforts to discover drugs and vaccines during the COVID-19 pandemic.

"I think anybody who's had any kind of experience with capitalism, or any kind of reward system, understand that human beings respond better to rewards than to punishment," said Rep. Virginia Foxx, R-N.C.

While drugmakers discover lifesaving and pain-relieving medications, "they're killing us with the prices they charge," responded Rep. Peter Welch, D-Vt.

Medicare a profit center

Another key factor is the money the companies make from the Medicare program, which is banned from negotiating prices directly with drugmakers.

Maloney said she was "astonished" to see how companies target Medicare as a profit center, knowing they could keep prices high in the U.S. to allow the manufacturers to maintain or cut costs in the rest of the world.

One presentation described the U.S. as a "highly favorable environment with free-market pricing," Maloney said.

The notion that in a market system Congress is having a debate about drug price negotiations "is very peculiar to me," said Congresswoman Eleanor Holmes Norton, D-D.C.

The documents obtained from Teva by the committee revealed that it considered removal of the so-called government non-interference clause — the measure that prohibits Medicare pricing negotiations — to be the greatest threat to its future revenue.

In one presentation the committee cited, the company had emphasized that one of its key strengths was its ability to "increase prices successfully," which was "influenced heavily" by its U.S. business being allowed to "hike prices."

The documents showed that Teva had engaged in an "intense" lobbying campaign to try to stem off efforts to end the ban on Medicare drug price negotiations.

Teva's internal data showed that from 2010 to 2013, U.S. taxpayers and patients would have spent $1.4 billion less on Copaxone if Medicare had received the same price as the Departments of Defense and Veterans Affairs, which are permitted to negotiate directly.