Enlarge (credit: Senate HELP Committee)

When big pharmaceutical companies are confronted over their exorbitant pricing of prescription drugs in the US, they often retreat to two well-worn arguments: One, that the high drug prices cover costs of researching and developing new drugs, a risky and expensive endeavor, and two, that middle managers—pharmacy benefit managers (PBMs), to be specific—are actually the ones price gouging Americans.

Both of these arguments faced substantial blows in a hearing Thursday held by the Senate Committee on Health, Education, Labor and Pensions, chaired by Sen. Bernie Sanders (I-Vt.). In fact, pharmaceutical companies are spending billions of dollars more on lavish executive compensation, dividends, and stock buyouts than they spend on research and development (R&D) for new drugs, Sanders pointed out. "In other words, these companies are spending more to enrich their own stockholders and CEOs than they are in finding new cures and new treatments," he said.

And, while PBMs certainly contribute to America's uniquely astronomical drug pricing, their profiteering accounts for a small fraction of the massive drug market, Sanders and an expert panelist noted. PBMs work as shadowy middle managers between drugmakers, insurers, and pharmacies, setting drug formularies and consumer prices, and negotiating rebates and discounts behind the scenes. Though PBMs practices contribute to overall costs, they pale compared to pharmaceutical profits.

Enlarge / A box of Paxlovid, the Pfizer antiviral drug. (credit: Getty | Europa Press News)

Pfizer on Wednesday revealed that it raised the list price of a course of Paxlovid—its lifesaving antiviral drug used to reduce the risk of severe COVID-19 in those most vulnerable—to nearly $1,400, more than double the roughly $530 the US government has paid for the treatment in the emergency phase of the pandemic.

Pfizer CEO Albert Bourla had noted in an investor call at the beginning of the week that the company would increase the price of Paxlovid as it moves from government distribution to the commercial market at the end of this year. But, he did not announce the new list price then. Instead, the company revealed the more than twofold increase in a letter to pharmacies and clinics dated Wednesday. The Wall Street Journal was the first to report the list price of $1,390 after viewing the letter.

A Pfizer spokesperson told the Journal that "pricing for Paxlovid is based on the value it provides to patients, providers, and health care systems due to its important role in helping reduce COVID-19-related hospitalizations and deaths."