Former Chairman, Regeneron
Galien Forum USA 2017 / Keynote: Drug Pricing and Access in the Trump Administration ...
With: • P. Roy Vagelos, MD, Chairman of Regeneron Pharmaceuticals and Retired Chairman and Chief Executive Officer of Merck ...
About Roy Vagelos
Roy Vagelos, former CEO and chairman of Merck and former chairman of Regeneron, has continued to speak publicly about his career and the pharmaceutical industry. In a September 2024 interview, he discussed Merck's decision in 1987 to donate ivermectin free of charge to treat river blindness, stating that the company made the drug available to anyone in the world for as long as it was required. He also described a program in which Merck trained Chinese scientists and engineers to manufacture a recombinant hepatitis B vaccine, with the company making no profit from the effort. Vagelos has also commented on drug pricing, saying in a 2017 forum that he is not opposed to high prices for drugs that provide significant value, such as a hepatitis C cure, but criticized price increases after launch, citing Gleevec's rise from $26,000 to $146,000. He has advocated for transparency in pricing and for price increases to be tied to inflation. Vagelos has also reflected on his approach to drug discovery, emphasizing the importance of understanding basic science and disease mechanisms. In a 2020 fireside chat, he said that scientific leaders should find intersections where new science reveals something about a disease and technology exists to affect that molecule. He noted that during his tenure at Merck, he was closely involved with research even as CEO, and that the company's decision to stop clinical studies of lovastatin for two years after a rumor of tumors in animals was driven by a commitment to patient safety. Vagelos has also discussed the role of financial incentives in the industry, stating in a 2020 interview that while profit is important, the industry must be careful not to reduce pricing to a point where people lose interest in drug development.
Transcript (39 segments)
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Roy Vagelos0:00
Ladies and gentlemen, let's begin this next polemic that will take place on pricing in the Trump era, and drug pricing of course. This is a big deal, and so we have brought together a number of heavyweights to discuss the various topics. But I will give you a little bit of a preamble. First of all, this industry, the biopharmaceutical industry, has brought about incredible improvement in the health of people in the last 40 or 50 years. Incredible. I mean, you can just spout out the various innovations that have been introduced that have made major improvements in health. And these have been done by a collaboration that takes place between people who do basic research at universities and find fundamental knowledge that is needed, supported entirely by government and philanthropy, and then industry steps in. Biopharmaceutical companies take over and they try to make drugs. And as one of my friends on my left here says, getting a real drug to market is hard. And it is. It's a very risky business, and it's very expensive. But what kind of things have been done? We've seen reduction in cardiovascular diseases dramatically by introduction of drugs for high blood pressure and cholesterol. Incredible reductions in death rates from cardiovascular diseases. We've seen improvements in almost every aspect of our health. Infectious diseases, of course, vaccines, hepatitis B, which prevents liver cancer, the human papillomavirus vaccine, which prevents cancer and cervical cancer. Right down the line. And this is done well. So 20 years ago, the public had an enormously positive reaction to the reputation of the biopharmaceutical industry. Over the last 20 years, the reputation has gone into the dust. We're down there along with smoking cigarettes and a couple of other bad things. So why? And it boils down really to, other than the rogue people, things that are caught up where people go to jail and unusual episodes like the Mylan EpiPen pricing, huge increases because it's a product that is controlled by a company where people must have it and you can put any price on it. But other than that, there have been problems with our industry in pricing. And this pricing at one time was thought to be not too difficult. You figured out what the value to the patient was, and you saw what other things cost on the marketplace, and you made a judgment and put a price on your product. But the scene changed. There were individual items that happened that I attach to these changes, but they're not inclusive. But the one thing that hit me, and it was maybe 15 years ago, Len can remind me, when Avastin came on the market by Genentech. Avastin was introduced for metastatic colorectal cancer that had been treated before and failed, so it was an important disease and unmet need. Avastin was put into these patients. The average value to the patient, that improvement, was an extension of life of three to four months, filled with side effects. The price was $50,000. I almost fell out of my chair when I read that initially. And it stuck. Not only did it stick, but Avastin became a multi-billion dollar product that put a floor on cancer biotech drugs. Anything better than that had to be a multiple of that. It just had to be. And so those are the incidents that stick in my mind. Now, I've been accused of being opposed to high price drugs, but that's inaccurate. For instance, this morning there was a discussion of a hepatitis C drug that was launched at over $80,000, and that was said to be very high and people screamed about it. But this is a drug that cures people. Better than 95% of people are cured of a disease that otherwise causes chronic liver disease or death from liver cancer. It cures them. This is a bargain. $80,000 for a cure from that, and you're not treating your general population, you're only treating the people who have the infection. HIV price? Exactly. I'm not sure, $25,000 to $30,000 a year. A bargain. HIV, everybody's going to die. Now everybody who gets a triple combination goes back to work. Incredible value. Is it worth $25,000 to $30,000 a year? Absolutely. And it goes right down the line. There are some wonderful drugs. However, something else has happened in addition to some abnormally high-priced launch of drugs. The other thing that's happened is increases in prices after the launch. And while these were modest, and I would say there have been experiments in the past on how to control this, Merck in the early 90s agreed and announced that they would increase prices no faster than the increase in the Consumer Price Index. The industry hated it, but they followed. Within a year, every major company agreed to the same thing, and it worked. Obviously, it hasn't continued. A really good drug, Gleevec, terrific drug, wonderful introduction by Novartis of a drug that cures some people, but most people respond, they go back to work, they live almost normal lives. The price at launch was $26,000. What is it today? $146,000. That's a jaw dropper, isn't it? That's incredible. These are increases of over 10% per year at a time that we've had some inflation, but this is crazy. And so that has stunned people. And people say drug prices are too high. And our president, who is otherwise crazy, also says that drug prices are too high, and he's going to do something about it. Well, yeah. So what else has happened that's new? I'm telling you things that you know. But let's say what complicates the issue. And we have, by the way, representatives here on the podium to speak to all these issues. We have PBMs, pharmacy benefits management groups, that come in. They gather large numbers of people that they control, for which they provide all the drugs for this group. There are three PBMs that I believe control about 80% of the population that needs drugs in the US. And they negotiate to get the drugs that they're going to provide to their population that they control. They negotiate with each of the biopharmaceutical companies, and they get the prices. They get either discounts or rebates, whatever you like to call it, of 30, 50, 60%. And so they're reducing the prices. Some of that is returned, it benefits the patients or the payers, but a good deal of it they keep. And the amount that they end up keeping, I believe, is almost equivalent to the amount that is kept by the inventing company, which is incredible. And so we have middlemen. And not only do they negotiate prices, but if they think the price is so high and the cost to them, to their formulary, is too high, they manage the utilization by putting hurdles for doctors to cross in order to get the drugs delivered to the patients. So not only do they change the prices, but you have a whack price, wholesale acquisition cost, and then you have a net price, which is what you end up with. And then they can regulate the amount that you can sell. So if you have a product that you're anxious to break through, they could sell at a much lower price and reach a fraction of the population that you need to reach for the good of the people who deserve that drug. So you have that. Then you have the issue of international pricing. What happens when you have a good drug and you want to get it on the market? You get your price in the US. You go to all the countries overseas. All these prices are regulated. It's all price regulation. They all negotiate down. You never get the US price. So it's decreased by between 30 and 60% to get onto individual markets, country by country. They negotiate you down. And so, excuse me, as it turns out, American people pay the most and the highest prices ever. And it's a terrible situation because it's that money that supports the research and development. So Americans essentially pay for the R&D that's going into drug discovery and vaccine development, et cetera. So we have that. Is there a way to come up with fair pricing, to actually relate the benefit to the patients to the price? And in the UK for a number of years, they've used the NICE approach. NICE, which is the National Institute for Health and Care Excellence. But they negotiate, they try to relate to the quality, the cost for quality. And you're going to hear about that because there's a non-profit, independent group called ICER in the United States, not related to government at all. It's independent. It's the Institute for Clinical and Economic Review. And they look at every new product or service, and they put a value on it, and they come up with the economic effectiveness, cost effectiveness. And they publish their results with a recommended price. But you don't have to take it. You can not pay any attention to it if your company and just go on and do it, or you can negotiate with them and try to convince them to work with you so that you come up with an understanding that when they publish, they don't knock you out of the market. At any rate, so those are the complications. And it's a system that's working amazingly. People continue to come up with new drugs. But the system cannot continue as it's going because there's tremendous pressure now to do something about pricing. And while I myself think we need to be in a position where there's a complete understanding, transparency in the pricing, so people know what the prices are, how they relate to value to patients. Transparency for everyone. And that there should be a growing feeling that going back to where we started, that the industry is working to improve health and to do it at a reasonable cost for people. That means fair prices at the launch and then price increases that try to recover inflation or consumer price index, something like that, where everybody could understand it and would agree that this is a fair thing to do. Now, I don't know that we can get there, but we have certainly people who can speak to all of these. And the first panel is filled with experts. The first one is Len Schleifer, who is the founder and CEO of Regeneron. And I must admit, I'm chairman of that group. And we had another Regeneron speaker earlier, George Yancopoulos, who was explosive. He gave a very exciting talk, kept me on my toes, wondering what he was going to say. But it was exceedingly entertaining and informative. Then I expect Len Schleifer has an MD PhD. He trained first at Cornell, then went to University of Virginia for his MD PhD, which he did with Al Gilman. And then he trained in neurology and started an academic career in neurology. But within a very short time, decided that he wanted to start a business. And he did that in 1988. That startup company has been enormously successful, and there are 6,000 people employed in that company here. And so he brings the focus on how you price exciting new products and to make it worth it, because the most important thing is for people to have an incentive to discover new products. That's what we have to be able to guard and be sure we retain. But we have to do it with fair pricing and with the people who look at us feeling that they're getting a good deal for their health improvements. So Len will give us the company. And Peter Bach is a director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering. And he's something of a critic of pricing of cancer drugs and maybe other drugs as well. And in 2015, he put out a Drug Pricing Abacus to help people determine fair prices, which is his focus. He trained undergrad at Harvard, then an MD at the University of Minnesota and University of Chicago later. He is triple board certified. And so he's a real doctor who understands this. And he will talk about his view of fair pricing. Then we have Steve Pearson, who is an MD with a master's degree in an MBA, I believe. He is the founder and president of ICER. And he's a good guy because he evaluates the value of products in a technology that he will explain to you, which seems to make sense when you read about it. The objective is to improve patient care and improve costs both. And so we will hear from him. Then we will go to... Let's see, he's an MD at UCSF and then a Brigham and Women's training, and then a master's degree in health policy and management. And he spent time at NICE in England, so he's enormously well trained. Then Steve Miller, MD, Senior VP, Chief Medical Officer at Express Scripts, a PBM. So he was trained in pathology, so he's ready. He's used to dealing with very ugly things. And he did cardiology at UCSF, Washington University. He did pulmonary, I'm sorry, nephrology and transplantation work. Has an MBA in addition from Washington U. Since 2006, he's been the Chief Medical Officer at Express Scripts. And he knows the field better than everybody because he knows all sides of it. So let's start. Len, would you start off the discussions, please?
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Len Schleifer20:00
I can't believe we wouldn't give Roy a round of applause for that. I have the great misfortune to be surrounded by these two Greeks. George Yancopoulos tells me what to do on a daily basis. Roy tells me what to do on a daily basis. I get home, my wife tells me what to do on a daily basis. And the only free time I have to be in control is driving up and back to work. But now Roy has decided I should get a driver, so I don't even get to make that decision anymore. Roy told you his philosophy about pricing. Roy was one of the most admired CEOs in the world when he ran Merck. And he came out of the research organization. First, he was a member of the National Academy of Sciences. And he set the standards for how companies should behave, what the standards are for philanthropy, what the standards are for keeping the patient first. I just wanted to say, I only have one wonder about all of Roy's philosophies. I've adopted 99% of them, which is he believes that his management philosophy is to get the very best people, put them in the job, and let them do their job, leave them alone. If they're not good enough, get rid of them. And what I can't understand is what he calls me every single day. I can't even sit on a panel without him. Anyway, I'm going to give it a try. Einstein said that if he was given an hour to solve the world's biggest problem, save the world, he would spend 55 minutes defining the problem and five minutes coming up with the solution. And I think that I only have nine minutes, maybe I'm down to eight, so I'm going to try and spend six minutes trying to define the problem. And the problem of drug pricing, what really is the problem? And when I realized and started to think about this, it's actually not one problem because depending upon your perspective, it's a whole bunch of different problems. If you look at it from the perspective of the most important stakeholder in the whole chain here, the patient, the problem is that they either can't afford to pay for their drugs, or get the insurance that pays for the drug, or pay for the copay that gets their drugs. Or if they have all that, they can't get access to the drugs because somebody's making a decision somewhere other than their provider that they really don't need that drug, that they should take a more toxic drug because it's a lot cheaper. So from the patient's point of view, it's really an affordability problem and an access problem. From the provider's point of view, that is the doctors, there are many of them in the room on the panel, in fact I think everybody on the panel is a physician. The problem of the physician today out in the real world is one of access for their patients. It's also affordability for the patients, but it's also paperwork. Would it surprise you to know that the forms that it takes for our new drug for cholesterol lowering sometimes are 20 pages, 30 pages, rejected, documentation sent back? The payers know exactly how many people will give up based on what they put these questions. These aren't done by accident. This is all highly calculated. I would submit maybe Steve could tell me otherwise, but I don't think so. The providers are frustrated by this because they went to medical school and they wanted to write a prescription and expect that their patient could go get it and the patient could afford it. So that's the problem as they see it. Now from the payers' perspective, their problem is a per member per month problem. That is, what does it cost me to deliver what I'm obligated contractually to do, which is provide a health benefit? In this case, we're talking about pharmacy benefit. How much is it costing me every month? So it's a cost problem. And what does that beget? It begets pharmacy benefit managers because the HR person doesn't really know how to do this. So they bound together and they get the pharmacy benefit managers. And from their perspective, it's these greedy pharma companies who are raising prices like crazy, and they brought it on themselves, and they deserve what they get because they behave recklessly, and we're the only people that separates their behavior from people not being able to get drugs at all. So from the payers' point of view, it's a cost and a cost containment perspective to try and rein in the abuses. From a policy point of view, represented let's say by Dr. Pearson, it's how do you come up with policies that make sense that allow us to make rational decisions? And it's an admirable goal. But Pearson and I have done battle before, okay? And I can tell you that in some cases, you can drive a Mack truck through the assumptions that go into these value calculations. It isn't a great science yet. I commend him for what he's doing. He's trying to turn it into a science. But any statistician will tell you that most of it's a bunch of nonsense because there's only a middle estimate, a point estimate with errors of value to be that great. And even if you know what its value, how much will society pay for value? Well, they have this system. And so that's their problem is what is a value. And I'm sure we're going to hear more about that from Steve. From a politician's point of view, it's really just who can they point a finger at? Politicians don't want their constituents to be angry at them. So what have they found out? It used to be easy to point a finger at the insurance company, but the insurance companies have gotten very sophisticated in how they portray themselves and how they've behaved, and they're not as easy a target as they used to be. And so the greedy, murderous drug companies who have incredibly bad behavior become a very easy target for politicians. Plus their constituents are annoyed, as I told you, that they can't afford to get the damn drugs to keep them healthy. What nobody's actually talking about from the politician and the policy perspective is how do we make sure when we tinker with this system that we don't undo the world's greatest system for developing and discovering drugs? It's in our Constitution. In our Constitution, between Congress's right to levy war and Congress's ability to levy taxes is the right to grant patents. The right to grant patents in the Constitution is there for a reason. The framers realized that the fabric of our nation was going to be based on entrepreneurship. And in the words of Lincoln, the only president ever to get a patent, although he didn't commercialize it, the payers wouldn't pay for it, I think. Although I'm sure he would have. He said that the patent system adds the fuel of interest to the fire of genius. Lincoln always had great quotes. The fuel of interest to the fire of genius. And that's the perspective of the pharmaceutical companies and the biotechnology companies. What in the world is going on here? We signed up for this. If we ran that gauntlet from getting money and finding investors and doing experiments and going through failures and bringing on chair people like Dr. Vagelos to steer us back into the middle of the road rather than off to some extreme where we were, we thought if we ran that gauntlet and the FDA actually gave you that stamp approved, that the game was over. We could celebrate. We expected to march down Main Street and at the end of the street there'd be a parade and everybody would celebrate that we got the drug approved. We never expected to be staring Steve Miller in the face. It just isn't what we signed up for. And I've had to stare them down, believe me. So the point is that these are the problems from many different perspectives. So the question is, what's the solution? If we have seven different problems that I've just enumerated, how can we have one solution? And I don't think we can have one policy solution. I think we have to have a market-based solution. I think that we have to increasingly be vigilant about the behavior of all players, including the greedy pharmaceutical companies who think they're entitled, as I said last year, to a fraction of the GDP, which they're not. Who think they're entitled because they had a drug failure. A company very recently who had a big drug failure and missed their earnings decided that raising their prices by 20% could plug that gap. That's not right. And so the point is that we have to have a market-based solution that will punish bad behavior by exposing it, shining a light on it, writing about it, complaining about it, threatening to change the law about it, locking up the really egregious people. But it will also reward the good behavior. If you come out with a new drug and you actually can convince Pearson that it's fair value and you can convince Miller that it's good for his patients, they ought to be making it easy, not a 25-page form, a two-page form, a doctor writing an attestation that the patient really needs this drug. So my solution is market-based because there's too many problems for one policy to solve. We have to keep punishing the bad behavior and really aggressively rewarding the good behavior. Thank you very much.
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Roy Vagelos29:59
You see, that's another Regeneron person. Explosive. That's the kind of thing we encourage. Okay, okay. Peter, thanks, Roy.
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Peter Bach30:11
Yeah, I have to say I would pay money to see a meeting between you and George. And also Steve, thank you for coming. It's fun for me to not be the most hated person on the panel. So I have some ideas about solutions as well. I'm sure they'll come up during our conversation. But I just want to try and frame this and take a step back and ask the question, and Len articulated many of my concerns as did Roy. But I think we're caught in some conflicting narratives. I think around whether or not this current system functions well or close to well, and that drives us to different conclusions: whether we need tweaks, small things like just get a hold on drug price inflation, or much larger things like completely reshape how we price drugs in the first place, never mind middlemen and things like that. And so I think the work that I have observed, some of the work that I have done looking at this space for a while, has convinced me of a couple of things. That well-functioning markets tend to have products clear in the market at prices that reflect their value to customers. And healthcare is a system which can never fully achieve that goal because of layers of insurance, PBMs, lack of opacity, and things like that. And that has led to prices of current drugs being unable to be linked to the value to patients, no matter how you define value. You can write any equation you want. One thing that comes out of the Drug Abacus that leaps off the page, or in this case off the web page, is that you can't figure out an equation for value of a product that makes the current prices make sense. And you can't look at current trends in prices either and have them make sense. We had work showing that the price per quality-adjusted life year in oncology has gone up about five-fold, adjusted for inflation, over the last 20 years, from about $50,000 to $250,000. As Roy points out, a price increase in something like Gleevec of three-fold or four-fold doesn't make any sense when the product is exactly the same. It can't incrementally get better while it's also exactly the same. But the other challenge is, and I think you brought up hepatitis C and you brought up the HPV vaccines as well, it really depends on how you view the end goal of this system. And there's of course a trade-off between the wealth transfer that is healthcare in general that has made all of us in this room wealthier than the median person in this country. But it's also a question whether or not the end goal of pharmaceutical innovation, how much it tilts towards wealth transfer, which of course is the fire that fuels genius, or that it causes health transfer. And sometimes those things don't work together. So I look at hepatitis C and I'm thrilled. Pharmasset made an amazing compound that Gilead then advanced, and we now have a treatment that's highly effective at eradicating an important virus that causes complications for many of the people who have it. But it costs so much money that things with fixed budgets like prisons and states can't afford it. So we have about 2.7 million people in this country right now who have untreated hepatitis C. And we've treated, give or take, half a million of them so far. We started at about 3.3. So you can either look at that as a scientific success turning into a commercial success, certainly a success for the companies, particularly Gilead, that have succeeded there. Or you can look at it as a massive public health failure due to a system that is not designed to actually deliver the innovations to the people they were originally designed for. If you look in oncology, we rank last of all Western countries in terms of access to cancer drugs. Part of that is our broken insurance system, which is due to apparently healthcare being complicated, but it's due to other things as well. And so I think that we're obviously going to talk about this a lot. But I think the challenge we face is through which crucible do we want to view our biggest biomedical successes? Through the crucible of did we get close to the health gains we could have gotten from this? Or through the crucible of we got this drug approved by the FDA that nobody thought could ever get to the point of scalability into humans? And you brought up the HPV vaccine. When that drug launched, as you know, the penetration of the vaccine into states where girls were highly likely to later grow up and die of cervical cancer was the worst in the country. It was the best in the states where they were least likely to do it because, of course, those things travel with income levels. So this was again, at launch, I think it was about $400 for Gardasil. And poor states just didn't pay for it. So it went to not the wrong people, many people will benefit, and now we of course know more about HPV. But it didn't go the way it would have if you were designing a system to promote health. And the incremental health gain from each treated girl at the time we were only vaccinating girls was being strategic. Thanks very much. I look forward to the discussion.
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Steve Pearson35:32
All right, thank you. Good afternoon. So, you know, I've known Len for a while now, and I know he's been outspoken. I had no idea what Roy was like, so it's clearly something in the water at Regeneron, or the apple doesn't fall far from the tree. But I really love the way that Len also laid out the different perspectives on what the problem is, because it is part of both the political discussions going on about what the solution should be, but it's really true. And Peter also gave further perspective to that. I would also add one more to that. And that is, if you had been working with a Medicaid program or the VA at the time the hepatitis C treatments came out, you would have felt a deep angst that they felt. They knew they had a brilliant, innovative treatment. Many of them were clinicians by training and by spirit, and again, they felt how horrible it was for them not to be able to treat the patients they wanted. They also felt that there was a bit of a misguided sense that we have to rush to treat everybody all at once, that that's the American way. We would never prioritize because that's not what we do. But I talked to some people who are caring for homeless people in LA County, and they said if you could give me a thousand dollars a day for a couple of months, the last thing I would want to do is buy hepatitis C treatment. They need a place to sleep. They need very acute problems taken care of. And then I will maybe come back and do what's really needed for their longer-term care. So there are a lot of problems there. And you also talk to state policymakers where, and I have the data from Massachusetts, but I know this is true of all states. Over a 10-year period in Massachusetts, adjusting for inflation, their healthcare costs for their state employees and families went up about 60% over ten years. Where did that money come from? It's about six billion dollars. Well, Massachusetts, you could assume they taxed more to get it, right? But they didn't. That money came from decreases in state spending for every other line of spending that the state has. Absolute decreases in education, in police and fire departments, in all kinds of infrastructure, housing. Literally, if you name it, the state cuts spending to balance the books to pay for more health. So that's the broader challenge that we face. And you can understand that people in those shoes will view any cost increase in healthcare as a problem. It's very easy to see that as short-sighted and miserly and in some ways even to embody a certain ingratitude. 'What, you're bringing me another great treatment? No.' Right? But that's the situation we've led to. And I will tell you that recently I've even heard that gene therapies, which are just about to come through and be approved into the US system, true gene replacement therapies, there are large self-insured employers out there today who are asking their health plans to write new healthcare benefits for next year that will not cover them, full stop. A new kind of treatment. We can't afford it. Very expensive. Somebody else has to step in and save this problem. So we're going to have patients, real unmet need, tremendous innovation, and a brick wall. So I think that's part of the problem and why I think it's great to have this panel at this particular forum. So very briefly, I want to talk about what I think are three ways to think about fair pricing. I'm glad Roy used that term first before I did. And then I'm going to talk very briefly about ways that I think the health system in the US is going to try to get it or get them. So realize again that even asking a question about fair pricing can seem un-American. I mean, what is a fair price in anything? Don't we have a market that uses supply and demand, and we kind of let that market function as freely as possible, and the price that comes out of that is the right price, or the price of the market? There's no fair price. And again, as you know, there are lots and lots of reasons why the way that the pharmaceutical market has been created is not a pure free market. It needs to protect innovation. It needs to provide extra incentives. But along with all the other bells and whistles around patents and extensions and the lack of some kinds of competition, a lot of people feel that fair market or free market competition is not getting us prices aligned with value. And that's what Peter was pointing out. So what are the two other ways that we could talk about fair prices? The one that I actually think is the most dominant one that you will get from the man on the street or the person in Congress or whoever's in the White House, to be honest, is fair profit. Also something that might seem un-American, but it's how we treat utility companies, right? Water, electricity, where there's a monopoly. We don't think competition is working. We need to protect the population. We have regulated prices. And basically, people think, how much did it cost you to actually make that pill? And of course, we can wrap in all the failures and all the risk and the need for capital for the future. But ultimately, people are looking at profit margins on an annual basis. And is that really the way to price innovation? What did it cost you to make it, and we'll give you a fair profit? But that's powerful. And the price increases on generic medications have driven a lot of thinking in that direction. The third major conceptual way is to think exactly what Roy and Peter said, which is, can we scale the price in some way to the benefits, the added benefits of a new treatment for patients? And the rest of the world is more up to speed with thinking this way, but it's relatively new in the states in terms of putting a number on it. So that's what my institute does. We've tried to adopt health economics and other approaches to trying to figure out how we would, in the United States, the richest country in the world, scale a fair price for the demonstrated ability of a new treatment to advance the benefit of patients through either lengthening their life or improving their quality of life. And we can talk a lot more about the details of that if we want to. But it's one basic approach. And it's not that policymakers or the public in the US will ever, I think, adopt one of these in isolation. They're going to wrestle with the tension between them. But I think there are reasons to think that pricing to the added benefit to patients is the right way to price for innovation, to maintain it and to sustain it. All right. In two minutes, what are the payers out there going to do to try to get a fair value-based price? I think they have about three options, maybe four. One is to continue to cost shift to patients, to use the tools of step therapy, of other formulary management tools, to try to share the cost and the risk with patients and clinicians in a variety of ways. Two is to exclude more drugs from the formulary because this is a model that's very easy for employers to understand. If it doesn't meet a certain cost-effectiveness threshold at the best price you can negotiate, you drop it off the formulary and do not be surprised if that comes to an insured population in the United States. That is what NICE does, of course. There's a lot of back and forth over that price, but that's ultimately what NICE does. The third way is to say, look, we want to cover every drug that's brought to market. Some patients, we can't always deal with averages. There will always be patients in situations for whom this will be the
Right drug at the right time. So the other way to use this general approach of thinking about fair pricing is to say, okay, we will cover it, but we will only pay up to some fair price. So it's not excluding it's saying pay up to, and trying to figure out how in the US insurance system that plays out. Is it just spill over onto patients or whom? The last way, and I almost feel like we're in a Darwinian moment where the first mutation has occurred, or maybe it's a reversion to a former species, but it's something that happens without the government and it happens without price capping or hard caps. And it's when enlightened companies with a long-term view of their corporate responsibility and their social responsibility see a different landscape. I'll give a shameless plug to two of you on the panel here. Basically, when a company like Regeneron and Len came and was very thoughtful in working with us before they launched, and they had been thinking themselves obviously for quite some time, but they took very seriously the idea of pricing in alignment to value in a way that would muster up to the public's ability to see transparently where the number came from. So they didn't just say we priced it because it's good for patients in society. They said we'll price it here, and believe me, they could have priced it higher given the benchmark psychologically in people's minds. But when they did price in alignment to value, and Steve Miller may say more about this, the responsible nature of that triggers a responsible reaction. And if it doesn't, that's that Darwinian moment we're going to lose the opportunity to have our country have its own way forward here. So I'm a big fan of the idea of publicly available independent evidence analysis to drive the private market to be able to do the right thing and to create an ongoing ecosystem that will support the kinds of innovation that companies can bring to market in a way that the US public can afford and will support. Thank you.
I wish I could say thank you, Dr. Vagelos, for having me. So as the most hated man in the world, or at least in this room, and the only payer that's in the room, as you know, I come from Express Scripts. Express Scripts is one of these evil PBMs. To let you know, I actually started out as a bench scientist. I'm a transplant kidney doctor, invented a bunch of drugs, have a bunch of patents with the pharmaceutical industry. If any of my patents had worked, I wouldn't be shilling here today for Express Scripts. At the risk of correcting my hosts, I do got to say one thing. The way the marketplace works, Express Scripts does get rebates. Rebates were actually invented by the pharmaceutical industry to reward and punish where you place something on a formulary. So if you give a drug a good formulary placement, they pay you a rebate. If you do not put their drug on the formulary, they have to have a way of punishing you. They don't pay you a rebate. Now, when it comes to the flow of the rebates, we actually do keep ten percent of rebate dollars. Remember, we only get rebates off of branded products. So in the United States, ninety percent of fills are generics, ten percent of fills are branded products. We get the rebates. Ten percent that we get to keep off those branded products. My whole goal is to create a sustainable system. I want to see new drugs come to the marketplace. We don't exist as a business if we don't have new drugs, and as a physician, I don't have the tools to treat patients if we don't have new products. So how do you keep America the most innovative country in the world when it comes to new drugs, but also have access and affordability? And if we were so evil, then Roy's companies wouldn't actually be hiring us to do their bidding. Most your companies in this room actually use a PBM. In fact, we're the PBM for many of you in this room. And so what we need is we need the same innovation on the payment side as we have on the development side. And so I use the best thinking of people like Peter Bach, Steve Pearson, Len Schleifer, and others to try to create a benefit that gives you every drug that you need to have if you're sick or your family members are sick, but also have access and affordability. And so now we've been moving the bars. For instance, with rebates, we now have the ability to give those dollars back to the patient at the point of care. So we don't care where it's paid to. We don't care if it's paid back to the plan sponsor or to the patient. Rebates can go to wherever the plan chooses. Most plans do not choose to give back to the individual patient. They use it to lower the cost of the entire premium for everyone, and not those one or two percent of patients that have the high premiums. I will tell you that I have real concerns about high deductible health care. High deductible plans are designed for rich people and sold to poor people. You and I in the room have a couple thousand dollars in the bank. We can actually pay that high deductible. The vast majority of Americans don't. And when they buy their health care, they're just looking at what the monthly premium is, the cheapest premiums for the high deductible health care plan. So it is rich people who should have them. It's poor people we sell it to, and that is really creating a horrible system. We have got to migrate this system to do new things. For instance, we're working with pharmaceutical manufacturers on something Peter thought up, which was indication-based reimbursement. If a drug works really well, the pharmaceutical company gets one price. If the drug doesn't work particularly well, the pharmaceutical company gets a different price. It's going to take a lot of regulatory changes to make this work for every type of payer, but we can now do this in the commercial marketplace. We're doing value-based pricing, as Steve Pearson talked about, where we're actually doing things above and beyond to add value to patients more than what is already out there. Let me give you a great example. When we treated hepatitis C, I was one of those that really complained about the price. We chose a product that was a little less convenient, because it was really inexpensive for our plans. The big concern was you had to take it twice a day for 84 days and the patients wouldn't be adhering. We guaranteed the adherence of the patients, which meant we had to innovate. We had to develop predictive models where I could predict which patients would take their hepatitis medicines and which ones wouldn't, and be able to treat those patients specifically with apps, letter campaigns. To be very frank, I got the drug so cheap I could have taken a nurse and sent them out to the house and forced the pills down your throat to take it. We had adherence rates that were unheard of even in the clinical trials. So we had adherence rates that reached almost 95 percent, which was better than the clinical trials. And so indication-based pricing, value-based pricing, as we move into the era of gene therapy, we're going to have to think about even more innovative things like amortization across years and portability. I'm going to stop there because I think the questions are going to be more useful than the talks from the podium. I will tell you that I will probably be exiting first because I know that it's going to be a hostile environment. So thank you.
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Roy Vagelos51:36
Great, thank you very much, Steve. Okay, so we have an open forum now and I invite questions. I would just have one for Len. How do you look at drug pricing yourself? To take an example and lead the group through how you thought about it. Okay, is the biotech important? Yeah.
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Len Schleifer51:57
I mean, I will, for convenience sake since people know a lot about it, use the drug that Steve Pearson gave as an example, which is our new drug for the treatment of atopic dermatitis, which was invented by George and his team after decades and decades of work. Atopic dermatitis is not just a little eczema. Atopic dermatitis is a terrible, terrible disease where people in the worst case they really just can't get out of the house. I've known people with bad atopic dermatitis. They scratch and bleed so badly that when they travel to a hotel they bring their own sheets because they're too embarrassed to leave the bloody sheets in the hotel. It's a devastating disease, and there hasn't been a treatment for it in 50 years really, other than topical steroids and then systemic immunosuppression. Our team came up with a treatment that was dramatic. It took people who were covered in this terrible outbreak of rash and scratching and the vicious cycle and infections and made them clear. It was really quite remarkable, and you can look at the data and you'll see that everybody agreed. The FDA agreed. They stamped this as a true breakthrough. They rushed it through to get it approved. And everybody rushed. We every day mattered. The FDA rushed. And you know what happened when we got to one of the big payers? They said, 'We don't cover new drugs. Come back and see me in six months.' You know, that's the sort of thing that we knew was out there. And where you asked me how did we set the price, we had to think about all this. So what we did is we went and talked with Steve and his group, and we argued scientifically. His team had an approach, we had an approach on how you determine value. We looked at the benchmark of other drugs. The psoriasis drugs were way expensive, but there were lots of rebates. We did what the lawyers told some people was illegal, but it turns out it wasn't. We went to talk to the payers in advance. How can that be illegal? The drug is being rushed to be approved. We need to know that on day one we could actually get it covered. So we went to talk to people like Express Scripts and CVS and Optum and others and said, 'Listen, we are going to be responsible.' Pearson's going to tell you that, surprise surprise, he doesn't think that there are many responsible people, but we priced it based upon what was viewed as value delivered to the patient, right? And at the end of the day, the system worked the way I think that you're trying to suggest that it does. That good behavior was rewarded. Express Scripts on day one provided coverage. CVS day one. This is sort of unprecedented in our industry to get day one coverage. ICER came out and said our price was fair value. So to us, that was really, really important because at the end of the day, it doesn't do us any good to discover all these things if the patient's problem isn't solved, which is accessibility and affordability. So we tried to price it in a way that it could get to the market, and I think we've succeeded, although not everybody is behaving rationally. Some people are just saying, 'You know what, it's still too expensive. We're not going to cover it for six months. Come back, we'll check it out. And by the way, there's a much cheaper drug called cyclosporine, and it doesn't bother me that it kills your kidneys, gives you hypertension, makes you more susceptible to cancer. It's cheaper. Take that first.' That's step therapy, by the way. That's what step therapy is. So anyway, that's what we did, and so far, for the most part, it's working. Thank you, Len.
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Roy Vagelos55:37
Jeff.
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Jeff Lieberman55:43
Jeff Lieberman. Can we have a microphone here, please? One right there. Here's one coming behind you. As someone who's a clinician and treats patients and works in the area of pharmacology, drug development, on the discovery, development, delivery side, more on the development delivery side, I see three points of leverage. One is something that's way above my pay grade, whether the FDA wants to take into consideration drug pricing, being the only country in the world that doesn't do it, and there's good reason that we don't do it. But the second thing is that I don't know how successful NICE has been, but if you look at the federal budget, which is 4.23 trillion dollars, and HHS consumes close to a third, defense department another, but virtually all of HHS is CMS, and there's no comparative effectiveness data or mechanism to generate that data that exists. The NIH can't do it or doesn't do it for the most part. PCORI was created as an effort to try and do something along those lines, but it's not been successful, and it won't be reauthorized when it expires in 2019. And so you have a situation where there's no awareness of the comparative value of treatments as they're being developed to come out of the market in price. And then the third thing, and this is something that I would support or in some way support above the evil empire of PBM and managed care insurance companies, physicians. And I, you know, it was nice that Len mentioned how we are nobly motivated to do all this stuff, but something happens after you get out of medical school that makes you stubborn in some ways. Anti-delivery people are resistant to having their practice or their independence proscribed, even if it makes perfect sense to do so. And if you have me-too drugs that are still being prescribed under patent protection and higher price, but there's no added value, you don't need to have them in your formulary. Now they fight to get on and to get off, and advocacy groups of patients scream if they're not able to get them, even though they don't know whether that's really worth it or not. But a huge amount of cost efficiency could be achieved by structuring formularies based on comparative effectiveness data, and physicians as a group, along with other stakeholders, are really resistant to that, but for no good reason that I can say.
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Roy Vagelos58:24
Okay, anybody want to take that on?
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Steve Pearson58:24
You know, I'll start with a couple things. One is, you know, in this country we spend 3.4 trillion dollars on health care. The federal budget is actually 17 trillion dollars, and so we spend significantly more than anyone else. And when it comes to drugs, we spend significantly more. It's not just because the drugs are more expensive. You're exactly right that you can actually have these drug lists and you can drive down the cost. As a physician, I want my patient to be able to have, I want to have every drug available at a cheap price for my patients. Patients want every drug available at a cheap price. The unfortunate thing about that is the system doesn't support that. And so when you have these formularies, there are a list of drugs that essentially say what you can and cannot get. Usually almost every generic is on the formulary, and so that's why generic utilization rates are 90. But you gotta remember, for that last ten percent that's branded products, it's seventy percent of the spend. And so when you can actually say, 'Okay, which SGLT2 do I want to prefer and what discount can I get on?' I mean, that's what we do. We aggregated 80 million people and we go to the different diabetes companies and we'll say, 'Who will give me the lowest cost for insulin? I will move my market share to you. Which one will give me the lowest cost for a blood pressure medication? We'll move our market share to them.' By doing that, we actually drive billions and billions of dollars of excess unnecessary spend out of the system. But you bring up one really important point. The system has to modernize. We now have most prescriptions coming electronically. We should also have prior authorization electronically. It should be mandated to be electronic because if you as a physician or you as a patient knew which drug you were on at the time of prescribing, all the friction goes away, and you would be much more accepting to what happens. Right now, we get 85 percent of our prescriptions electronically. The biggest gap is actually narcotics. Only 14 percent of narcotics come electronically, and that's a whole different topic that's led to the opioid crisis. But if you made electronic prior authorization also required, you would see that much of the friction would go away.
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Peter Bach1:00:46
Just a short comment about comparative effectiveness. It's easy to think that that's all we need for decision-making, but it's not. A couple things about the idea of comparative effectiveness is that often when drugs have been approved by the FDA, they've only been compared to placebo or to best usual care, and maybe not to another active drug that would be viewed by a clinician as a potential competitor. The difficulty is that you're still never going to get those head-to-head trials at the time of launch when a lot of the decisions around coverage and pricing still occur, and we don't have a system that's all that good at looking at the full life cycle and continuing to gather evidence. I do wish that PCORI had kind of figured out a way to plug in, especially to accelerated approvals, to be able to help us gather that information. The other feature of the science of trying to compare two drugs head to head is that if the differences are relatively minor, which they very often are, you would need a tremendously large patient sample in many years to tease things out. So the key feature of what health technology assessment groups do is to try to do the best indirect comparisons we can, and there's still evidentiary needs that we have to do that. But we can get a lot of the, and this is what PBMs have been doing and health insurers themselves for a long time, trying to do the best at that indirect comparison. But you're right, trying to translate that through into a formulary that clinicians and patients will find clinically acceptable has been challenging.
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Jeff Lieberman1:02:23
Yeah, go ahead, Jeff. Sure. You know, the way we're structured, everything gets pushed to phase four. So you've got a choice between either pharma doing phase four comparisons to their competitors that they want to design a study to favor the outcomes to show their drug to be better, or you have a PCORI type thing which, as you said, has been not very successful. But that's as good as we can do now. But we still don't have you could have provisional pricing which could then be informed. And in terms of the numbers you need and the time you need to get the answer, Rob Califf, who unfortunately had a relatively short tenure at the FDA, has really pioneered very creative approaches to kind of seeding clinical practice with mechanisms by which to acquire, if not randomized controlled trial data, at least quasi-naturalistic data that can be informative. And so we don't use that. That's not sort of factored into this process. Good point.
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Roy Vagelos1:03:27
Okay, how about Ron here?
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Ron Cohen1:03:33
Thanks, and thanks for very interesting comments. Ron Cohen, Acorda Therapeutics. So, you know, in listening, I participate in a lot of these conversations and listen to a lot of them, enough so that I hear the same themes again and again. So I'll ask you all a couple of things, in particular leading to a bigger question. So for example, Steve, when you were talking about assessing the value by profitability on a given drug, you know, what I will tell you as someone who's on the other side of it is I think that that's actually just the wrong way to do it. And the reason it's the wrong way to do it... Steve said that that's what I said. He said that. Oh, you did say it was the wrong way. Okay, good. He rejected that. Good. Then you do reject it. Then I'll just move on. It's never been so easy for me to win a point as it was just then. So, thanks. So the big question is this. I'm starting to feel like we are doing what there's this classic term called bike shedding. I don't know if any of you ever heard it, but apparently it was first used when there was some big committee to build a big nuclear power plant, a massively complicated issue, and it was noted that they spent days and days and days on the design of a bike shed for the employees to put their bikes in, rather than on the issues of the water systems and the uranium and the actual plant. And what they figured out was that they had defaulted to that because dealing with the real issue, the big issue, was so complicated that it was much easier for them to make progress on the bike shed. And I get the feeling that we do a lot of that in these conversations. We wind up focusing on the title here, which is drug pricing, as opposed to the context, which is health care and the provision of effective health care in this country. So if you look at metrics, people say, 'Well, why are drugs so expensive here relative to Europe and Japan?' Very few people ask the companion question, 'Why is all health care much more expensive here than it is in those same countries?' And if you do the analysis, drugs don't stand out as being particularly egregious. Drugs are two, three, four times as much. So are surgical procedures and hospitalizations and doctor visits and diagnostics. The whole thing. So right away there is a fallacy in the way in which we approach this discussion, which is that we focus only on this discussion rather than the larger context, which is a lot of the distortions that we and that you have been discussing within this system are related inextricably with the distortions and inefficiencies of our entire health care system. Because let's face it, money is fungible. If you're paying four times as much for hip surgery, that's money you don't have to pay for a hep C drug. So there are choices inherent in that. Where in this conversation should we be dealing with the big picture, which is it's not drug pricing because everywhere you look there are distortions? And Peter, you know, a couple of years ago I asked you a question about Sloan Kettering and other hospitals. But for example, and not to pick on hospitals at all, but just as an example of how it's pervasive throughout the entire health care system, this week the Moran Company published a report, admittedly full disclosure was sponsored by pharma, but it's an independent group, and what they showed was that across the country, on average, hospitals are jacking up or marking up the price of drugs that they give to their patients by 500 percent. And then Steve and his colleagues at the PBMs get a wonderful victory. They knock it down by 50, which means that the hospitals are actually getting 250 percent markup net on these drugs. So I mentioned that because it's fresh and it's new, but I think that's just one of millions of examples you could give of the distortions in the system and the fact that the dollars are flowing into various constituencies' pockets, including pharma and insurance and PBMs and pharmacies and distributors. Here's where they're not flowing: the patients. They're flowing out of the patient's pockets in the forms of high co-pays, high co-insurance, unaffordable deductibles. And so we've created this monster system in which one out of every five or six people in this country earns a living out of the health care system. 18 percent of our expenditure GDP is health care. To me, that's the issue, and we're bike shedding because how do you deal with that? So we talk about drug pricing. Discuss amongst yourselves. That's the easy part.
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Roy Vagelos1:08:40
Okay, thank you, Ron. Mike Rosenblatt has a comment or a question.
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Mike Rosenblatt1:08:46
First a comment, and then a question. I think it pays to remember that most of this discussion is of the price on day one, and that's the sticker shock that everyone experiences. That's what many payers, including state health systems, experience. But if you track the price of a drug over time, there's usually a very big fall when the fast followers come on. This was the case with Sovaldi. It dropped 40 to 60 percent. Actually, it's cheaper now in the US than it is in Europe. And then of course it goes off a cliff ten years later when the patent runs out. So there's no other part of the health system that does that. Doctors' fees don't go down. Hospital fees, last time I checked, don't go down. All of this. So that's just a note to remember. But I wanted to maybe go through one example of why it doesn't make sense to just single out one sector of an interconnected system. So imagine that we could decrease today the price of branded drugs by 30, 40, 50, let's say 50 percent. I don't know if that would be enough for the people on the panel, but I'm going to start with 50 percent. And I'm going to take an American worker who earns fifty thousand dollars a year. He or she takes home forty thousand dollars after taxes. He or she chooses the cheapest insurance plan that they can get, which is about eight thousand dollars for their family of four. Then they have three or four thousand dollars of deductible. So now they're up at eleven, twelve thousand dollars. And then, Roy, let's say they got Avastin for fifty thousand dollars. They have a twenty percent co-pay, so they are now adding ten thousand dollars to the twelve thousand dollars that they are paying one way or another for health costs. Cut the price by 50 percent, they're still at 18,000. They're bankrupt in any scenario. So I think that exclusive focus on drug pricing isn't going to get us to where this panel started, which is the patient and can the patient afford their drugs.
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Roy Vagelos1:11:37
Mike, can I respond?
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Steve Pearson1:11:37
For sure. I don't think anyone's taking the nihilistic view that pharmaceutical pricing is the only issue we have in healthcare today. I certainly haven't heard that on this panel. But also, Steve Ubel wasn't able to show up, so I made a list of his talking points and I've been checking them off. So Mike, you gave me two. I have three more to go. I hope there's some more questions. I will say one thing though. Remember that pharmaceuticals is the number one touch point in healthcare. You go to a doctor twice a year. You go to a hospital less than once a year. You use your pharmacy about 12 times a year. And so this is why it's so front of mind for people. It's because that's how they touch healthcare. But in America, we don't have a shortage of money. We spend 3.4 trillion dollars. We waste a trillion dollars. The trouble is, pharmacy, to be very frank, is the only managed part of health care, as you point out. And so that's why pharmacy rates are actually going up slower than anything in health care today.
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Peter Bach1:12:35
Yeah, well, I'd like to respond, which is of course in Europe there's no co-pay, and by the way, there aren't PBMs. That's right. And there's also less profitability for the pharmaceutical manufacturers. Great comment. I would also say that if we don't talk about both ends of the spectrum, prices and costs, not just within drugs but across the whole spectrum, and believe me, there are meetings all over the country at which the payers and the employers are trying to figure out how to stop unnecessary testing and keep patients out of the hospital. And they've been able to figure out how to pay their hospitals and doctors so that they at least have some reigns around shared savings and can work together on that. And they've been struggling to do that with the pharmaceutical industry. So it's one reason that there's just a kind of a structural difference. But if we don't assume and demand that with responsible value-based pricing we have serious movement towards making these more affordable for individual families, we have lost the game before we've started.
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Roy Vagelos1:13:41
That's exactly right. Then I think it's kind of bold to think that we can do something about all of healthcare costs, although we are probably the catalyst in reducing costs when you come up with a life-saving drug that works well, like the hepatitis C drug, which was the objective of a lot of the discussion today.
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Viviana Volta1:14:11
There's a question back here. I'm Viviana Volta. I'm a postdoc at NYU Medical Center. I hear a lot talking about comparison between pricing here in the US and in Europe, but I don't think you really can compare the two things because here healthcare is a business. In Europe, healthcare is a government service to the citizen. So you cannot compare the two things. You can argue about which one is the best, is the most fair, and blah blah blah. But it is true that most of the innovation comes from the US and not from Europe because the drug pricing is the engine that moves the innovation here in the US. And that's what we want to review. That's exactly what we need to preserve, no matter where we come down. Yes, and everything else. If you want to really take Europe as an example, I think it would be better to think about how doctors handle diseases in Europe. Like they first try to change the patient behaviors. Like I don't know, if you have high cholesterol, you just change your diet for example, and then as a second course you use a drug.
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Len Schleifer1:15:30
So that's one of the greatest fallacies ever propagated. Diet doesn't do very much to lower cholesterol. Not saying that dieting isn't good for obesity and other things, but it's one of the greatest fallacies in the world that you can, compared to a pennies a day statin, that is crazy.
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Viviana Volta1:15:47
Right, so I mean, I would be because behavioral changes you can do it, and also you can do research, maybe not companies, but research to understand the root of the problem instead of making drugs that just cure the symptoms.
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Len Schleifer1:16:06
You know, if we don't, I mean the biggest picture of all here is we have Stanley Prusiner sitting in the audience, a Nobel Prize winner, and he's working with a company trying to come up with a treatment for Alzheimer's disease. If he or one of the hundred other enterprises that are working on this don't succeed, do you realize that our whole conversation is just unimportant? We're going to drown. We're going to drown in the cost of caring for all the demented. Friends of mine, yeah, um, certainly not Roy, but some of my other friends maybe, but perhaps myself. But if we don't, and the only solution is not a surgical solution, it's not a diet solution. The only solution is, God bless, we hope Stanley or some other company comes up with a treatment. We have George's discussion of exactly that point this morning.
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Roy Vagelos1:17:01
I have a question. It's right here. Okay, you're nice. Yeah, you're first.
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Audience Member1:17:09
I think people, even very erudite people like all of you, don't speak very much about the one problem maybe we could solve, and that is that the average payer insurance company only keeps their patient for about 18 to 24 months. So the payer really doesn't care about starting hep C early so the disease is gone, or waiting until the patient falls off the cliff at which point there's no choice but transplant. So isn't there something we could do about that? Outcomes work like you two do certainly could show the long societal cost, but private insurers and even the Medicare processors, you know, Palmetto and so forth, don't really care. They don't care about the very holistic system and society benefit. Do you follow? They care about the cost within the premium period.
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Peter Bach1:18:08
Okay, thank you. Yeah, tonight make a comment. Sure, is that okay? So appreciate the comment. Some caution. We do have a solution called single payer health care, which I don't think we're going to get to very quickly. But the argument about long-term cost savings and societal benefits certainly applies to some products, it doesn't apply to others. So I think that if you sort of work through the problem, it wouldn't necessarily even cut the direction I think you assume. So right now, payers are contracted entities to deliver certain health care benefits, and the problem I believe, and what Steve Pearson is trying to solve to some extent, is to get these things priced to their value, at which point payers should be contractually obligated to not only pay for them but not burden patients with high costs attendant to them, and that would solve these other problems naturally.
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Michael Aberman1:19:02
Thank you, Peter. I hope this isn't going to make me too unpopular. Michael Aberman, and I'm a CEO of a new startup biotech. Len mentioned something that was pre-glossed over. Revlimid increased its price by 20 percent this week, and this has been on the market for a long time. It's a pre-Galleon winner. We're here at the Pre-Galleon Awards to celebrate innovation, and we talked about a market-based solution. Martin Shkreli was run out of town based on his price increase. The cost to society for that drug wouldn't have been the cost. What is 20 percent of Revlimid going to cost society? So where is leadership that Roy showed 20 years ago? Where are all the CEOs to stand up today right now and say they'll stop this practice? I'm calling on you all to stand up and do that. I'll do it. My drug's not gonna be in the market for 10 years. I'm with you.
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Roy Vagelos1:19:58
Okay, other mysterious. Yes.
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Fred Nasm1:20:05
I'm Fred Nasm. I'm the CEO founder of a company called Rejuvenant. The question you brought up is very exciting. I'd like to know from the panel how many drugs are as good as hepatitis C, as effective. Our biggest problem is that very few drugs are really curative. Most of them are palliative or they're lifelong drugs. And so you look at an elderly taking 10 or 15 drugs. They don't even know what the drug-drug interaction is. Much of the industry is really got black dark stuff, and nobody knows. That's why consumers are not very happy, and they're just having very big suspicions about this whole thing. You talk about all the good things that you could come up with, which is wonderful, but how about the stuff that is just palliative and everybody copies everybody? There's all kinds of game marketing games going on.
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Roy Vagelos1:20:51
Yeah, oh, thank you. I think it's factual. And let's say one last question.
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Ted Alcorn1:20:58
I have a mic already. Actually, what, um, hi. I'm sorry, my name is Ted Alcorn. I'm a reporter for The Lancet, so I'm probably bringing down the average income in this room by a little bit. But the title of the panel was about a prospective one about looking ahead to the age of Trump. And what I'm sort of curious about is not what the proposals are on the table to address high drug prices, but actually what you see motivating change. Is it enlightened self-interest and folks standing up? It doesn't see a lot of people actually joining the movement there. Or are there some forces outside of this room that you think about that might be motivating whether or not the people in here are interested in it? I know Peter's worked with the state of Louisiana, and that's just one small example of where states and other payers maybe are going to use legal tools at their disposal to affect change.
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Peter Bach1:21:57
So I think there was a huge shift, if you didn't notice, around the presidential election and thinking about what the federal government would do around drug pricing. And the environment basically, the arena has shifted to the states and to the private market much more so. There are states out there that are absolutely committed to figuring out ways to manage drug prices now. Again, when states get involved, you get legislatures, you get governors, you get lots of different people and action, but there's a lot of activity, a lot of experimentation going on. And I think the private and employer market, Steve may want to speak to that as well, but they're coming to their PBMs, they're coming to their health plans and saying, 'That's it. Business as usual is over. We need something else.' We had the Essentials Formulary last year. We need the Bare Essentials this year or something different. So I sense a continuing impetus based not on anger or ingratitude, but on a sense of desperation. And they think they're trying to do everything about other costs, but they feel like they need to try something else on drug pricing. So I anticipate a lot of experimentation at the state and private employer level.
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Steve Pearson1:23:11
If I can't see right, Peter, sure.
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Peter Bach1:23:11
Yeah, no, just building and thanks for the shout out. With regards to Louisiana, on our website, which is drugpricinglab.org, you can actually see some of that work. We put the entire Louisiana discretionary budget onto the website, and you can actually do the allocation Steve Pearson was talking about. How many people, how many nurses will you fire, how many benefits will you take away from blind people in order to pay for hep C treatment in that state where the burden is very high? And it points out the difficulty of these trade-offs as drug prices rise. People cut back on spending on other services. And every time I hit a pothole on the FDR, I actually swear at Len because of this. But there's other decisions in there in the middle of it. But also on our website, we've cataloged every federal policy that's been introduced by any major think tank across the aisle, centrist, every congressman, senator, and where they are right now. And there is an amazing coherence across these recommendations and policy proposals, independent of party, about what things are being targeted. And so you can see some of the easy stuff, not easy to do but logical, like pay for delay things, but also comparative effectiveness, formularies, negotiation, a lot around that, co-pay caps, a lot that's around pricing.
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Roy Vagelos1:24:34
Well, you know, it really pains me to hear such a focus on the hepatitis C drug because it is such a terrific drug. There are very few drugs, as was pointed out, that are cures of an infection which otherwise can lead to liver cancer. And it is an incredibly important drug. And so I wish we were focusing on some trivial drug which is high price in relation to what it does, because this one is terrific. And I don't know where I would be if I had made that decision for pricing. Probably wouldn't be that high, but it may not be that far off because it is so important. And that's what we don't want to lose in the actions that we want our politicians to do. We don't want to lose the incentive for doing great drug research. That's what we have to retain because, as was pointed out repeatedly by two other people from Regeneron, Alzheimer's is sitting out there, and what it needs more than everything else is investment in research because we desperately need drugs because the cost of the oncoming epidemic of Alzheimer's is going to put everything else to shame. So I'm going to thank the panel and thank the audience.