Thursday, May 23, 2019

Scott Gottlieb on CNBC, May 21, 2019

For a post on a bigger early May post-FDA policy speech of Gottlieb's, here.

For an 8 minute interview on CNBC, video here and clipped below.

        For a 20 minute CNBC fireside chat, here.

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[This is a news interview separate from his on-stage fireside chat at the conference]

Interviewer 1:
CNBC's Healthy Returns summit is back today for its second year. The summit's going to be discussing what's shaping the future of healthcare innovation.

Interviewer 1:
One of the featured executives is with us this morning, former FDA commissioner Dr. Scott Gottlieb. And in an op-ed on CNBC.com, he writes about the new world of pricing troubles headed our way, with cures to certain illnesses. He says, “Science offers the chance to cure debilitating and once intractable disorders, but we need to make sure the ability to access these therapies, or the risk that someone can be locked out of them doesn't widen gaps between the rich and the poor.”

Interviewer 1:
Dr. Gottlieb joins us right now from the conference this morning. And Scott, it's great to see you. Thank you for joining us.

Dr. Gottlieb:
Thanks for having me. Thanks.

Interviewer 1:
Let's talk about the new cures that are out there. There are some really exciting things that are happening in science right now. What are some of the most promising?

Dr. Gottlieb:
Well, I think we're at the cusp of being able to cure a lot of inherited diseases and pediatric diseases. So you look at things like hemophilia or sickle cell disease, even rare pediatric disorders like muscular dystrophy, SMA, we're really at the cusp of being able to cure these things with things like gene therapy and gene editing.

Dr. Gottlieb:
But what we need to do, the challenge is that a lot of these diseases actually perpetuate poverty, because they lead to disability that actually forces people into programs like Medicaid and Medicare disability, because people aren't able to work, sometimes families aren't able to work because they're caring for a child.

And the risk is that the insurance pools like Medicaid are going to be hard-pressed to pay for these things, so the very diseases that cause poverty in many cases, when we develop cures for them, we need to make sure they're accessible to the people in those programs so that we don't exacerbate gaps between the rich and the poor, based on their ability to access cures for these kinds of debilitating diseases.

Interviewer 1:
What's the solution? I mean, I know you're somebody who has looked at a lot of solutions, but is the answer to allow Medicare to negotiate? Or do you think there's something else that would do the trick?

Dr. Gottlieb:
Well, I think the challenge really is with Medicaid. 

You know, people's destinies shouldn't be determined by what insurance pool they're born into, and right now, if a child with an inherited pediatric disorder is born into a Medicaid program, there's a chance that that Medicaid program might not be able to pay for rolling out these kinds of curative therapies in year one. So if you have a cure that you know is safe and effective, you want to be able to try to distribute that as quickly as possible, because with a lot of these diseases, disabilities accrue with time, and you get irreversible damage. So you want to try to cure as many people up front as possible. So think of a potential cure, for example, for sickle cell disease. If you could come up with something that's safe and effective, and largely non-toxic, but the Medicaid programs can't absorb that one time charge.

Dr. Gottlieb:
And so I think the solution is to try to work out arrangements where you effectively lease the access to the therapy to the state Medicaid programs, and you have a pay over time mechanism, where rather than pay all up front in year one as you roll it out, the state Medicaid program is able to pay to get access to the treatment, and able to amortize that payment over a number of years. And in a kind of leasing arrangement, they can even have an option on subsequent technology. Because a lot of these companies that have been developing these cures, they also have follow-on innovations, and so you might be able to structure an arrangement where you get access to the initial treatment, and then if the new treatment that's better comes along, you can also get access to that at some kind of preferable, favorable rates.

Interviewer 1:
What's the industry's reaction to that plan, Scott?

Dr. Gottlieb:
Well I think the industry's open to these kinds of things. There is obstacles, and a lot of them actually are federal obstacles, because there is requirements on Medicaid best price reporting, and other kinds of conditions that the federal government sets on how sales to state Medicaid programs have to take place, that sometimes inhibit companies from entering into these sort of services type of agreements, and obligate them to selling things on a per drug basis. And I think we need to move away from the per drug, the unit of sale type of transaction, and move more towards a service arrangement with the states, where the companies can make these things accessible to the states.

Dr. Gottlieb:
By and large, most of the companies aren't making their money on the Medicaid programs. They make money in the Medicaid program. I don't want to say they're not making money by selling it to the Medicaid program, but it's not the most lucrative market. And I think for the companies at least, the biggest risk is that there's differential access in the marketplace, that people in employer pools, privately insured pools get access to these cures.

People who are less well off in Medicaid insurance pools don't get access. I don't think society's going to tolerate that kind of differential access, so this is really, I think a challenge that the companies need to solve when they come to market with these treatments, to make sure everyone gets equitable access. And the people who are poor, precisely because they have a disability that can now be cured, shouldn't be locked out of the treatment that could cure that disability.

Interviewer 2:
Dr. Gottlieb, it's [inaudible 00:04:48] that I think, whether you're looking at PARP inhibitors, or CAR T, or CRISPR technology, that it's the companies that have been incredibly innovative in driving these forward. But as somebody who looks at healthcare companies, biotech and drug companies, the list price and the net price to the companies are two very, very different prices. But I know a lot of ... you know, more generics. You know, tougher on the pharmaceutical companies and the biotechnology companies. But is that really where the problem in the system is? Or is there too much margin going to the middle men in the system? And why isn't that being addressed?

Dr. Gottlieb:
Well I think there's a lot of problems. I think in part, we don't have enough discounting in the marketplace, so we don't have competition for some drugs. You know, there's not generic competition where we expect generic competition to happen. Then when there is competition in the marketplace, the discount, it comes in the form of rebates that create this artificial spread between the list and the net price. Because of rebates, they're paid by the drug company back to the insurance company, but not back to the consumer that's out of pocket for the cost of the medicine.

Dr. Gottlieb:
So the patient goes and pays the full list price, and then their health insurer gets a rebate on that, and they use that rebate to subsidize everyone else's premiums rather than give it back to the patient who is out of pocket for the cost of that drug. That's exactly backward. You're basically using money that the sick person is spending, to subsidize the premiums of the healthy people. So we need to move away from that rebating system.

Dr. Gottlieb:
That rebating system is driven by a lot of things. In part, again, federal rules force drug companies to perpetuate discounts in the form of rebates. There's now action to try to do away with that, or to try to make it more difficult, and move towards more of an upfront discounting model. There's also mandatory discounting in the marketplace, and so the companies have an incentive to come to the market with the highest list price possible, because they know they're going to have to discount the programs like the DoD or the state Medicaid programs. And so, there's a lot of price controls right now in the marketplace, that create these artificial pricing mechanisms, and these artificially high list prices.

Interviewer 1:
Scott, well these are federal guidelines. How do you change them? I know we've spoken with the head of HHS, Health and Human Services, talking about plans to do things like make them advertise, give a list price in the advertisement to maybe embarrass them into changing some of these ways. But what needs to happen to the federal guidelines? Can that happen through the administration, or is there congressional action that's necessary?

Dr. Gottlieb:
Well, these different little rules that distort the market have grown up in successive pieces of legislation. It's hard to just start over. I think one way to reconceive this is to come up with what you think is the optimal arrangement between, for example if we're talking about Medicaid, between a drug company and the state, and say, “Look. If a drug company enters into this kind of an arrangement with the state, where for example, they're leasing access to a therapy over time, not at unit pricing but at one contracted rate, if it meets these requirements that we consider to be public health goals, they're obviated for some of these other requirements and some of these other mandatory discounting that ends up distorting prices in the marketplace.” So we can define what we think the optimal arrangement is, and then say, “If you meet these conditions, you effectively have a safe harbor from the other rules that we know are impediments to entering into these contracts.”

Dr. Gottlieb:
I think we need to move much more towards a services model, for the delivery of what really is a public health solution to a population when it comes to these curative therapies, especially when it comes to austere insurance [pulls] like Medicaid, that are on fixed budgets, and they're going to have a hard time absorbing the one-time cost of curing a population.

Announcer:
Powered by data. The digital revolution is changing every industry. But when it comes to your wellness, this technology and innovation, the clearest path to healthy returns, as the healthcare debate rings louder, is Novartis the right prescription for investors?

Speaker 5:
We got a real conundrum when it comes to healthcare, here. On the one hand, these are exactly the kind of stocks that are insulated from the trade war with China.

On the other hand, many Democrats running for President will want to implement some sort of single-payer system, which could really eat into the profits of the whole industry.

Speaker 5:
That's why I was so thrilled to attend CNBC's Healthy Return-

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