The Future of Healthcare with Dr. David Shulkin, former Secretary of the United States Department of Veterans Affairs Part 2

And the next week I was testifying before Congress. And when somebody asked me a question, I said, and by the way, we are going to cure every veteran in this country of hepatitis C. And I knew the senators would applaud that and say that's a great thing to do, which they did. And as soon as they did that, I said, now all that I need is $1.

5 billion, which was a calculation of the $84,000. Yeah. Yeah. They gave it to me in two weeks.

And once they gave me that money, we went out at the VA and we contacted all 76,500 veterans, and we said, We need you to come into the VA because we now have a way of treating and curing your hepatitis C. Hello, hello, and welcome to Pharma Sessions, a place for pharmaceutical leaders to come and learn from each other. I'm your host, Jonathan Kaskey. Technology and market trends are bringing change at an ever-accelerating rate, and no person, team, or company can afford to be left behind.

Here we dive into the strategies and tactics that our guests use to tackle these challenges and create new opportunities and how you can do the same in your own organization. This episode of Pharma Sessions is sponsored by Xunt, makers of the X1 reporting platform. I was planning to talk on the things that you were most expert and care most about. Like it is a podcast that is for from all my other episodes are like that, but okay, I was very interested in your opinion on this.

Is that okay? I mean, I hope I hope that it wasn't, you know, I I was not trying to pull a bait and switch or anything. Yeah, yeah. Okay.

All right. Well, at some other point, you know, I'd love to talk to you about that. What what what are you what are you interested in discussing on the pharmaceutical side? Well, look, my view on pharmaceuticals and where I'm spending, I'd say about 20% of my time right now, um, is that I think that the pharmaceutical companies are really missing the boat.

They're under pressure because of most favored nation pricing buttons, yes, but they're under pressure under for price, under many other models that are happening right now coming out of Washington. And yet they're happy sort of with the political compromises that they're able to end up with or Oval Office discussions and others. But to me, they're missing this is a wake-up call for them that they should not be focused on pricing alone. They should be making a transition to outcomes-based contracting that is being paid for the value that they're delivering, the value of their products.

Yeah. And they're missing this opportunity to engage with the president and with Congress and saying, look, we agree with you. Pricing per unit is not when you look at what other countries are paying and you look at what Americans are paying. We're essentially subsidizing, right?

The rest of the but it's a non-sustainable model just to continue to come out with these high prices. And to me, the GLP one drugs are the perfect case study. They came out with these outrageously high prices initially. Now look at where they are by focusing on price.

You know, you can buy the oral GLP ones now for $149 a month. And had they focused on, look, this is a drug class that is dramatically reducing the total health care expenditures of the country through reduction in cardiovascular events, through reduction in diabetes, through improved mental health, you know, all the things that GLP1s can do. Had they been paid for a piece of the improvement to health rather than focused on price, these drugs would be extraordinarily valuable for decades to come.

Let me ask you this, right? So I was involved from a marketing side with the launch of a drug called Savaldi, which essentially cured Hep C, right? And it was super expensive. I think it was like $80,000 per patient.

And their $82,000 when I was secretary. There you go, right? So their take on the value or their argument was you're not paying for dialysis, right? Like there's a massive quality of life, and there's it's also it takes like what was an enduring disease, and it essentially ends that.

At the same time, they were launching a super expensive drug. So, like, how does that fit into your paradigm of value-based pricing? Let me give you a story that you must not know. Okay.

But I think it's one of the most important stories in American pharmaceutical healthcare. When these drugs came out, these hepatitis C drugs, and sounds like you were involved at the time, they really caught my attention. And maybe they caught my attention in some ways because I understood the power of what was happening, but in some ways it was personal to me in that when I went through medical school and I was trying to decide what type of doctor I would be, as every medical student does, I quickly figured out that I should not be a surgeon because I'm very clumsy.

And when I was suturing patients or get to figure out before you become a surgeon. Yes, exactly. And so when I would be doing procedures on patients like most medical students in residents, I was always worried about sticking myself with a needle or a suture needle. And somebody who has really good dexterity doesn't worry about that as much.

And the reason I was worried about that was because there was a thing called non-A, non-B hepatitis, which is now known as hepatitis C. And at the time I was a medical student, there was definitely no cure. So once you did that, you were looking at the very high likelihood of liver disease and then cirrhosis and then liver transplants were just getting on the scene. So you're really looking at death.

Very bad. So I said, I'm going to stay away from that. So I became an internist. When I was secretary, these drugs came out.

And I said, Wow, this is fantastic. This is really one of the true miracles of modern medicine, where we now have a drug that can cure hepatitis C in over 95% of cases. So I asked my staff, tell me how many veterans have hepatitis C. And they went into the databases, and literally in a week, they came back to me and they said, 76,500 veterans have hepatitis C.

And the next week I was testifying before Congress. And when somebody asked me a question, I said, and by the way, we are going to cure every veteran in this country of hepatitis C. And I knew the senators would applaud that and say that's a great thing to do, which they did. And as soon as they did that, I said, now all that I need is $1.

5 billion, which was calculation of the $84,000. Yeah. Yeah. They gave it to me in two weeks.

And once they gave me that money, we went out at the VA and we contacted all 76,500 veterans, and we said, We need you to come into the VA because we now have a way of treating and curing your hepatitis C. And we set up a system to bring them all in and we treated everyone that was willing to be treated. And today, there would be less than 10,000 veterans in this country who still have hepatitis C. Now, at the time we were able to do that.

No other health system in the country chose to do that or had the ability to do that. But this is what American healthcare should be doing. Rather than waiting for a patient to come to their hospital to be admitted with end-stage liver disease and needing ICU care and then liver transplantation, they should be reaching out into their communities with drugs like this and being able to prevent and treat illness. And it's this approach of taking the value of a pharmaceutical like the hepatitis C drugs and being able to say, we need that money, the $1.

5 billion now, to be able to go out and treat people so that we're not going to be paying for this over the next couple decades, that the pharmaceutical companies deserve to make profit on that because they're going to save the country billions and billions of dollars and save lives and do the things of the power of pharmaceuticals. But instead, because of our model of care of pricing this so high, at the time 84,000, it's much less today because new competitors have entered the market.

But still, the price prevents people from getting access. And there should be no reason why we're not trying to get drugs like this to everybody in this country that would benefit from them. If you've been enjoying the conversations here on Pharma Sessions, you should know they're made possible by the team at Excent. XSunt helps life sciences companies turn complex data into clear, actionable insight.

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I always hear the standard line, like when you're watching debates or whatever, is a medical decision should be between a doctor and a patient. And I look at that and I it's like an eye rule for me because it's like, no, it's not. It's between whoever sets the formulary status of my drug and what I can actually get. And I'll give you a personal example is I'm trying to take a very simple drug, Sky Rizzy, which is like a psoriasis drug.

Expensive drug, yeah. It's like 15 grand, right? And yeah, it's amazing. I got them to approve one round of it and it it was like fantastic.

I can't get them to approve a second, a second dose for me. And then when you think of like in my take on it, again, you're far more expert at it than me, but then when you look and see where the clinical development drug resources are being spent, to me, it seems very clearly tied to policies of hey, if you get a new rare disease drug and you're first in class, you can kind of have carte blanche with pricing. So you see a lot in rare disease and a lot in oncology. So I feel like the things that you're talking about are so far reaching, not just in what drugs patients can have access to, but what even what drugs are being developed, right?

They're being developed with the end in mind. I think that's right. And I think that the pharmaceutical companies have figured out what the current system allows them to do so they focus their research and development on it. It's one of the reasons why we've seen so little advances in brain science because it's been so challenging to bring those drugs to market.

But at the same time, they've also, the pharmaceutical industry has also figured out how to make the current system work for them. And so we're in this sort of everyone seems a little bit satisfied, a little bit dissatisfied, but not enough to change the status quo. And what we need at this time, that there's such pressure on the industry for pricing, is to say, let's not figure out a way to sort of negotiate and make the current system work. Let's figure out a new way that actually changes the model to support drugs that actually make major changes in both health outcomes, but also in impacting the total cost of care.

And the hepatitis C drugs are a great example. And there are many other examples, particularly around behavioral science, that would make a great example of that too. And many of these rare disease drugs would also, the ones that are coming out now in sickle cell and others, that fundamentally change the nature of these horrible diseases. Uh, those companies deserve to be rewarded for the science and the development because they're going to impact populations of patients.

They're going to impact the total cost of care to society. And we need those types of drugs. For sure. And I don't mean to disparage the rare disease or treat it like, oh, it's just because for some people that have that, it is absolutely life-changing.

Yeah. Because that what you brought up earlier with the GLP ones, um, it seems like the reason that there is able to be price pressure and there's, you know, now you can get it from an online distributor or whatever, is because it's is somehow allowed to be compounded, right? So it's basically there were competitive manufacturing happened way before any type of patent cliff would expire. What's the role of patent system in all this?

Well, look, the patent system is so important, and so is you know, the protection of intellectual property. And this is where I think many companies are very concerned about what's happening in China because they're concerned that intellectual property is not protected in the same way. But if you don't have a strong IP and patent system, then you can't really rationalize the investment in RD that's massive investment, right? Years and hundreds of millions of dollars.

Right, right. And what most RD efforts turn out not to ever lead to a commercial product. So those that do have to be protected. And I do think that in this current environment where everything seems like it's negotiable, it is not unreasonable to think about extending intellectual property periods, you know, making them longer in exchange for trying to change the pricing model.

And ideally, the perfect drug would be one that has a price point that does not limit access, that rewards the company that developed it with a percent of value that they've created for a longer period of time. So I'm having a tough time following exactly what you have in mind. Like if I give you a magic wand and you can set the new model, what does that look like in practice? Well, look, let's go back to the example we've been talking about.

You know, even though um it no longer is eighty-four thousand dollars a dose, but if you take your hepatitis C drugs, instead of having made them eighty-four thousand dollars a dose, let's say that you had made them a thousand dollars a dose. But you said that there's gonna be a sharing with the pharmaceutical company on the reduction in the number of people in America that still have hepatitis C. And every time you cure a patient with hepatitis C, you avoid the downstream costs of chronic end stage liver disease, liver transplantation, multiple admissions.

So you gave the pharmaceutical company 10% of the savings that they're going to be responsible for, and the taxpayer and society keeps 90% of the savings. Right. Okay. And you give that to the pharmaceutical company over the next 20 years because that's how long it's gonna be for the end-stage liver disease often to develop.

In the end, everybody wins. The patient wins who doesn't die from the disease. The pharmaceutical company ends up with more value back to their company over time, and society and the taxpayers get 90% of the savings. This is a win-win.

And by the way, it then gives the incentive for the healthcare providers to be able to do what we did at VA to reach out to people in their communities that they serve and say, we now have something that can help you. Please come into the office. We're no longer waiting for you to show up sick at our doors. So this turns the model upside down, but it's a total win for everybody.

And it's something that we need to begin to be doing now. Do you see this as possible in the current system of privatized healthcare? Does this require government health care? This is possible right now, requires nothing but people to sit down and be open to these types of ideas.

And these types of conversations should and need to be happening among pharmaceutical companies and our healthcare leaders, our policy leaders right now. So my audience is mainly the pharma company people, right? So if you're advising them, if you wanted them to take something away from this as far as an activity or an action to do, what would be the responsibility of the pharma company in this scenario? First idea is let's be open to the way that this could be run differently.

Second is pick something in the product line that fits well along with this, and then let's model it out and engage government leaders in the discussion with the model of what this would look like. Because I understand, you understand, how complicated this is. This crosses pharma and healthcare delivery and healthcare insurance and societal issues. And to think that a government leader is going to intrinsically understand this model may be a stretch.

So they need to, uh the pharmaceutical industry needs to come to them with this modeled out and transparently about where everybody benefits and where essentially the expenditures come from. And I think once people understand this, they will see this is truly the way that we should be paying for pharmaceuticals. This episode of Pharma Sessions is sponsored by Excent, makers of the X1 reporting platform. And that's a wrap on today's episode of Pharma Sessions with me, Jonathan Kaske.

If you enjoyed today's conversation, don't forget to hit follow or subscribe and share it with someone else in the pharma world who might need to hear it. For more on pharma trends, career growth, and business strategies, connect with me, Jonathan Kaske, on LinkedIn. Until next time, thanks for listening.