Welcome to The Long Run. This is a podcast for biotech adventurers. I'm your host, Luke Timberman.
Today's guest is Jeremy Levin. Jeremy is the CEO of New York-based Ovid Therapeutics. Ovid is doing interesting work for rare neurological diseases, but that's not why I invited Jeremy onto the show. Jeremy is the chairman of the board at the Biotechnology Innovation Organization. It's his job to lead on advocacy for the biotech industry in Washington, D.C.
This is the most perilous time ever to be the chairman of BIO. Biotech and pharmaceuticals have become public enemy number one. Approval ratings are down in the single digits, worse than even big tobacco. People were angry with Martin Shkreli as the personification of pharma greed in the last presidential election cycle, but they're absolutely furious and demanding radical change to curb healthcare profiteering this time around. Kicking the can down the road, pointing fingers at the middlemen, ignoring bad actors in their midst, assuming everything would just blow over in time — those political strategies from yesteryear didn't work out so well for biotech. Jeremy knows he must do better as BIO chair, and the industry as a whole has got to get its house in order. This interview was recorded February 10th at the BIO CEO and Investor Conference in New York. Jeremy spoke with me after he delivered an alarming state of the industry message. He called it the best of times scientifically and the worst of times politically. He warned not just of the threat of price controls from single-payer government healthcare plans or from an international price indexing plan, but also about the threat of private insurance consolidation that could squeeze the profits out of drug development.
You'll hear my frustration come through with this dismal state of affairs. It didn't have to go this far or get this dire. Given the grave nature of this political moment, I decided not to discuss Jeremy's personal background in this episode. We had a lot to cover. To learn more about his personal backstory, which is actually quite interesting, I recommend you listen to a previous interview Jeremy did on the Nature Biotechnology First Rounders podcast in December 2016. You can find the link to that show in the summary on timbermanreport.com.
Now, a couple of messages before we start. Join me at the Washington State Convention Center in Seattle on April 7th and 8th for the 20th annual Life Science Innovation Northwest Conference. Kicking off an exciting program is James Sabry, global head of pharma partnering at Roche. Additionally, I will be interviewing Dr. Amy Abernethy, principal deputy commissioner at the FDA, in a fireside chat. Visit www.lifesciencewa.org for more information and use the promo code 2020LUKE, all one word, capital L, to save $100 on your registration fee.
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Now, please join me and Jeremy Levin on The Long Run.
Jeremy Levin, chairman of the Biotechnology Innovation Organization. Welcome. Thanks for joining me today on The Long Run.
Thanks, Luke. Appreciate you having me here.
So, Jeremy, as you know, on this show, The Long Run, I like to go through people's whole life history before I get to their moment of possibility and the interesting things that they're doing at their companies. For the case of you, I'm going to throw out that model and I'm going to point people to a previous podcast you did with Nature Biotech called First Rounders, where you talked about your life story. I want to refer people to that because today I want us to talk about your role as chairman of BIO and some of the major issues facing the industry.
But before I go into that, I do want listeners to know that you are a man of substance. You grew up in South Africa and you escaped apartheid. Your dad was a journalist who opposed the apartheid regime, and that took a moral compass and some courage to follow one's convictions. And I think there's a throughline there in your life. And so this is, I think, this is a very important conversation that we have today about democracy and the role of the pharmaceutical industry in society. So thank you for doing what you do.
Thanks, Luke. It's important to me. There is a line, and it stems all the way from the Northern Cape in apartheid, all the way through the battlefields of Israel, through to this country, which is a remarkable country. So I'd be delighted to do that. But at the end of the day, it boils down to one thing: you stand on principle because nothing else matters. And this industry has some principles. It really does. It has a lot of capacity for good.
You're trained as a scientist and a physician, and now you're out there working hard to create new medicines. But the wider world does not appreciate this. This is a moment of, I think, existential crisis for the pharmaceutical industry, the biotech industry. How we develop new medicines. The political moment is dire. Big tobacco is considered in a more positive light than what you guys do. We run the risk of killing the golden goose, and this is like on your shoulders now as the chairman to try to preserve the innovation ecosystem.
So, Luke, you know, it's not so much on my shoulders. This has been starting in 1947 when NIH was invented, essentially conceived of, funded, and then drove the beginnings of innovation in biology in the United States. You have a multi-decade process whereby innovation has surged in the United States in a way that is nowhere else in the world, absolutely nowhere, completely unparalleled. Capital markets grew up around it. You had a huge scientific base. You have a medical base. You have patient expectations for new cures. We made that investment as a society coming out of World War II. It was built on American exceptionalism. We believed that we could do anything, and we would put our tax dollars to work and advance the frontiers of science, maintain science and technology leadership in the world, and people would benefit in the long run, both here and everywhere. And it was a — you know, you think you just landed on the moon. This was a moment where all possibilities were opened in a way which is absolutely wonderful. And now we face a moment when we are now the pariah. We are the pariah because absolutely the vast majority of Americans today equate the pharmaceutical industry, medicines, with bad things. And yet we need them. And this is tremendously important. So as I look at this, and as I think about how to use your words, existential — this really is it. It is existential. You have a moment where the populace is frustrated with us, that allows politicians to use this moment to actually gain advantage. And in this year particularly, as we go into a very rancorous discussion around the presidency and elections, this is a moment where you have various parties using any possibility to gain additional votes to beat on this industry, and we've given them that on a plate. We have not — we have abrogated the link that we have with patients and our primary focus on innovation, and rather we've allowed the population to think about us only in terms of price as opposed to what value we've helped them, and the fact that we see burgeoning costs every year of old drugs. This is not acceptable. None of us should accept it. But I'd go one step further. This is not on my shoulders. This is on the shoulders of everybody in the industry. Everybody in this industry. Absolutely everybody in this industry. Everybody has a responsibility to take action. Everybody has to look in the mirror and realistically say, 'Guys, gals, what did we do here? How did we lose the trust of so many people in the population and allow that to now color what is by far the most important and fundamental fact in our industry, which is the delivery of medicine to patients?' You got to go back to like basic questions: Who are we? What do we do? Why do we do it?
I, Luke, 100%, that's exactly right. You have what is the purpose of this industry? I like to say when you look at a company, if that company vanished, what difference would it make? Well, if our industry vanished, well, where would we be? What would the future of mankind look like? This is what's really important. We can't allow that to be that so-called, if I can use a genetic expression, the delete experiment to happen. But some politicians, unless we actually explain and teach them that delete possibility is real. It is a very real possibility. If you just look at the two parties in the United States who are at war at the moment, you have the Medicare for All proposal, a single-payer system which would clearly tighten the screws, bring — it would bring price controls, and that would dry up investment by and large. Everyone agrees. Now, if you go to something like you call Medicare for All who want it, I mean, you still are going to have a colossal powerful buyer that will become more and more powerful over time in all likelihood, plus the consolidation of large private insurers as you alluded to in your talk earlier today. You could live under a world of monopsony like Amazon has imposed deflationary economics. You know, Walmart, Costco, all these like giant colossi that stride over the economy. Pharmaceuticals hasn't had to live under such onerous terms. Those are a couple of different options under the Democratic tent. The Republicans are talking about indexing to international prices, which would in effect have a pretty similar kind of effect. I don't know who's going to save the industry from this kind of fate of being reduced to serfdom.
So I think the fact is nobody's going to save us except ourselves. This is a moment where every single individual in the industry needs to know that they actually do have power. They do have authority. They do speak with a passion, and that they have a right to say what they need to say and say it loudly. But here's the thing. There are ill-conceived notions like IPI where you're trying to compare the pricing in Turkey with the pricing in Minnesota. I can't imagine for a minute that any sensible politician can allow something like that to happen. It just simply is something which is incredibly difficult to conceive of. The complexities of the one-party states, the one-buyer states in Europe do not compare to what we have here. If you, however, having said that, we've also allowed something to grow up, and that is the intermediaries between the innovators, the companies large and small who find new medicines, and the patient. So we have the PBMs who are not adding incremental value. They're taking an added slice. You only have to look at the price of the net to gross. And we keep on talking about net to gross. Well, this is absurd. Net to gross of an automobile. Net. Can somebody imagine a net to gross of an automobile? Let's get down to that. Would you every year see an increment in a price? Let's say, let's take an imported drug. An imported drug. This will be called a — let's call it a Volkswagen. And that Volkswagen every year increases its price. The same model, the 1966 model, every year to now you increase it by 5%. And oh, by the way, the vast bulk of that 5% price increase goes into the pockets of somebody else besides the manufacturer of the Volkswagen. Could we conceive of that? It's dysfunctional. It makes no sense, and it's a hard case to make. People don't understand this. They just know that they're paying more and they're not getting more.
That's correct. The prices are going up, and our overall health as a society, or you as an individual, it's not getting better.
That is correct. And worse yet, by doing this, when they go to the pharmacy to decide what is the medicine that they should choose, and should they pay out of their pocket for that medicine which they desperately need, or should they consider saving that money to buy something, a new automobile or buying a dinner or something like that? Can they afford it? The whole concept of being able to afford your medicine that will prolong and make your life productive goes away. That dialogue is critical, and we need to take really concerted efforts to reduce the cost of out-of-pocket.
We have to, Luke. This is absurdity. We have patients rationing their insulin. We have cancer patients and their families going bankrupt. We have just ordinary medicines just being — with no additional innovation being priced at 9%, 10% increases every six months. So we end up paying just so much more, and it's there. We have permanent patents pretty much on a lot of biologics that have been — I've been doing this for 20 years, and I thought the patents would expire on some of these pioneering medicines of the 1990s. They're still there making billions and billions of dollars. Biosimilars are not coming along. I mean, people have — they're upset, and rightfully so in many, many cases.
And what that moment, that time when that anger bubbles up obscures something really fundamental. It's what is happening right now in the industry is that you have all of these new curative medicines coming up, and instead of having the debate which is okay and which is important — how do we afford to pay for those medicines and bring the value that they bring and cure the disease that we cure — we're having the debate of that that's too expensive. That is not the right debate. But it's colored by this history of some of these drugs going on forever and ever and ever, others having price rises every year where there's no increment in value, and that's not helpful.
And this, as you say, it's the best of times and worst of times. The best is that the science has never been better. I mean, we've got the cell therapies, the gene therapies, all kinds of like underpinning information about the biology. It's never been better understood. Rare diseases that had no option before are looking more tractable. We're looking at hundreds of thousands of dollars or million-dollar price tags. But we don't have a system, as you say, that can logically look at how much we really ought to pay and get to some kind of fair price that rewards the innovator but also ensures maximum access. It's a balance we've got to strike, and we're not — we're doing a terrible job of it.
It's, Luke, it is — it's not a good job at the moment. We're constantly battling against the wrong question. It doesn't matter whether you're a small company or a large or a big company. They're both basically today — it's one industry effectively. But the array of medicines that each of these different parties brings to the table often differs. So the question is how can we get the politicians to understand that across this array of different companies there is an enormous amount of value being generated, and that that value is critical. Actually, I would argue it's critical to democracy. You can't have a population which is democratic and half or more than half are not getting the medicines that they need. That just doesn't make sense. So with regard to the perpetual franchises, I think, Luke, we need to actually take a couple of things. We have to congratulate the FDA. I think it's really important we do that because they have made steps to facilitate changes there that have been critical. However, in the payer systems, we really need to tackle that frontally. They are not letting the introduction of many of these new biologics that are out there, and there are — if we do not solve for the biologics now, we face something even more important as time goes on. The biologics that you've seen and I've seen for the last 20 years that did not become biosimilars are going to — are laying the groundwork for what's going to happen when we have gene therapies. What's going to happen when we have CAR-T therapies? What will happen when the second and third generation of new biologics come on and now their patents expire? Permanent million-dollar drugs. We need to tackle this and understand how we'll deal with this at this time because if we don't, we just pass the ball down, the anger will grow, and indeed the industry won't be able to show its true value to the society. So I would appeal to those who are really developing these incredible medicines to really think about that because if we don't, every sector of our society will be affected. And I can assure you the cures that are possible today in cancer would never have been had we faced this in the past, and the cures that should be present here for Alzheimer's, for heart failure, simply won't come because investors will not want to invest in an industry that's so berated by politicians and subject to constraints which I think are going to be extremely onerous unless we get ahead of them.
Coming back to what you said earlier about the investment coming out of World War II. I mean, we made that conscious decision to invest in science, and that was a very prescient one by our forebears. The United States has amazing basic biomedical research, and we ought to continue to support that. And we're now beginning to reap what I think of as the innovation dividend. We're actually seeing medicines come out of this. You know, we invested in things like the Human Genome Project, and 10 years later people said, 'Where are the medicines?' Well, actually now they're — it took longer than we thought or maybe people expected, but it's here, and a lot more are coming. It makes sense to continue with that, to continue investing our tax dollars in basic science and to provide incentives through our capital system for people to develop medicines all the way to help patients. But we need to maintain access. We can't put people into bankruptcy just because they got ill. It's morally wrong. So we got a balance here. You and others in biotech are now talking about a social contract, a new social contract. How do you think about that? How do you define that?
So when one takes — when one starts from the principle that you have a responsibility in the society to both all elements that support you, which include the shareholders, includes the patients, and it includes the broader society. As a company, you simply cannot divorce yourself from that responsibility and connection. So the social compact is designed specifically to state what each company individually means in the way that they're going to drive innovation and ensure that they are focused on patients. In the case of innovation, how are they going to seek to ensure that every single product they have is new, every single one is novel, and it's the best possible way that they have it, best possible approach to that disorder, and that's fantastic. And by doing that, they equally at the same time need to be able to say, how am I going to get this to patients? How am I actually going to derive — how's the society as a whole, through each individual patient, going to derive benefit? Now, company by company that will be different because each technology is different. However, the basic principles underlying this need to be across the industry. We've never stated it adequately in the past. Every company needs to subscribe to it. In fact, what they really are saying — our purpose, our reset, the reason that we exist — is for two things: driving innovation and getting the patient the medicines that they need. Those two things. And that if we don't do that, the delete experiment — then both innovation and the patient suffer. And that's a consequence of that. Our economy suffers as a consequence of that. Our society suffers. And oh, by the way, Luke, there's one further step. If you think that we didn't set the stage for a revolution in biology, we did. 70 years of hard work based on the NIH and then huge investment from venture capital, huge investment from the capital markets in the United States set the stage for a knowledge base in this industry which is unparalleled. That knowledge base crosses borders. That knowledge base is accessible to everybody around the world, and there are states that will simply say, 'Thank you very much for your investment in the past, and we will now carry the ball forward.' That is not acceptable. America is the engine for innovation, should remain the engine for innovation, and we should acknowledge that we have a certain responsibility to ensure that that continues, and that's both at the level of the companies and at the level of the policymakers.
Join me at the Washington State Convention Center in Seattle on April 7th and 8th for the 20th annual Life Science Innovation Northwest Conference. Kicking off an exciting program is Dr. James Sabry, global head of pharma partnering at Roche. Additionally, I will be interviewing Dr. Amy Abernethy, principal deputy commissioner at the FDA, in a fireside chat. Visit www.lifesciencewa.org for more information and use promo code 2020LUKE, all one word, capital L, to save $100 on your registration fee.
What role does BIO have to play here? Because I'll tell you, I've been critical of BIO in the past. There's been a lot of blame game going on, pointing fingers at PBMs and insurers and hospitals who by and large deserve it. They've been getting away with bad behavior of their own and not taking the same kind of public perception hit as you guys. It's human nature. I understand why people in this industry get defensive and might resent that. But playing the blame game does not solve the problem that we're talking about here. Totally agree. So there was that opportunity in the last election cycle when pharma was feeling a lot of heat around Martin Shkreli, etc. It was kind of wasted. We did not fix these problems. Now things are much more serious, I believe, in 2020. What are you going to do differently this time and get out of that politics of the past, this blame game?
Luke, you know, you asked two questions there. Number one, what is the role of BIO? And then how do we get out of it? Well, number one, the role of BIO is tremendously important because remember we're not just — we're talking about biotechnology at large, that is industrial, it's environmental, and it's health. Yes, health is the largest section, but remember we're facing unprecedented changes in the environment. That means that we need to have and support policies that help in driving new agricultural products, in driving new environmental products that will help us solve what is coming down the pike, and we can already see it. So in order to represent those companies and policies, whether they be medical, environmental, or agricultural, you need a body that says we understand these technologies, we understand what drives this innovation, and we are now going to serve the interests of those companies at the level of the Hill, which is very difficult for the central government to understand. These are politicians. They see all sorts of different things. So BIO's role is central in the sense that it is the voice of multiple constituencies which are critical to us, and they all need their incentives — profit incentives, which are fine. That is what has made America great, that has distinguished our nation, and that is one which we need to focus on. But the organization itself needs to be able to translate what is going on in the capital of the most extraordinary nation in the world, in Washington, D.C., and dialogue with them over the years. There are many different organizations which try to do this. Right now you have the large pharmaceutical companies which represent their interests through an organization called PhRMA. PhRMA has its own particular agenda, but it's different from that of BIO. Where necessary we would support them, where we have different views we welcome their different views, it's just a different view. But at the same time BIO must focus on two things: how to drive innovation and how to get patients the drugs they need. And those two — all of the policies that we do, everything, every policy analysis that we do, every policy that we suggest on the Hill must be focused only on those two principles. And if we keep on focusing on that, the relevance of BIO in the context of the evolving industry, the growing industry, becomes more and more important. So we're not necessarily all about pricing. That's — there are others who may deal with that. We're about how do we ensure that policies are put in place that give access to the patient. It's not about blame. It's about facility.
Do you guys need to make some kinds of sacrifices in order to achieve some kind of equilibrium so that we can continue to maintain incentives for innovation to help you do what you do, but in a way that maximizes access that we can afford, that we can live with? Are you guys going to have to just give a little?
Luke, we do. Just to be honest, I think there's many, many occasions when you see companies like Alnylam, you see companies like Bluebird who are making accommodations, who are doing their very best to articulate a way of working with the states, a way of pricing their drugs, a way of getting their drugs to the patients as best as they possibly can, and are making accommodations. Alnylam's doing a value-based contract with their first drug and in others to come. Bluebird is doing an installment payment system with its gene therapy, so that if the drug is still helping people over a period of years they get the full payment, and if not they don't get fully paid.
That's exactly right. But there are only one or two examples.
But imagine what you've just said. I picked out two companies. Imagine the hundreds and hundreds and hundreds and hundreds of companies that are out there, each one trying to think about ways of doing this. So I think there are — all of us, all the small companies are really thinking about it. Now, on the other hand, other side, you know, you could ask the question: why would one ever be compensated for a price rise in an old drug? Our boards across the nation, every single board, should perhaps be asking the question: are we going to be able to sustain our models if we consistently reward our management teams by price rises in old drugs? I think the boards need to take a role in this. I think they need to think carefully about that. They need to think carefully about where they should be investing their capital, in research or buying back stock. These are important compensation issues that need to be addressed where compromises can become. But we also just — let me, sorry, let me finish. We do need to see — absolutely do need to see changes in the behavior of the PBM and the suppliers because while...
We can make compromises. You can only do that in the context of the system changing at the same time. We've evolved something that is clearly not working. They also need those different participants in the ecosystem need to acknowledge that we're in a different game. So is there some kind of round table here where people, all the key stakeholders, recognize that they're they're in this together and that the whole golden goose could get killed, not just you guys but them too?
You you are quite right and that's that's really the dialogue. It's not a question of the big companies talking to the big distributors. Remember this is all about innovation. Remember that 70% of the pharmaceutical pipeline comes from the smaller companies. So that flow must continue. And that's why the large companies are so supportive and helpful in bio, by the way, just so you understand that it's really a remarkable thing. But then the other side to this is if you ask for a roundtable, there isn't one. There is a one-on-one conversation. And part of what I'm trying to do at bio is to foster the ability to talk to the four large payers, to have them understand what a crisis we're going through, to talk to the large hospital chains who are part of this as well. That dialogue has to happen and it can't just go, it can't just be me. It has to be the successor chairman and the chairman after. And to help that happen in bio, what we've instituted, it's a very different system from the past. At this stage I have a vice chairman. It's Paul Hastings. In the past the vice chairmen were in waiting. That is not what we're doing today. What we're doing is that Paul and I are working in direct concert, completely together. He takes some things, I do others, we dialogue around them. It means that when I hand over to Paul as chairman, he is fully conversant. He has been deeply involved and as vice chairman, he becomes chairman with a complete seamless change on the policy changes that we're trying to adopt. There is no interruption and then restart. The same thing is happening in, he will happen with his vice chairman. So as we look at bio and as we evolve bio, part of what's going on in bio right now, which is rather wonderful, is that when Jim steps down and retires, and he's been very generous in giving us the time to go through this very turbulent year and help steer us through that. Jim Greenwood, the CEO of Bio. Yes, Jim Greenwood will retire, but nevertheless, he has agreed to work with us through this incredibly turbulent year. He is one of the most articulate spokespersons for the industry and by the way, a passionate photographer of birds. One of the best I've ever seen.
Jim, biotech people are human beings too. Who knew?
Exactly. Exactly. It's really wonderful. Jim, we will transition to a model where we found somebody that is really focused on only those two items and can deal with the complexity of this industry which is completely different from what it was when Jim unified it. He unified bio 15 years ago, 16 years ago. So I think we're in a new phase. Governance within the organization has changed. The mission is very clear. Patience and innovation, that's all, nothing more. And anything that doesn't support that we simply will not spend time on. And then in addition to that, we will be looking for leadership which is different from before but will build on the legacy that Jim has put in place.
You mentioned earlier that you have areas of agreement with pharma, the big companies, and areas of disagreement. Can you elaborate on what those areas are?
It's not really substantive. It's just different focus rather than a disagreement. Pharma has a big canvas to paint on. Pharma's canvas includes every, as I ran a big company, you have anywhere from 50 to 100,000 people working for it. You could have a portfolio of several hundred major drugs and you're dealing with 150 different countries. This is completely different from what a small company focused on one technology in one area, perhaps in Boston, San Francisco. And I think one of the teachings I have is both of these different organizations have different dynamics that they have to deal with. On the one hand, for example, in pharma, trade issues are critical in drugs. Critical. Capital formation, not so much. In bio, capital formation is vital. Every single company focuses on capital formation. On the other hand, new policies that stimulate innovation, that stimulate new types of research, is of interest to both because at the end of the day, large pharma will actually subsume what the small companies are doing and that's the norm. So, we do have interests that are similar. We also have interests that are different and I think we should acknowledge that without blowing it out of proportion.
Now you, as chairman, are trying to mobilize your members around this existential threat, this moment of crisis in which the incentives could just go out the window. They really could. And you've done some things like this petition. I'm not sure you call it that, but you circulated a letter just articulating the social contract. You said you got a number of companies to sign, not all. What was that process like? What kind of reception did you get from various members or people that you wanted to sign on and join you?
Well, first of all, I want everybody to join. But we have to recognize that each company has its own particular imperative. Each one is an independent organization. Each one has its own board and its own CEO and its own day-to-day life. So what we offered in the letter, and the letter was really written by six of us, was our version of what we think is the beginnings of a dialogue with the outside world. It doesn't necessarily mean that every company needs to subscribe to everything in the letter, but in actual fact it is the principles under which we think it is critical to stimulate two things: innovation and patient care. That's all we really were trying to get at there. I would acknowledge that it's probably not a perfect letter. Actually, no letter ever is. Even the constitution gets morphed. And we ourselves here expect that letter to be interpreted slightly differently by each company. But what we would like is for each company to use it as a framework to begin to think about themselves, to think about their relationship within their community, and to use it as a way of dialoguing with the community after they've taken action. With regard to the people who signed on, we had an enormous response. We gave them a very short period of time to respond. Over 200 people signed on initially. We now have literally hundreds of others who've asked to sign or be involved. We may go back to them and say, look, sign on, but signing on is less important than actually taking action. With regards to those who decided not to sign, there are quite a number of them actually. There were those who said, 'I am anxious about exposing myself because I'm launching a drug in some way ill-defined manner that may or may not affect how people perceive me if I write this social contract. I could be seen as a hypocrite if I sign this and charge a high price.' That's exactly right. That is exactly right. So I want to keep my options open. I want to keep my options open. And look, that's fine. That is what it is. But the reality is that we hope that when they look at this they need to think about the value that their drug is making and if they focus on getting access to all the patients that they need, then that's the way to be thinking about the social contract.
