May 1, 2023

Rethink How Medicines Are Paid For

Rethink How Medicines Are Paid For

So often on the Patients Rising Podcast, we discuss the affordability of healthcare. This week, guest Peter Kolchinsky outlines how thinking of paying for medicines like paying for a house mortgage leads to lower costs for patients, and encourages...

So often on the Patients Rising Podcast, we discuss the affordability of healthcare. This week, guest Peter Kolchinsky outlines how thinking of paying for medicines like paying for a house mortgage leads to lower costs for patients, and encourages investment in the cures of tomorrow. 

Plus, Terry and Bob look at the latest healthcare headlines, including a promising framework for a PBM bill to address interactions between PBMs and federal health programs.

Don’t forget to register for the 2023 We the Patients Fly-In!

The Great American Drug Deal

Senate Finance Committee News Release: Crapo, Wyden Release Legislative Framework to Address PBMs, Prescription Drug Supply Chain


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The views and opinions expressed herein are those of the guest(s)/ author(s) and do not reflect the official policy or position of Patients Rising, nor do the views and opinions stated on this show reflect the opinions of a guest’s current or previous employers.



Peter Kolchinsky  0:00  
If I wrote a book on how we could ultimately improve the healthcare system, improve insurance and also ensure that society gets a really great deal from new medicines by ensuring that they go generic, and in order to ultimately advocate for those ideas, I felt that it was important to help to pull together a nonprofit group that would do all the kinds of things that are needed in order to promote novel ideas.

Terry Wilcox  0:28  
Today, why we should think of paying for medicines like paying for a house mortgage. Today's guest outlines how this approach leads to lower costs for patients and encourages investment in the cures of tomorrow. That's up next. Welcome to the patients rising podcast. I'm your host, Terry Wilcox, CEO of patients rising. I'm joined by my co host, who will be the face on the Bed Bath and Beyond koozie is Dr. Bob Goldberg, co founder of the Center for medicine in the public interest. Now Bob, I know BBB filed for bankruptcy. Is this part of a campaign to hold on to customers and why you

Bob Goldberg  1:08  
listen, I live in Springfield, where Bed Bath and Beyond its headquarters, and I live around the corner from their flagship store. Most importantly, however, I have about $5 million worth of those 20% off coupons. I'm kidding. And I do wish Bed Bath and Beyond well, but my koozie belongs to us, the Terry and our audience. So we will continue to dive into the latest healthcare policy stories that impact you, the patients, caregivers and advocates in the chronic disease community. And we'll talk about policy solutions to healthcare challenges. Discuss the latest innovations shaping the industry and just especially today, some of the outrageous statements being made about who's protecting patients.

Terry Wilcox  1:58  
Well, and oftentimes we're on this podcast, talking about finances, can patients afford care? How do we fix these issues? What programs are out there to assist? Essentially, how can we make health care more affordable?

Bob Goldberg  2:14  
That's absolutely right. In a Peter Kolchinsky, as you heard at the top of the show, The general partner of Ra capital and co founder of no patient left behind, actually wrote a book on fixing the healthcare system, improving insurance, and making the whole process more affordable for patients and why new medicines are part of the equation of making health care more affordable.

Terry Wilcox  2:41  
Well, and later in the show, we will talk about some real movement on another topic we are always interested in which is pharmacy benefit managers otherwise known to many of you as PBMs. The Senate Finance Committee actually released some framework for a possible reform bill which looks promising for patients.

Bob Goldberg  3:01  
But first, here's my friend Peter Kolchinsky, co founder of Boston based investment firm Ira Capital Management, founder of no patient left behind and author of The Great American drug deal. Now I spoke with Peter after our last podcast, Terry, where you and I talked about the prescription drug affordability board legislation in Minnesota. So just to recap, the name of the board sounds great. But setting limits how much the state will pay for new drugs as price controls, and it could well wind up limiting patient access to care altogether. Now, the boards can say that a drug is too expensive and basically recommend that to pay for it. But how much is too much for a drug that could save or prolong a patient's life or how much is too much to invest in avoiding another pandemic Fallout, or making sure that the next generation doesn't have to grapple with cancer and rare diseases and Alzheimer's, which will demand much of us. So Peter talked about how the math being used to measure value today doesn't always take into account the numerous benefits not just for patients, but for their caregivers and society. Here's Peter,

Peter Kolchinsky  4:20  
how do people figure out you know, whether a drug is overpriced and how hard to come down on it with the hammer and society for a long time has been doing really oversimplified math to estimate what is the value of a medicine. They look at how well the drug works for the patient. They look at the cost of the drug, they look at the immediate surrounding costs that that drug might offset, but they ignore so much they ignore for example, eventually the drug will go generic and yet it'll keep helping patients. They ignore that beyond helping patients the drug helps caregivers. You know, when a child has cystic fibrosis, it can be all kinds zooming for the family to attend to that child's daily treatment needs. 

Terry Wilcox  5:05  
So, last week, Bob, we talked about the prescription drug affordability review boards, right, we talked, we gave sort of an overview and to recap that prescription drug affordability review boards are really kind of a red herring. They say they're going to make drugs more affordable. But if you dig a little deeper and lift up the hood, or look under the fan, or whatever you want to say, on the six states that have passed affordability review board legislation, which are Colorado, Maine, Maryland, New Hampshire, Ohio and Oregon. You realize they're simply an opportunity for the government and big health insurance conglomerates to use price controls as a way of extracting more rebates and other financial incentives out of drug manufacturers for their bottom lines. Now, stay with me here, Bob, I think you agree with me, it's their bottom lines, not the bottom lines of patients living with chronic and rare conditions, who are often overwhelmed with out of pocket cost that insurance doesn't cover. And there's no stipulation in any of these boards that say that. All right, there's no stipulations for the patient in any of these, and then certainly not in the one in Minnesota.

Bob Goldberg  6:15  
Yeah, and look, the one in Minnesota, they came to this partial senses and excluded rare disease treatments from review. Because, again, let's go back to what Peter said, we're not just thinking about ourselves, everyone is, first of all, everyone's going to be a patient in one way or another. So they really were thinking about the future, you know, how the lack of access would impact patients with no other alternatives, whose families live with us daily, and whose communities are affected?

Terry Wilcox  6:44  
Well, they Yeah, they ignore all the things that Peter said they ignore that the drug will eventually become generic, they ignore the benefits to caregivers and society as a whole loss of work, benefits to patients benefits to families, they don't look a little deeper at where a lot of the costs are, that often are not covered by any insurance at all, yes, or even factored in.

Bob Goldberg  7:08  
So Peter is an investor. And he made a point about the fact that we should pay for medicines, like we pay for our mortgages or for our retirement or cars. Well, insurers, and the public and the media, you know, go crazy about the sticker price of a new drug, it is important to keep two things in mind. One is that there are other ways to pay for it. And secondly, that launch price is temporary.

Peter Kolchinsky  7:33  
So that is what I grew up with as an investor, knowing that if any successful drugs emerged out of my portfolio of risky bets, that they would have about 14 years to generate a return that made my entire portfolio worthwhile. Could it be nine years, it could be, you know, you could just charge more, I mean, these are like mortgages, right? So you can structure a mortgage to be any length, it's just that the system is not calibrated to think about the value of a medicine and what it has to pay for it, in terms of its you know, overall, timespan, they don't think of what they pay for medicines as mortgage screens. You know, they just look at the costs up front.

Bob Goldberg  8:13  
Right. And he also when we were talking talked about the fact that think of drug companies as homebuilders, and you're building a home, and then home once the mortgage is paid off is basically given to the public. So the length of patent life under the inflation reduction equities was referring to the nine years of exclusivity without price caps may seem like oh, it's a great deal. But if these prices are ultimately kept in the cap, whether they're after nine years or 10 years, it sends a signal to the market, that they're not going to be able to recoup their investments. And that means that there will be less investment in medical innovation. Here's Peter again.

Peter Kolchinsky  8:55  
But in the meantime, investors do what they do when faced with incredible uncertainty. They move away, they stopped funding programs where they just don't know how to make the math work. And we too, are forced to do that I'm forced to defund or not fund, you know, certain small molecule programs, because the IRA just kills the math.

Bob Goldberg  9:15  
There is referring to the fact that if you make a pill, you get those nine years and then you the price controls kick in. So Peter said that they've actually decided not to fund certain projects, because they are under that nine year gun under the IRA, which is, of course, the inflation Reduction Act, which Peter mentioned. So, Terry, the question is, with the P dabs, the prescription drug affordability boards, and the IRA, which of course patients rising is trying to change. What do we do to a to pay for these new innovations and sustained investment? And how should we value the products differently? So this is where Peters of the insurance model, basically thinking of new innovation as insurance motion stepped in, and he used antibiotics as an example.

Peter Kolchinsky  10:09  
It's not like people don't live joyful lives because they're just wracked with anxiety over drug resistant bacteria. But there is some tiny, you know, reduction in quality of life for everybody knowing that that's a risk. And when you consider that having novel antibiotics would alleviate that anxiety would restore that peace of mind that is measurable, as a quality of life improvement for billions of people. So when you add that up, you get to a willingness to pay by hundreds of millions of Americans, potentially billions of people around the world to pay a little bit every day in order to enjoy that peace of mind. So a little bit from everybody every day is how you actually get to a budget that allows you to reward the new drugs that you have, temporarily until they go generic, and to you know, keep maintaining the stockpile of all the generic drugs that we build up.

Terry Wilcox  11:05  
So a big thank you to Peter for joining us for today's show. If you want to learn more, we'll have a link to his book in the show notes which I am in the middle of reading and it is fascinating.

Terry Wilcox  11:19  
We are less than two months away from the patient's rising now we the patient's second annual flying register now to secure your place in Washington DC and make your voice heard. This is your chance to speak with other patient advocates participate in meaningful roundtables and get your healthcare story in front of actual legislators to make a difference. The way the patients find takes place in Washington DC on June 12 and 13th. The link to register is in the show notes and we hope to see you there.

Terry Wilcox  11:53  
Now a hopeful update from the Hill this week's and its Finance Committee Chairman Ron Wyden from Oregon and ranking member Mike Crapo from Idaho released a bipartisan framework for a PBM bill to address interactions between PBMs and federal health programs. Now this bill's goal is to bring down drug prices and would be a welcome addition to other PBM legislative efforts. And we don't have the bill text yet. But the framework helps us predict what a future bill might address. So Bob, yes, two potential solutions the framework identifies is more transparency into PBMs. I'm always for more transparency as anyone who wants to solve these larger healthcare issues. But seeing how they are negotiating prices, what savings are not being transferred to patients. I think this is all great. As far as the transparency piece. You know, we've been trying to harp on this transparency piece for a while. And we'll have to see what are your thoughts? 

Bob Goldberg  12:54  
Well, the transparency is good. And obviously getting some of the discounts to the savings of the pharmacy is good. Two observations. One is sort of a technical one, which is the extent to which the insurance companies use the PBMs to create group purchasing organizations, they will be exempt from any kind of scrutiny that is being imposed on the PBMs.

Terry Wilcox  13:18  
I want to talk right here just for one second, because you just brought up I was going to say group purchasing organizations and what I said and we're going to be learning folks a lot more about group purchasing organizations, because suddenly, they have become extremely important. I've known about them for many years and sort of where they fit in the supply chain. But now we're starting to see PBM sort of protect themselves under GPOs. And we can go through this a little bit further. But basically, there is a safe harbor act, right, Bob? Yes. group purchasing organizations and PBMs are exempt from the anti Kickback Statute in this safe harbor law, right. GPOs were first group purchasing organizations for first GPOs are who will purchase all of the products and things for hospitals. And then you've got PBMs, which came along later, that do all the drug purchasing for health plans, right. So they're protected from this anti Kickback Statute. So basically, Congress said, You know what kickbacks are illegal, but not for you guys.

Bob Goldberg  14:29  
It's right. You guys can go ahead. Yes,

Terry Wilcox  14:31  
can go ahead and have all the kick, kick back all you want back there, kick it up. So this bill would be making sure that discounts negotiated by PBMs translate to savings at the pharmacy counter. However, what Bob and I are talking about is the worry of how they're starting to hide some of their transactions under GPOs. And that's not addressed here. So, as I say, people always find new ways to protect their enzyme On. Yes, absolutely. You know they find new plays and this is one of them. So thank you for listening to today's episode of the patients arising podcast. Be sure to share the episode with a fellow advocate chronic disease warrior or caregiver

Bob Goldberg  15:14  
and click the Follow button so you don't miss out on our upcoming episodes.

Terry Wilcox  15:18  
We'll be right back here on Monday with another new episode. Until then, for Bob and everyone at patients rising. I'm Terry Wilcox, stay healthy.

Peter KolchinskyProfile Photo

Peter Kolchinsky


Author, The Great American Drug Deal