Leadership, Vision, and the Future of Healthcare with Brent Saunders

I'm great, thanks for having me. Excited to be here.

Oh, I have so many. It was a great college experience for me. But probably the one that stands out the most is in 1991, I was president of the student body, and I had the absolute pleasure of being the student host for Nelson Mandela when he came to Pittsburgh. Wow. Got to spend time with him, have a meal with him, go to his speech that he gave in Pittsburgh back then. This was before he became president. He had just come out of jail. It was a remarkable experience seeing someone of such greatness but such humility at the same time.

Well, the Dirty O was definitely a reason I probably gained 20 pounds in college.

You know, it actually stayed with me to this day, but just his absolute humility. He was just a regular guy. He spoke very plainly, he was very at ease around me. It was hosted by the chairman and CEO of H.J. Heinz, which was based in Pittsburgh. Whether he was with these companies — they're no longer as big as they were then — Westinghouse, Heinz, the CEOs and a lot of the board members were all there, and then there was just a student like me. And he treated us all as equals and took the time to really talk to you. It was truly remarkable how humble he was. I actually have a picture of him hanging in my house. Big fan.

I'm not. I grew up on the east side of Pennsylvania.

Well, it depends what you say. But I view Penn State as the bad part of the state.

After Pitt, I moved to Philadelphia. And I went to both Temple Law School and Temple Business School at night, and worked at Thomas Jefferson University Hospital throughout most of that time. That's really how I got connected to healthcare.

Sure. So I do a lot of things, but the thing I spend the vast majority of my time on is being chairman and CEO of a company called Bausch + Lomb, which is a 170-year-old eye health company. We make everything from contact lenses to lasers to implants after surgery, to pharmaceuticals, and of course most of the things you see in the eye care aisle at the drug store.

We have just under 14,000. And we have an office here in Miami, but we also have a fairly big footprint in Florida. We have a very large pharmaceutical plant in Tampa, and we make a lot of the intraocular lenses or implants after cataract surgery in Clearwater. We have a really big commitment to the State of Florida. Is Miami the headquarters? I don't like the word headquarters. I always view headquarters as places where bureaucracy goes to grow and decisions go to die. I like that. That's good. So I got rid of the idea of a headquarters when I joined here, and same was true at my last job as chairman and CEO of Valeant. We have a substantial presence in New Jersey, a hub here in Miami, and a hub in Irvine, California — predominantly R&D. But we also have offices in 80 or 90 countries around the world. We're a dispersed company with offices around the world.

Yes. I'll give you the short strokes of the last 25, 27 years. After school, I continued working at the hospital for a while, and then I went into consulting at Price Waterhouse Consulting and became a partner very quickly, doing quite well there focusing on the pharmaceutical industry. Ultimately, a client came to me — a company called Schering-Plough at the time — and asked me to come join their executive team as CEO. I said no a few times, but after a while thinking about it, I really wanted to get into business versus consulting. I actually wanted to do versus advise. I joined Schering-Plough, worked there for roughly eight years, and worked my way up to president of the company. It was a really good run. I ran their consumer health business, so products like Claritin, Dr. Scholl's, Coppertone, Afrin, MiraLax, and a whole bunch of consumer health products globally. Some of the most well-known products at Walgreens, CVS. At the time, they were all market leaders. One of the big things is I brought a lot of those products to China. That's when I really learned about how to build a business in China, which was interesting.

Multifactorial. Back in the day, Walgreens was always known as having the best pharmacy or pharmacist, and CVS was known as a great retailer. I think Amazon certainly had some impact, but I think it goes beyond that. When you look at what happened to those companies, when you think about the pharmacy itself, the shopping experience has gotten quite difficult. Most things are behind glass. With the labor market being tough as it has been for the last few years, there's not enough staff to open the glass. That experience has become difficult. They make it painful to buy razor blades. That shouldn't be painful. Razor blades seem like a commodity to me. Well, I think a lot of the theft prevention has really hit that retail experience hard. The other thing is they probably expanded too rapidly. There's a Walgreens or CVS on virtually every corner. The third thing is they all expanded into different lines of businesses. CVS bought Aetna and Caremark. Walgreens also expanded their distribution capabilities and other things outside the US. It's been a tough macro environment. I'm not sure it gets easier in the short term for them, but they have some good new leaders at all those companies. Certainly rooting for them to get back to where they were.

About roughly, Bausch + Lomb has four business units, and we're pretty evenly balanced. About one quarter of it is consumer health. The drug channel is important, but so is Walmart, Target, and of course Amazon and Walmart.com are pretty big channels for us. In the pharmaceutical prescription business, clearly CVS and Walgreens are important places for patients to go to pick up their prescription, but there's also a lot of specialty pharmacies and mail order as distribution partners. On the surgical side, the surgeon and surgery centers are predominantly the customers. Then in vision care, contact lenses, it's predominantly either your optometrist, your chain store optometrist, or some of the big retail partners like Walmart and Costco.

I'll start by saying I'm optimistic that we can continue to improve the efficiency of a fairly inefficient healthcare system. That being said, healthcare is difficult and sometimes slow adopter of technology. A lot of it is based around the regulatory environment that surrounds healthcare, and the disparities that sit within healthcare. For example, if we had a universal medical record that could be shared and portable and owned by the patient, think about the efficiency that could be gained by that. Just have everything in one single pane of glass, be able to see it on your phone. Companies have tried to do this — Apple has tried, others have tried — but it is really difficult. The interoperability between your record at the hospital when you go for a procedure, versus your primary care doctor, versus your specialist, versus perhaps where you go for your MRI or X-ray. These systems are in many cases antiquated or proprietary and they don't talk to each other. From my humble point of view, if I could wave a magic wand or ask the government to focus on one thing, it would be creating this portable, universal health record. From there, you could build a lot.

I'm not aware of any. But to be fair, when you go into some of these nationalized health systems like the UK, I'm pretty sure they must. The National Health Service, there's one provider of healthcare, so they must have it. It may not be 100% a universal record, it may not be owned by the patient, but there's a much more cohesive system.

I think I've done just shy of $300 billion of M&A over the last 20 years. You got me by a few zeros. I had a big one that didn't get over the finish line, interrupted by the government, which was the merger of Allergan with Pfizer. But I've done a lot of deals. I have a general formula for M&A. I always start with strategic logic. Once you can pass that screen — what makes 1 plus 1 equals something greater than 2, what's the strategic rationale for the deal, and how strong is that rationale? Then the financial metrics become the next big test. But if you can't get past a strong strategic rationale, there's no point in doing the financials. Even if you can pencil it out, it won't be a great deal at the end for either the buyer or the seller if it doesn't have a great rationale behind it. When I look at most of the deals, I feel very confident about that rationale. There were a few, namely I was CEO of Bausch + Lomb once before, 2010 to mid-2013. That was in a private equity-owned situation. Bausch + Lomb was private equity owned. In that case, it was really about private equity isn't permanent equity, so there had to be an exit. That transaction was about maximizing the return for the private equity firm and their LPs. Otherwise, outside of that one deal, most of the deals I've done have had very strategic rationale. The best series I can think of is in 2013 when I sold Bausch + Lomb. I went to a small predominantly neuroscience-based company in New York City called Forest Labs as the CEO. It was known for innovations like Lexapro and Namenda for Alzheimer's. I then used that company over the course of almost 10 years to do 200-plus billion of M&A, which created, up until 2020, what people know as Allergan. I renamed the company a few times along the way. At the end of the day, we wound up selling Allergan for a total value of about $83 billion. People know that company predominantly for Botox, the maker of Botox. It was a great 10-year run using M&A to create value for shareholders.

It may sound perverse in some ways, but bigger deals are, if you stay true to your ideals, strategic logic, financial discipline — bigger deals are sometimes easier than smaller deals. I'll give an example. When I was at Schering-Plough, we wound up selling to Merck. Merck bought us predominantly for our cardiovascular franchise at the time. We had a drug called Zetia for cholesterol management, and we had a partnership with them for a drug called Vytorin, a combination of Zocor and Zetia. We had a late-stage program, another cardiovascular drug in Phase 3 testing, which was the one they were most interested in. They were zeroing in on that, but we also had an animal health business, a consumer business, and a lot of other franchises in different disease states. But they zeroed in on that cardiovascular program. Interestingly, after they bought us — the price was around $40 billion — that drug failed Phase 3 testing. Most people at the time said, 'This is a really bad deal for Merck.' Guess what we had in our pipeline? It was a drug called Keytruda. Keytruda now is the largest drug in the world. Merck's sales this year are mid-$20 billion a year. They've had it for a long time, and they'll have it for at least a few more years. They built a leading oncology portfolio around this pipeline product that we had that they really weren't even aware of when they bought us. The point is, big deals have lots of other value drivers that can come in and out. When you go out and just buy one thing, it has to work. It's very risky. It puts a lot of pressure on your diligence and your conviction that one thing is going to work. I tend to sweat the single product or the smaller deal more than I do the bigger deals.