WELCOME TO THE CLINICAL CENTER GRAND ROUNDS, A WEEKLY SERIES OF EDUCATIONAL LECTURES FOR PHYSICIANS AND HEALTH CARE PROFESSIONALS BROADCAST FROM THE CLINICAL CENTER AT THE NATIONAL INSTITUTES OF HEALTH IN BETHESDA, MD. THE NIH CLINICAL CENTER IS THE WORLD'S LARGEST HOSPITAL TOTALLY DEDICATED TO INVESTIGATIONAL RESEARCH AND LEADS THE GLOBAL EFFORT IN TRAINING TODAY'S INVESTIGATORS AND DISCOVERING TOMORROW'S CURES. LEARN MORE BY VISITING US ONLINE AT HTTP://CLINICALCENTER.NIH.GOV WELCOME EVERYBODY TO THE FIRST ETHICS GRAND ROUNDS FOR THE FALL AND FOR ANYBODY WHO PLANS AHEAD, HAS THEIR PHONE, THESE ARE THE UPCOMING ONES. WE'RE GOING TO HAVE ONE MORE IN THE FALL, TWO MORE IN THE SPRING. ALL OF WHICH WILL BE GREAT SESSIONS. IF YOU'RE AROUND AND HAVE THE TIME, PLEASE JOIN US. I'M FROM THE DEPARTMENT OF BIOETHICS HERE AT THE NIH CLINICAL CENTER. WE'RE THE HOSTS OF 4-5 ETHICS GRAND ROUNDS A YEAR. FOR PEOPLE WHO HAVE BEEN HERE BEFORE, THERE IS A STANDARD FORMAT AND TODAY WE'RE GOING TO DIVERGE SLIGHTLY. TYPICALLY WHAT WE DO IS PRESENT AN ACTUAL CASE THAT CAME TO OUR CONSULTATION SERVICE. THEN WE ASK AND OUTSIDE EXPERT TO DISCUSS THE ETHICAL ISSUES RAISED BY THAT CASE. TODAY, WE'RE NOT GOING TO FOCUS ON SPECIFIC COMPLICATION. INSTEAD WE'RE GOING TO FOCUS ON A GENERAL ISSUE THAT HAS BECOME IMPORTANT, THAT SEEMS TO BE GETTING MORE AND MORE IMPORTANT FOR PEOPLE WHO SAW ON THE FRONT PAGE OF THE NEW YORK TIMES ON MONDAY, THERE IS A VERY LARGE ARTICLE ON THE PRICE OF DRUGS AND IN PARTICULAR, ON SOME COMPANIES WHO'S BUSINESS MODEL INCLUDES AT LEAST BUYING UP DRUGS AND INCREASING THE PRICE OF THOSE DRUGS, SOMETIMES BY 100 OR A THOUSAND%. WHICH LEADS TO OBVIOUSLY LOTS OF VERY INTERESTING ETHICAL ISSUES ABOUT THE TENSION WHICH WE'RE GOING TO LOOK AT TODAY BETWEEN THE COST OF DRUGS AND ENSURING ACCESS TO THOSE DRUGS. WE'RE GOING TO DO IT NOT IN A GENERAL WAY, BY FOCUSING ON A VERY SPECIFIC ISSUE WHICH I'LL DESCRIBE IN A MINUTE. PUBLISHER A COUPLE THINGS ABOUT -- BUT A COUPLE THINGS ABOUT BACKGROUND. THESE. THESE SESSIONS ARE STREAMED ON TO THE WEB. IT'S IMPORTANT FOR THE QUESTIONS TO GO INTO A MICROPHONE. WHEN WE GET TO QUESTION PERIOD IF YOU CAN GET TO A MICROPHONE, GREAT. IF NOT I'LL REPEAT THE QUESTION BEFORE WE GET SOMEBODY TO ANSWER IT. THE SECOND THING IS THAT ETHICS GRANDS ROUNDS FOCUSES ON ETHICAL ISSUES WHICH TEND TO BE CONTROVERSIAL. THAT SORT IS THE HOPE, INTERESTING ETHICAL ISSUES BOTH TO EDUCATED PEOPLE AND ALSO TO GET DISCUSSION GOING AND HOPEFULLY TO HELP RESOLVE AND ADDRESS SOME OF THESE ISSUES. IMPORTANTLY, EVERYBODY WHO SPEAKS UP HERE UNLESS THEY SAY OTHERWISE, THEY'RE SPEAKING FOR THEMSELVES. THEY'RE NOT SPEAKING FOR THE DEPARTMENT OF BIOETHICS OR THE NIH. EVERYBODY PRESENTS THEIR OWN VIEWS. THE IDEA IS TO ALLOW PEOPLE TO REALLY PRESENT THE VIEWS THEY THINK MOST PASSIONATELY ABOUT. OR TO ARGUE FOR A POSITION JUST TO MAKE THINGS INTERESTING. SO WITH THAT BACKGROUND. TODAY, WE HAVE, AS A PRESENTER, SARAH STEVE PEARSON, A KEYING OF OURS -- COLLEAGUE OF OURS, BEEN IN OUR DEPARTMENT ABOUT TEN YEARS. HE'S ALWAYS THE FOUNDER AND THE CURRENT PRESIDENT OF ISER, THE INSTITUTE FOR CLINICAL AND ECONOMIC REVIEW. STEVE WILL EXPLAIN MORE ABOUT WHAT THEY DO IN A MINUTE. ONE FINAL NOTE, TYPICALLY AFTER DEPRESENTER PRESENTS, WE PAUSE AND HAVE SOME QUESTIONS FOR THE PRESENTER. TODAY, BECAUSE WE HAVE 3 PEOPLE, I THINK THIS IS SUCH A GREAT ISSUE. I WANT TO MAKE SURE WE HAVE ENOUGH TIME FOR DISCUSSION SO WE'RE NOT GOING TO DO THAT. I DON'T THINK IT WILL BE A PROBLEM. AS YOU'LL SEE, STEVE IS AN EXTRAORDINARILY CLEAR PRESENTER. AND IF THERE IS ANY QUESTIONS YOU HAVE FOR HIM, HE'LL BE UP HERE AFTERWARDS AND YOU CAN ASK THE QUESTIONS THEN. SO STEVE. [APPLAUSE] >> GOOD AFTERNOON. THANK YOU. NICE WELCOME AND WHAT A PLEASURE FOR ME TO HAVE A CHANCE TO ADDRESS THE ETHICS GRAND ROUNDS AFTER BEING A SCIENTIST IN THE DEPARTMENT FOR TEN YEARS. HERE IS THE TOPIC, THE TENSION AND IT IS A TENSION, BETWEEN ACCESS TO INNOVATIVE MEDICINES AND OFTEN CURES, AND THE COST. SO FIRST DISCLOSURE, I AM A VISITING SCIENTIST HERE. ISER, I SERVE AS THE PRESIDENT, IS AN INDEPENDENT NONPROFIT RESEARCH INSTITUTE BASED IN BOSTON. WE DO EVIDENCE REVIEWS ON A VARIETY OF HEALTHCARE INTERVENTIONS, PARTICULARLY DRUGS BUT ALSO DEVICES, TESTS, AND EVEN HEALTHCARE DELIVERY SYSTEM INNOVATIONS. 80% OF THE FUNDING FOR ICER COMES FROM NONPROFIT FOUNDATIONS. ABOUT 10% OF THE FUNDING WE GETGOES TO A SPECIFIC POLICY SUMMIT PROGRAM. THAT COMES FROM A MIXER OF PRIVATE HEALTH INSURERS AND DRUG MANUFACTURERS, BY CHANCE, NONE OF THE DRUG MANUFACTURERS PART OF OUR FUNDING MAKE HEPATITIS C DRUGS. SO THE OBJECTIVES FOR TODAY. I'M GOING TO TRY TO DESCRIBE THE CLINICAL IMPLICATIONS OF CHRONIC HEPATITIS C INFECTION. PART WILL RELATE THE HISTORY OF THE TREATMENTS LEADING UP TO THE MOST RECENT DRUGS AVAILABLE. AND REALLY, THAT'S INTENDED TO SET THE STAGE FOR A DISCUSSION. WE'RE GOING TO BE VERY -- WE ARE VERY PRIVILEGED TO HAVE WITH US TWO PEOPLE WHO CAN HELP US EXPLORE THIS TENSION BETWEEN THE CLINICAL BENEFITS AVAILABLE FROM THESE NEW TREATMENT OPTIONS, AND THE FINAL BURDENS THAT THEY CAN PLACE ON THE HEALTHCARE SYSTEM. SO, BRIEFLY, ABOUT CHRONIC HEPATITIS C INFECTION. IT IS A VERY PREVALENT CONDITION WORLDWIDE. BETWEEN 120-170000000 HAVE CHRONIC HEPATITIS C. IT IS A LEADING CAUSE OF CHRONIC HEPATITIS C INFECTION LIVER DISEASE. IN SOME CASES ALL THE WAY UP TO LIVER FAILURE. ALSO HEPATOCELLULAR CARCINOMA IS CAUSED IN MANY CASES BY CHRONIC HEPATITIS C INFECTION. HERE IN THE UNITED STATES THE PREVALENCE IS ESTIMATED BY THE CDC AND OTHERS, BETWEEN 3 TO 5.2 MILLION PEOPLE. HERE IN THE U.S., IT IS CURRENTLY THE LEADING CAUSE OF LIVER FAILURE REQUIRING LIVER TRANSPLANT. THERE IS AN INTERESTING ASPECT TO CHRONIC HEPATITIS C INFECTION THAT CAN SOMETIMES GET LOST IN THE BIG NUMBERS. AND THAT IS IT'S NATURAL HISTORY. WHICH IS SOMEWHAT COMPLICATED. THIS SLIDE TRIES TO SHOW YOU HOW SOME OF THIS KIND OF NATURAL HISTORY PLAYS OUT. SO IF YOU SEE IN THE TOP ROW THERE, IF WE TAKE 100 INDIVIDUALS WHO ARE INFECTED INITIALLY WITH HEPATITIS C -- INFECTION COMES THROUGH INJECTION DRUG USE, IN THE OLD DAYS USED TO BE FROM BLOOD TRANSFUSION. IT CAN COME FROM SEXUAL ACTIVITY, LESS OFTEN. LET'S START WE START WITH 100 INDIVIDUALS INFECTED WITH HEPATITIS C. 20-30% WILL DEVELOP SYMPTOMS. MOST WILL REMAIN ASYMPTOMATIC. AGAIN, EVEN IF YOU DON'T DEVELOP SYMPTOMS YOU CAN DEVELOP CHRONIC INFECTION. AND OUT OF THAT, 100 INFECTED, FULLY 75 TO 85% WILL NOT KIND OF CLEAR THE VIRUS INITIALLY AND WILL GO ON TO DEVELOP A CHRONIC INFECTION. BUT NOT ALL OF THOSE WILL SUFFER FROM CHRONIC LIVER DISEASE. ONLY ABOUT 60 TO 70% WILL DEVELOP SOME FORM OF LIVER DISEASE THAT YOU CAN PECULIAR UP, EITHER THROUGH A BLOOD TEST OR LIVER SCAN. BUT THE MORE SERIOUS KINDS OF LIVER CITIES. DISEASE, LEADING UP TO CIRRHOSIS, ONLY HAPPENS BETWEEN 5-20% OF PATIENTS. IT TAKES A LONG TIME IN MOST CASES, UP TO 20 OR 30 YEARS FOR THAT TO OCCUR. AND ULTIMATELY, OUT OF THAT 1000 INITIALLY INFECTED, ABOUT -- 100 INITIALLY INFECTED, 1-5% DIE FROM THE COMPLICATIONS OF LIVER FAILURE, CIRRHOSIS, OR LIVER CANCER. SO AS YOU CAN SEE GOING FROM 100 TO 1 TO 5 IS PART OF THE IMPORTANT BACKGROUND IN THE NATURAL HISTORY IN THINKING ABOUT THE TENSION ABOUT TREATMENT AND COST. SO WHAT IS THE TREATMENT OF THE TREATMENT OPTIONS? SO MUCH HAS OPENED OVER RECENT YEARS. FOR MANY, MANY YEARS THERE WAS REALLY ONE STANDARD TREATMENT, PEGLETED INTERFERON. THE GOLD STANDARD FOR A LONG TIME. ABOUT 50% OF PATIENTS WERE CURED AND CURED MEANS THAT AFTER TREATMENT, YOU COULD NO LONGER FIND CIRCULATING VIRUS IN THE BLOOD STREAM. UNFORTUNATELY, PATIENTS WHO UNDER WENT THIS TREATMENT HAD MANY SIDE EFFECTS. IN SOME CASES, THEY TURNED OUT TO BE VERY DANGEROUS, INCLUDING ANEMIA, NEUTROPENIA AND OR THROMBOCYTOPENIA. LOW BLOOD COUNSEL AND CLOTTING FACTORS. AND MANY, MANY PATIENTS -- PARTLY BECAUSE OF THE TOXICITY OF THE TREATMENT, WERE EITHER NOT IDENTIFIED OR NOT TREATED. STARTING AROUND 2011, THERE WAS THE ARRIVAL OF A FIRST GENERATION OF WHAT ARE CALLED DIRECT ACTING ANTI VIRAL AGENTS. AND THESE SUBSTANTIAL LE IMPROVED CURE RATES, UP TO AROUND 75%. BUT THEY STILL HAD TO BE USED WITH INTERFERON. AND INTERFERON IS THE PART OF THE TREATMENT THAT PRODUCED SO MANY SIDE EFFECTS. SO THERE WERE STILL LOTS OF SIDE EFFECTS. DOSING PROBLEMS, AND STILL, THE FAST MINORITY OF PATIENTS, EVEN WHO WERE KNOWN TO HAVE HEPATITIS C WERE BEING TREATED. SO, VERY RECENTLY, 2013 AND 2014, THE ARRIVAL OF OTHER NEW SECOND GENERATION DIRECT ACTING ANTIVIRALS. HERE I NEED TO DROP INTO THE HISTORY OF THE CLINICAL DEVELOPMENT, ALSO THE FINAL DEVELOPMENT. THE SO THE FIRST ONE, UNDER THE LEADERSHIP OF EMORY PROFESSOR RAYMOND AND HE SUSTAINED SUPPORT FROM THE NIH AND VA. COMING OUT OF THAT WORK, HE DEVELOPED A THE PROFESSOR HIMSELF RECEIVED AN ESTIMATED $440 MILLION AS PART OF THAT PURCHASE. NOW, THE PHASE 3 TRIALS WHICH HAD STARTED BY WERE BASICALLY CONDUCTED IN 2013 WITH FUNDING FROM GILEAD, AND THESE NUMBERS ARE HARD TO COME BY, BUT ESTIMATES AVAILABLE IN THE PRESS SAY THAT THE TOTAL PRIVATECISM AND DEVELOPMENT FUNDING FROM GILEAD AND OTHER SOURCES IS ESTIMATED TO A TOTAL OF ABOUT $300 MILLION. IN DECEMBER, 2013, THE FDA APPROVED SOW VALIDI, AND THEY SET A LIST PRICE FOR APPROXIMATELY 12 WEEKS. THIS WAS THE HEADLINE IN THE PAPERS, THE THOUSAND DOLLARS PER PILL. WHEN YOU TOTALED IT UP IT WAS ABOUT $84,000. 2nd2 OTHER DRUGS WERE APPROVED BY THE FDA. NOW, DURING THIS ENTIRE TIME, THE PRESS AS YOU KNOW COVERED THIS EXTENSIVELY. PART OF WHAT THEY PUT IN THE PUBLIC AWARENESS WAS THAT THE PRICES FOR THESE DRUGS OFTEN VARIED DRAMATICALLY ACROSS DIFFERENT PARTS OF THE WORLD. AND GILEAD DID PRICE ITS DRUG SOVALDI ABOUT $300 FOR A TREATMENT COURSE. IN INDIA, ABOUT 900. IN EUROPE, IT FLUCTUATED ACROSS DIFFERENT COUNTRIES A COMMON NUMBER WAS $46,000. SO, WHAT WERE THE RESULTS OF THE TRIALS THAT LED THE FDA TO APPROVE IT ON A CLINICAL BASIS? THIS IS A GRAPH THAT SHOWS THE VIRAL CLEARANCE WITH THE NEWEST HEPATITIS C DRUGS. THERE ARE LOTS OF COMBINATIONS THAT HAVE BEEN TRIED OR COME THROUGH THE FDA. IF YOU LOOK HERE, THOUGH, THIS IS THE BAR OF SOFOSBUVIR WHEN IT NEEDED TO BE USED IN MANY PATIENTS. WITH INTERFERON. AND YOU CAN SEE THAT WITH THAT COMBINATION, THE VIRAL CLEARANCE WAS OVER 90%. THE SECOND SET OF NEW HEPATITIS C DRUGS REPRESENTED BY THESE HERE, AND LED THE LDVSOF HARVONI AND THE 3D PLUS R, YOU CAN SEE CLEARANCE RATES TOPPING UP TOWARD 100% WHICH MEANT THAT FOR ALL INTENSE AND PURPOSES, IF YOU TOOK THESE DRUGS, YOU HAD THE VIRAL CLEARANCE. NOT EVERYBODY. BUT OBVIOUSLY THE VAST MAJORITY AND NEARLY 100%. SO BOTTOM LINE, REMEMBER WHERE WE STARTED BEFORE 2011, NOT THAT FAR AGO. NOT THAT LONG AGO. WHERE LESS THAN 50% OF PATIENTS WOULD BE CURED. AND MANY WOULDN'T EVEN ACCEPT TREATMENT GIVEN HOW TOXIC IT WAS. THESE DRUGS WERE FANTASTIC. LOW SIDE EFFECTS. TREMENDOUS ABILITY TO CLEAR THE VIRUS FROM THE BLOOD STREAM. AND MANY CLINICIANS BELIEVED THAT WITH CLEARANCE OF THE VIRUS, THE PATIENT IS ESSENTIALLY CURED. SO, WHAT ABOUT HEALTHCARE BUDGETS? WE'VE TALKED ABOUT THE COST FOR THE TREATMENT COURSES, AGAIN, IN THE U.S. THEY LISTED BETWEEN 83 TO 95,000. SO MANY GROUPS STARTED TO DO CALCULATIONS ABOUT THE POTENTIAL BUDGET IMPACT. BY GROUP WAS AMONG THEM AT ICER. IF PATIENTS WITH KNOWN INFECTION WERE TREATED IN THE U.S. AND SPREAD THE COST ACROSS ALL AMERICANS IN TERMS OF INSURANCE PREMIERS, INSURANCE COSTS ACROSS THE COUNTRY WOULD HAVE RISEN BY 14% IN ONE YEAR. NOW, NO ONE WAS SUGGESTING THAT ALL PATIENTS WOULD MARCH FORWARD AND GET TREATED. BUT THERE WAS A TREMENDOUS SURGE IN INTEREST IN TRYING TO TREAT AS MANY PATIENTS AS POSSIBLE, THERE HAD BEEN NEW RECOMMENDATIONS TO SCREEN BABY BOOMERS, HORHEPATITIS C TO MAKE SURE THAT WE IDENTIFIED PATIENTS WHO DIDN'T KNOW THEY WERE INFECTED. SO THIS REALLY POTENTIAL FOR MILLIONS OF AMERICANS TO GET TREATED WAS BEING DISCUSSED AS WAS THE POTENTIAL BUDGET IMPACT. IT WAS INTERESTING TO NOTE THAT IF THE INSURANCE PREMIUM WAS ONLY ATTACHED TO ADVANCED LIVER DISEASE, NOT THE EARLY PHASE OF INFECTION, IT WOULD GONE UP 4.8%. STILL A VERY LARGE RISE FROM A SINGLE AGENT. SO EARLY IN THE COURSE OF TIME, AS SOFOSBUVIR WAS APPROVED, PEOPLE CAME TO THINK OF IT AS THE TOPIC OF EVERY SINGLE MEDICAL CONFERENCE IN WASHINGTON, D.C., CERTAINLY. AND THERE WAS A LOT OF WHAT PEOPLE WOULD TALK ABOUT, THE SHOCK AND AWE OVER PRICE. PATIENT GROUPS, SOME OF THEM. RAISED A FLAG SAYING THIS IS NOT APPROPRIATE. THESE PRICES ARE TOO HIGH, THEY WILL LIMIT ACCESS. INSURERS WERE AWARE THAT THIS WOULD CREATE TREMENDOUS BUDGET CONCERNS FOR THEM. SO WHAT WAS THE RESPONSE INTHE INSURERS AROUND THE COUNTRY? WELL, THERE WAS HONESTLY SOME DISCUSSION ABOUT REVERSE MEDICAL TOURISM. THIS IS A SLIDE THAT I BORROWED FROM THE -- ONE OF THE LEADERS OF A LEADING PALMSCY BENEFIT COMPANY IN THE UNITED STATES. IT WASN'T JUST A FARCE. HE SAID HE HAD LARGE EMPLOYEES WHO WERE COMING -- EMPLOYERS SAYING I WOULD BE WILLING TO SEND MY PATIENTS ABROAD IF YOU THINK THAT THAT WOULD BE A BETTER DEAL. THEY STARTED TO CREATE SOME PLANS GORE THAT. TIMING, IT NEVER CAME THROUGH. WHAT DID THEY DO? SO THEY STARTED VERY QUICKLY USING SEVERAL DIFFERENT APPROACHES. THE PRIMARY ONE WAS PATIENT PRIORITIZATION. SOME PEOPLE WOULD CALL THIS RATIONING. WHAT DID IT MEAN? IT MEANT THAT INSURERS WOULD ONLY PROVIDE PAYMENT FOR THE DRUG IF PATIENTS HAD A LIVER BIOPSY OR SOMETIMES A DIFFERENT KIND OF TEST INDICATING THAT THEY ALREADY HAD LIVER DAMAGE FROM THE INFECTION. SO THIS ONE, THE LANGUAGE HERE, WHICH COMES FROM SEVERAL DIFFERENT LARGE INSURERS, SUGGEST THAT ONLY IF PATIENTS HAD A LIFE FIBROSIS SCORE OF ONLY A CERTAIN NUMBER -- THEY DIDN'T HAVE TO BE SEMATIC. THE LIVER HAD TO SHOW SIGNS OF PROGRESSED FIBROSIS, IF THAT WAS THE SITUATION, THEN ONLY WOULD THE INSURER PLAY. INSURERS CONSIDERED A STEP THERAPY POLICY, BRIEFLY. THIS WAS LANGUAGE FROM A HUMANA POLICY IN EXISTENCE TO MARCH 6, 2014. THEY SAID THAT A MEMBER, TO GET COVERAGE, MUST HAVE FAILED TO ACHIEVE SUSTAINED VIRAL RESPONSE ON A PRIOR TREATMENT REGIMENT. SO THAT MEANS THAT THEY WOULD HAVE HAD TO TRY ONE OF THE EARLIER DRUGS WITH HIGHER TOXICITY. AND FAILED IT. REMEMBER, SUCCESS RATE, 50-75% BEFORE GETTING THE NEW MORE EXPENSIVE TREATMENT. THAT POLICY WAS SHORT LIVED AND WAS NOT PUT INTO PLACE FOLLOWING MARCH 6. ALMOST ALL INSURERS -- WE'LL HEAR MORE ABOUT -- I'LL DISCUSS WHAT MEDICAID DID. ALL OF THEM WERE UPUILOUS ABOUT LIMITING OFF LABEL USES, CAN'T BE USED IN COMWITHIN NATION. THE VAST MAJORITY REQUIRED THE PATIENT BE SUPERVISED, THEIR CARE SUPERVISED BY SPECIALISTS WITH A LOT OF EXPERIENCE IN THE TREATMENT OF HEPATITIS C. SO THAT WAS PRIVATE INSURERS. MEDICAID POLICIES, WE NOW HAVE A LITTLE BIT MORE INFORMATION ON BECAUSE I'VE DONE SOME RESEARCH WITH A RESEARCH FELLOW IN THE DEPARTMENT OF BIOETHICS HERE. IN CONJUNCTION WITH FOLKS AT THE MEDICAID DIRECTORS, TO TRY TO SURVEY DIRECTORS, HOW DID THEY RESPOND TO CHALLENGES FOR PROVIDING ACCESS FOR DRUGS FOR HEPATITIS C. MORE THAN 75% OF THE STATE DID PROVIDE PATIENTS. 80% HAD STIPULATIONS REQUIRING DOCUMENTED SOBRIETY. THAT MEANT FROM ALCOHOL AND OR INJECTION DRUGS. AND MOST OF THESE POLICIES REQUIRED DOCUMENTED SOBRIETY FOR MORE THAN 6 MONTHS. OVER 50% OF THE STATES REQUIRED THAT ONLY SPECIALISTS RIBBED THE MEDICATION. ABOUT A QUARTER OF STATES HAD A ONCE IN A LIFETIME COVERAGE POLICY. THE IDEA BEHIND THAT BEING THAT IF YOU TOOK THE MEDICATION, AND YOU EITHER WERE NON ADHERENT, YOU DIDN'T FINISH THE PILLS -- IT WAS SAYING YOU ONLY GOT ONE SHOT AT THIS. THERE WAS A FAIR AMOUNT OF CONCERN THAT IF YOU TOOK A PILL BOTTLE HOME, WORTH ABOUT $30,000, AND YOU DIDN'T TAKE IT SERIOUSLY AND JUST LOST IT, WAS THE SYSTEM GOING TO PROVIDE YOU ANOTHER PRESCRIPTION. SO THEY TRIED TO SUGGEST IT WAS A ONCE IN A LIFETIME SHOT. SO WHAT'S BEEN THE OUTCOME ON THE SPENDING ON HEPATITIS C TREATMENT? SO SOME OF THESE FIGURES COME -- THEY COME FROM A VARIETY OF SOURCES. GILEAD, ONE OF THE COMPANIES, THE LEADING MAKER OF THESE DRUGS WITH SOFOSBUVIR AND HARRISONI, THEY'RE 2014 MARKET SALES ACCOUNTED WORLDWIDE, 12.4 BILLION. WE KNOW NOW THAT MEDICAID SPENDING ALL THEIR MEDICATIONS FROM HEPATITIS C ROSE FROM 113 MILLION, ACROSS THE COUNTRY IN THE YEAR 2013, INCREASING ABOUT 10 FOLD. TO APPROXIMATELY 1.5 TO 2 BILLION LAST YEAR. NOW, IT'S INTERESTING, AT THESE OTHER NEW DRUGS STARTED TO COME OUT THERE WAS ACTIVE COMPETITION AND ACTIVE NEGOTIATION IN THE PRIVATE AND PUBLIC MARKET. GILEAD ANNOUNCED IN AN INVESTOR CALL EARLY IN -- LATE IN 2014, THAT THEY WERE ANTICIPATING 46% DISCOUNTS OFF THEIR LIST PRICE IN THE UNITED STATES MARKET. LINKED TO THOSE NEGOTIATIONS, SOME INSURERS SAID NOW THAT THE PRICE HAS COME DOWN, WE ARE GOING TO TAKE AWAY OUR REQUIREMENT THAT PATIENTS HAVE LIVER FIBROSIS, IN ORDER TO RECEIVE COVERAGE. SO THERE WAS A LITTLE BIT OF A GIVE AND TAKE DEPENDING ON HOW LOW THE PRICE WENT. HOWEVER, DURING THIS TIME THE VA WAS HAVING SERIOUS FINANCIAL DIFFICULTIES. IT ADVISED CONGRESS AT ONE POINT THAT IT WOULD NEED TO CLOSE HOSPITALS UNLESS IT RECEIVED ADDITIONAL FUNDING THAT IT SAID WAS LARGELY NEEDED TO HELP PROVIDE ADDITIONAL THINKS PENCES TO TREATMENT -- EXPENSES TO TREAT HEPATITIS C. SOME MEDICAID PROGRAMS WORKING WITH STATE LEGISLATORS AND ADMINISTRATORS, REQUESTED ADDITIONAL STATE FUNDING TO TRY TO CLOSE THEIR BUDGET GAPS. IN CALIFORNIA, ONE OF THE BEST KNOWN SITUATIONS, THEY ASKED THE GOVERNOR AND THE GOVERNOR PUT IN AN ADDITIONAL $300 MILLION OF FUNDING IN THE STATE BUDGETS TO HELP MEDICAID CLOSE THEIR BUDGET GAP. IN THE FIRST HALF OF 2015, THESE NUMBERS ARE RELATIVELY RECENTLY OUT, GILEAD HAD WORLDWIDE SALES OF HEPATITIS C DRUGS, 9.5 BILLION. THAT MEANS FOR THE FIRST 18 MONTHS OF SALES OF THEIR DRUGS, THEIR REVS HAVE BEEN $22 MILLION WORLDWIDE. SO THAT IS IN A SENSE A QUICK HOVER CRAFT OVERVIEW OF THE DEVELOPMENT OF THESE DRUGS. THEIR CLINICAL BENEFITS. AND OF THE FINANCIAL TENSIONS AND OUTCOMES THAT WE'VE SEEN SO FAR. [APPLAUSE] THANKS. STEVE. WE'RE FORTUNATE TO HAVE TWO INDIVIDUALS WHO ARE IDEALLY SUITED TO HELP US THINK THROUGH THE ISSUES RACED BY THIS CASE, AND THE QUESTION OF COST IN GENERAL. SO TWO PEOPLE, FIRST, MATT SALO, WHO IS THE EXECUTIVE DIRECTOR OF THE NATIONAL ASSOCIATION OF MEDICAID DIRECTORS, HE'LL TALK TO US FIRST. AND THEN SECOND, ROBERT DUBOIS, THE CHIEF SCIENCE OFFICER OF THE NATIONAL PHARMACEUTICAL COUNCIL WHICH IS A POLICY GROUP FUNDED BY THE PHARMACY INDUSTRY, NOT A LOBBYING GROUP. SO MATT, THEN BOBBY. >> ALL RIGHT. THANK YOU SO MUCH. GOOD AFTERNOON EVERYBODY. STEVE DID A GREAT JOB OF LAYING OUT SOME OF THE BIG PICTURE STUFF HERE. I'D LIKE TO HONE IN ON THE -- WELL, THE THEY ETHICAL ISSUES FACING STATE GOVERNMENT. MEDICAID, I HOPE YOU KNOW IT WELL. IF YOU DON'T, IT'S QUIETLY BECOME THE LARGEST HEALTH INSURER IN THE COUNTRY. MEDICAID COVERS MORE THAN 70 MILLION AMERICANS. WE SPEND A COMBINATION OF STATE AND FEDERAL DOLLARS, HALF A TRILLION PER YEAR AT THIS POINT. THAT NUMBER IS ONLY GOING UP. MEDICAID IS ALSO THE SAFETY NET. AND MEDICAID HAS TO -- MEDICAID IN ESSENCE IS GENERALLY THE LOWEST PAYER OF PRACTICALLY EVERY SERVICE IN THE HEALTHCARE INDUSTRY. WE HEAR THE COMPLAINTS ALL THE TIME. PHYSICIANS, NICERS, NURSING HOMES, HOSPITALS, ET CETERA. AND I WOULD REITERATE THAT MEDICAID IS NO STRANGER TO HIGH COST, HIGH NEED INDIVIDUALS. MEDICAID SERVES THE OLDEST, THE SICKEST, THE FRAILEST, THE MOST MEDICALLY COMPLEX PEOPLE IN THE COUNTRY. WE COVER -- WE PROVIDE MORE THAN HALF OF ALL THE LONG TERM CARE IN THIS KIN. WE PROVIDE THE MAJORITY OF HEALTH TREATMENTS, THE MAJORITY OF HIV-AIDS TREATMENTS. LIKE I SAID, NO STRANGER TO VERY EXPENSIVE CONDITIONS, TO EXPENSIVE POPULATIONS. INDIVIDUALS WITH TRAUMATIC BRAIN INJURY, KIDS WITH CYSTIC FIBROSIS FOR WHOM THE COST OF CARE CAN BE 300, $400,000 PER YEAR. SO PEOPLE WILL ASK, WELL, WHY IS HEPATITIS C SUCH A PROBLEM? WHY IS A THOUSAND DOLLARS A PILL SUCH A PROBLEM WHEN YOU'RE USED TO SUCH SIGNIFICANT NUMERATORS AND DENOMINATORS LIKE THAT? AND I WILL PREVIOUS FACE THIS BY SAYING, AND I THINK AS STEVE HAS POINTED OUT, THIS IS A VERY GOOD PROBLEM TO HAVE. THIS IS A GOOD ETHICAL THING TO WRESTLE W HEPATITIS C IS A VERY SERIOUS ISSUE AND WE DO HAVE OSTENSIBLY A CURE FOR IT, WHICH IS SIGNIFICANT HEY BETTER THAN THE TREATMENTS THAT HAVE BEEN IN PLACE FOR THE DECADES PRIOR TO LAST YEAR. BUT IT IS A PROBLEM. AND IT'S A PROBLEM BECAUSE -- ACTUALLY, STEVE SHOWED A SLIDE OF THE MEDICAL TOURISM SLIDE. THE SAME PERSON HE STOLE THAT FROM COINED A PHRASE I LIKE TO USE. GILEAD VIOLATED A SOCIAL COMPACT. AND UNWRITTEN SOCIAL COMPACT THAT SAID BASICALLY, WE CAN TREAT ORPHAN DRUGS LIKE ORPHAN DRUGS AND CHARGE LARGE AMOUNTS OF MONEY FOR THEM. NO ONE REALLY BATS AND EYE WHEN THE ANNUAL TREATMENT FOR A KID WITH CYSTIC FIBROSIS IS $300,000 A YEAR BASE THE NUMBER OF KIDS IS VERY, VERY SMALL. BUT ONCE YOU START TO GO MAINSTREAM, WHEN YOU'RE DEALING WITH MAINSTREAM WIDESPREAD CONDITIONS, YOU'RE MORAL OBLIGATION TO NOT CHARGE ORPHAN DRUG PRICES KICKS IN. AND I THINK A LOT OF PEOPLE FEEL THAT THIS IS WHERE THE CONTRACT BROKE DOWN. AND THAT $1,000 A PILL, $84,000 FOR A COURSE OF TREATMENT FOR 3 MILLION AMERICANS WHO HAVE HEPATITIS C, IS UNTENABLE. AND JUST TO PUT, AGAIN, SOME NUMBERS THERE, IN MEDICAID WE SERVE ABOUT A MILLION OF THOSE 3 MILLION INDIVIDUALS. AND THAT'S NOT COUNTING THE VERY SIGNIFICANT NUMBER OF PEOPLE WHO -- WHAT WE CALL JUSTICE AFFILIATEED INDIVIDUALS IN PRISONS, IN JAILS, INCARCERATED OR AN PAROLE, ET CETERA. THOSE ARE NOT COUNTED IN THAT LIST. BUT WE CAN GET INTO THIS LATER. WE HAVE EVERY REASON TO BELIEVE THAT THE JUSTICE SYSTEMS ARE GOING TO FIND WAYS TO EARLY RELEASE OR MEDICALLY DISCHARGE AS MANY OF THOSE PATIENTS AS POSSIBLE INTO THE COMMUNITY TO GET MEDICAID TO PAY FOR THEIR HEPC TREATMENTS. SO, TALKING ABOUT -- SO WHAT DOES THAT MEAN? STEVE POINTED OUT, WHAT IS THIS COST? WHAT WOULD THIS COST FOR INSURANCE PREMIERS? IF MEDICAID WERE TO PACE $1,000 A PILL, AND, OF COURSE, THERE WILL BE REBATES. IT DOESN'T END UP BEING THAT MUCH. IF WE WERE TO PAY THOSE AMOUNTS FOR EVERY ONE WHO HAS IT, AND AGAIN, AGREED NOT A LIKELY SCENARIO IN YEAR ONE. BUT IN TERMS OF FRAMING, AND IN TERMS OF TALKING ABOUT THE NEED THAT'S IN THE SYSTEM, IF WE WERE TO DO THAT, MEDICAID WOULD BE SPENDING AS MUCH ON THIS ONE DRUG OR ON THIS ONE CONDITION THAN IT WOULD ON EVERY SINGLE OTHER DRUG IN THE ENTIRE HEALTHCARE SYSTEM COMBINED. AND THAT'S A PRETTY SIGNIFICANT NUMBER. AND TO UNDERSCORE HOW MEDICAID WORKS, MEDICAID IS A DELICATE BALANCE. IT IS FUNDED BY STATE AND FEDERAL GOVERNMENTS BUT LARGELY DRIVEN BY THE STATES ABILITY TO FINANCE IT. AND STATE REVENUES HAVE NOT KEPT UP, HISTORICALLY, WITH MEDICAID EXPENDITURES IN THE HISTORY OF THE PROGRAM. AND WHAT THAT HAS MEANT OVER THE YEARS, AS MEDICAID HAS GROWN AND MEDICAID, WHICH IS ABOUT A THIRD OF HEALTHCARE SPENDING IN THIS COUNTRY, MEDICAID HAS BECOME 25 TO 30% OF THE AVERAGE STATE BUDGET. SO WHAT THAT MEANS IS THAT AS MEDICAID COSTS SPEAK UP, ESPECIALLY WHEN THEY'RE SPIKING UP UNEXPECTEDLY, AS MED CASE COSTS SPIKE UP, STATES HAVE TO DEAL WARRIOR UNLIKE OUR GOOD FRIENDS AT THE FEDERAL LEVEL, STATES HAVE TO BALANCE THEIR BUDGETS EVERY SINGLE YEAR. SO WHEN MEDICAID COSTS SPIKE UP FOR WHATEVER REASON, THERE CONSEQUENCES. AND WHAT HAS TO HAPPEN, EITHER SPENDING SOMEWHERE ELSE IN THE MEDICAID HAS TO GO DOWN AT AN EQUIVALENT AMOUNT, OR SPENDING IN OTHER PARTS OF STATE BUDGETS, K THREW 12 EDUCATION, TRANSPORTATION, INFRASTRUCTURE, WORKFORCE DEVELOPMENT, HAS TO GO DOWN. OR TAXES HAVE TO GO IN. AND NONE OF THOSE THREE SCENARIOS ARE EASY TO DO. ONE OF THE THINGS THAT MEDICAID -- MEDICAID IS ALWAYS KIND OF A DIFFICULT BALANCING ACT. YOU CAN'T GO TO -- YOU CAN'T GO TO A STATE CAPITAL IN THE COUNTRY WITHOUT FINDING INDIVIDUALS OR ENTITIES WHO SAYING MEDICAID NEEDS TO DO MORE. MEDICAID NEEDS TO COVER MORE PEOPLE. HALF THE STATES IN THIS COUNTRY HAVEN'T TAKEN UP THE MEDICATION EXPANSION. IT NEEDS TO PROVIDE MORE BENEFITS. OR IN PARTICULAR, MEDICAID NEEDS TO PAY PROVIDERS MORE. THAT'S DAY TO DAY EVERY DAY BASELINE OF MEDICAID. I WAS TELLING THE OTHER PANELISTS EARLIER TODAY, ONE OF THE ISSUES WE'RE FACING, THERE IS GOING TO BE AN UNEXPECTED SPIKEUP IN MEDICARE, PART B PREMIUMS THAT WILL OCCUR IN THE FLEX COUPLE MONTHS. THAT MAY NOT SOUND LIKE A PROBLEM FOR MEDICAID, BUT ONE OF THE THINGS MEDICAID DOES, IT PAYS ALL THE PART B PREMIERS FOR ABOUT 9 MILLION MEDICARE BENEFICIARIES. THAT POLICY, WHICH AGAIN CAME OUT OF NOWHERE, IS GOING TO COST THE STATES HUNDREDS OF MILLIONS, IF NOT BILLIONS OF DOLLARS. THESE ARE THE KINDS OF THINGS THAT GET THROWN INTO THE MIX AND AS STATES TRY TO FIGURE OUT WHAT IS THE BALANCE OF HOW DO WE TAKE CARE OF ALL OUR PRIORITIES, THESE ARE THE THINGS THAT HAVE TO GET WEIGHED. EVERY SINGLE ONE OF MY MEMBERS, THE 56 STATES AND TERRITORIES THAT AUTOIMMUNE MEDICAID, ARE TRYING -- RUN MED CASE, ARE TRYING TO PROVIDE THE BEST HEALTHCARE TO SIT CITIZENS WE WILL REMAIN STEWARDS OF THE TAXPAYER DOLLARS. UNEXPECTED INCREASES IN PRICE HAVE TO GET DEALT WITH. STATES HAVE SAID BECAUSE OF THE UNEXPECTED INCREASE IN THE PRICE OF SOVALDI, STATE OF MISSOURI SAID WE'LL HAVE TO ELIMINATE COVERAGE OF DENTAL SERVICES FOR ALL THE ADULTS IN OUR STATE. THESE ARE THE BALANCES WE HAVE TO FIND. SO -- I'LL CLOSE HERE AND I LOOK FORWARD TO WHAT BOBBY HAS TO SAY AND LOOK FORWARD TO QUESTIONS FROM EVERYBODY ELSE. THIS IS A VERY, VERY DIFFICULT SCENARIO, AND WE SORT OF SAID WE'RE NOT GOING TO DO INDIVIDUAL CASES, BUT I ACTUALLY GOT INTERVIEWED BY AL-JAZEERA AMERICA THE OTHER DAY. THEY THREW ONE OF THESE CASES AT ME. THEY SAID WE HAVE A CASE OF A YOUNG WOMAN IN PENNSYLVANIA WHO GOT HEPATITIS C FROM A TATTOO. INFECTED TATTOO. AND SHE'S TRYING TO GET COVERAGE TO CURE IT AND THE STATE IS SAYING NO. WHAT DO YOU SAY TO HER? AND THIS IS THE KIND OF THACK WE'RE FACING EVERYWHERE. THERE IS SIMPLY NOT THE MONEY TO PROVIDE THE DRUG, ANYONE OF THESE DRUGS, AT THESE PRICES WITHOUT HAVING SERIOUS REPERCUSSIONS ELSE WHERE. STATES ARE TRYING THEIR HARDEST TO BRING THE PRICE DOWN. STEVE TALKED ABOUT HOW THE PRICES HAVE COME DOWN FROM $84,000 LIST PRICE, DOWN TO POTENTIALLY A 46% DISCOUNT. BUT I WOULD ARGUE THAT EVEN THERE e-- AND THAT'S OPENING UP SOME OF THE COVERAGE CRITERIA. BUT IT'S SIMPLY ISN'T ENOUGH TO SAY WE CAN AFFORD TO OPEN UP THE FLOOD GATES AND COVER EVERYONE EVERYBODY, INCLUDING THE ASYMPTOMATIC, INCLUDING THE NAIVE. AND INCLUDING PEOPLE WHO HAVE -- WHO -- THERE IS NO REASONABLE EXPECTATION OF LIVER CIRRHOSIS OR DEATH OR DETERIORATION OF LIFE. SO THESE ARE THE STRUGGLES THAT WE HAVE TO DEAL WITH. THESE ARE THE STRUGGLES THAT MEDICAID DEALS WITH EVERY SINGLE DAY. AND THEY ARE DIFFICULT DECISIONS TO MAKE. BUT UNFORTUNATELY, THIS IS WHY MY MEMBERS IN STATE GOVERNMENT GET PAID THE BIG BUCKS. SO I'LL STOP THERE. AND LOOK FORWARD TO YOUR QUESTIONS AFTERWARDS. THANK YOU. [APPLAUSE] A LOT OF CAPITOL CAPITOL CHALLE NGES. LET MEDAKAS A FEW MORE. AND WHAT I'D LIKE TO DO IS FRAME MY THOUGHTS AS A SERIES OF 3 DIFFERENT TENSIONS. THIS IS AN ETHICAL GRAND ROUNDS. SO ETHICAL ISSUES ME CREATE SOME TRADE OFFS THAT YOU GUYS CAN HELP WRESTLE WITH. SO THE FIRST TENSION AND YOU HEARD A BIT OF IT FROM MATT, IS THAT THE GROUP THAT PAYS THE BILLS, THE INSURE GROUP THAT'S PAYING THE BILLS, IS NOT THE GROUP THAT FINANCIALLY SAVES MONEY FROM THAT TREATMENT. THE AVOIDED SER ROSIS, THE AVOIDED TRANSPLANTS AND THE LIKE. A COUPLE OF FACTS TO ADD TO WHAT STEVE SAID. TYPICAL PATIENT IS ABOUT THE AGE OF 55. A TYPICAL PERSON IN A HEALTH PLAN, NOT NECESSARILY MEDICAID, SOMEDAYS WITH THAT HEALTH PLAN FOR TWO YEARS. SO SOMEBODY IS PAYING $50,000 BUT NOT SEEING THE BENEFITS ECONOMICALLY BECAUSE THAT PATIENT IS MOVING ON TO SOMEBODY ELSE WHO WILL BE PECKING UP THE BILL. AND WHO IS USUALLY THAT PLAYER? SO MEDICARE IS PLAYING, MED -- MEDICAID IS PAYING, MEDICARE IS LIKELY TO BE THE PHENOMENON BENEFICIARY. THE COMPLICATIONS THAT YOU DON'T HAVE TO PAY FOR ANYMORE ARE PROBABLY 5 OR 10 YEARS DOWN THE LINE SO AGAIN, MEDICARE IS THE BENEFICIARY. SO IT'S NOT A SURPRISE, IF YOU HAVE A RELATIVELY NARROW TIME HORIZON, THAT ALL YOU SEE IS THE PRICE OF THE DRUG TIMES THE NUMBER OF PEOPLE WHO NEED IT. BUT DON'T SEE THE SAVINGS THAT WILL COME DOWN THE LINE. ONE OF THE POINTS THAT WASN'T MADE YET IS STEVE'S GROUP VALUATED THE COST EFFECTIVENESS AND USING STANDARD PRINCIPALS OF WHAT IS COST EFFECTIVE, USING THE ACTUAL PRICE THAT IS BEING PAID. IT'S COST EFFECTIVE. IT'S A GOOD DRUG. TIONINGLY IS EFFECTIVE. IT IS COST EFFECTIVE. WHAT WE HAVE IS A PAYMENT PROBLEM AND THERE ARE SOLUTIONS PEOPLE ARE TALKING ABOUT. LONG TERM FINANCING IS AN EXAMPLE. YOU DON'T BUY YOUR HOUSE AND HAND THEM $200,000. YOU PAY FOR IT OVER 20 OR 30 YEARS, IF YOU HAVE BENEFITS OVER TEN OR 15 OR 20 YEARS, MAKE THERE IS A WAY TO PAY ON THE INSTALLMENT PLAN. THAT'S ONE TENSION. WHO IS PAYING? AND WHO IS BENEFITING? SECOND TENSION IS WHAT IS THE PATIENT'S FINANCIAL RESPONSIBILITY VERSES INSURE COMPANY? IN MEDICAID IT'S A DIFFERENT STORY. THE PATIENTS PAY ALMOST NOTHING FOR THE DRUGS. LET'S TAKE THE TYPICAL COMMERCIAL INSURER. THEY ARE VERY FOCUSED ON THE RISING COST OF HILLARY HEALTHCARE. THEY ARE SCRAMBLE DOING FIGURE OUT WHAT TO DO. SO ONE OF THE MOST POPULAR APPROACHES TO DEAL WITH IT HAS BEEN TO MOVE MORE DOLLARS OVER TO THE PATIENT. SO PREMIUMS INCREASE, DEDUCTIBLES INSURANCE, AND COINFECTIOUS IS INCREASELY COMMON. WHAT IS COINSURANCE, YOU SPEND 20, 30, 40, $50 WHEN YOU GET YOUR MEDICATIONS. NOW INSTEAD OF A FLAT RATE FOR THESE SPECIALTY TYPE DRUGS YOU'RE PAYING 20 OR 30%. SO YOU CAN DO THE MATHS. IT CAN BE A LARGE NUMBER. SO A RECENT KAISER FOUNDATION STUDY LOOKED AT THIS ISSUE AND THE TYPICAL DEDUCTIBLE IN A COMMERCIAL PLAN IS ABOUT $1,000 PER PERSON. IF THEY'RE IN A HEALTH SAVINGS ACCOUNT, WHICH IS NOW BECOMING VERY, VERY POPULAR, ANYWHERE BETWEEN 1300 ANDATIVE HUNDRED. ONE OF THE THINGS WE KNOW, AS WE MOVE MORE DOLLARS OVER TO THE PATIENT, THAT EFFECTS THEIR LIKELIHOOD OF ADHERING TO THE THERAPY. AND IF YOU DON'T ADHERE TO THE THERAPY, YOU HAVE WORSE CLINICAL OUTCOMES. IF YOU HAVE WORSE CLINICAL OUTCOMES IN MANY DISEASES, YOU'LL END UP WITH MORE MONEY. AND AS PAYERS ARE FOND OF SAYING, THERE IS ONLY ONE THING WORSE THAN PAYING FOR AN EXPENSIVE TREATMENT. THAT'S HAVING TO PAY FOR IT A SECOND OR THIRD TIME BECAUSE THE PATIENTS WEREN'T COMPLIANT. SO AGAIN, IF YOU'RE MOVING MODER DOLLARS TO THE PATIENTS, YOU'RE GOING TO END UP BEING POTENTIALLY PENNY WISE AND POUND FOOLISH. THIS IS A TENSION BECAUSE THE INSURE COMPANIES DO WRESTLE WITH WHAT ARE WE GOING TO DO WITH RISING COSTS OF HEALTHCARE? SO YOU HAVE THIS TENSION BETWEEN HOW MUCH SHOULD BE PUSHED TO THE PATIENT, VERSES HOW MUCH NOT. THEN YOU HAVE AN ETHICAL QUESTION ON THE HEALTH EXCHANGES WHERE MANY OF THE DEDUCTIBLE IS EVEN HIGHER. INDIVIDUALS PURCHASING OFTEN CHOOSE THE CHEAPEST PLAN WHICH HAS THE HIGHEST DEDUCTIBLE. IS THERE AN ETHICAL ISSUE OF SAYING LOOK, YOU CAN'T HAVE ONE OF THOSE HIGH DETECTABLE PLANS BECAUSE YOU'VE GOT NO WAY OF PAYING FOR IT, IF YOU GET SICK. I'M NOT ADVOCATING THAT WE TO THAT. BUT THAT'S AN ETHICAL ISSUE. FREE CHOICE IS A WONDERFUL THING. BUT IF IN THE END THEY CAN'T PAY FOR IT, ENDS UP BEING BACK ON PUBLIC PAYMENT, THAT'S A PROBLEM. OKAY. THE THIRD TENSION IS THE TENSION BETWEEN THE COST OF BRANDED DRUGS AND THE LATER COST OF THOSE SAME DRUGS WHEN THEY BECOME GENERIC. SO YOU HEARD ORIGINALLY, IT WAS $89,000 FOR TREATMENT. NOW WITH THE PRICE DISCOUNTS IT'S PROBABLY HALF OF THAT. MANY OFF YOU ARE PROBABLY OLD ENOUGH WHEN LIPITOR, THE STATIN, CHOLESTEROL LOWER WAS ON THE MARKET. OUR PLAVEX, THOSE WERE THOUSANDS OF DOLLARS A YEAR WHEN THEY WERE BRANDED. IF YOU GO BACK TEN YEARS, THERE WAS THE SAME CONCERN ABOUT -- THIS IS TOO EXPENSIVE, TOO MANY PEOPLE THAT NEED IT. THIS IS A PROBLEM. IF WE FAST FORWARD TO TODAY, YOU CAN WALK INTO COSTCO, AND GET THOSE EXACT SAME DRUGS FOR BETWEEN 5 AND $10 A MONTH. THOSE DRUGS WILL PROBABLY BE IMPORTANT IN TAKING CARE OF PATIENTS FOR THE NEXT DECADE OR TWO OR MAYBE 3. SO YOU HAVE TO BALANCE THE COST OR THE PRICE TAGS TODAY WITH THE LOCK TERM PRICES WHICH TYPICALLY WILL FALL. THEY'LL FALL 60%, 80%, 90%, DEPONES THE DRUG, HOW MANY COMPETITORS, A VARIETY OF OTHER THINGS. SO IT'S IMPORTANT FROM AN ETHICAL STANDPOINT NOT JUST TO TAKE A NARROW VIEW, THIS IS THE PRICE, THIS IS A PROBLEM. THINK MORE BROADLY. BUT IF YOU'RE A PAYOR YOUR TIME HORIZON IS ONLY A COUPLE OF YEARS. SO THEY'RE NOT IN IT FOR THE LONG HAUL AND THINKING IN TERMS OF I'M GOING TO HAVE THIS PATIENT FOR 30 YEARS, I'LL GET THE BENEFITS OVERTREATING THEM WELL. OF TREATING THEM WELL. THEY'RE NOT IN IT FINANCIALLY PROJECTING OUT 30 YEARS TO SAY THIS DRUG WILL BECOME CHEAP OVER TEAM. AND THAT WILL ALL WORK ITS WAY OUT. AS YOU PROBABLY KNOW MOST OF THESE ARE PUBLICLY TRADED COMPANIES, THEY HAVE QUARTERLY EARNINGS. SO THEY DO HAVE A MUCH MORE CONSTRAINED DIME HORIZON HORIZON. SO STEVE RAISED SOME CHALLENGES, MATT RAISED SOME CHALLENGES, I'VE RACED A COUPLING OF MORE. AND I GUESS IT'S NOW FOR YOU TO FIGURE OUT WHAT TO DO. [APPLAUSE] >> WHO IS GOING TO STAND UP FIRST AND SOLVE ALL THIS? A LOT OF PEOPLE, GOOD. >> THE GOOD NEWS IS THESE ARE HARD QUESTIONS BUT WE'VE GOT A FULL 15 MINUTES TO SOLVE THEM ALL. I THINK WE'RE IN GOOD SHAPE. YES. >> I'M A HEPATITIS C. HEPATITIS C. HEPATOLOGIGIST. I THINK THERE IS ANOTHER TENSION THAT HAS NOT BEEN BROUGHT UP, IMPORTANT TO BRING TO THE TABLE. THAT'S WHAT IS THE EFFECT -- WHAT IS AFFECTING THE PRICE STRUCTURE THAT PHARMOCOMPANIES ARE ATTACHING TO MEDICATION. THEY'RE FOR PROFIT ORGANIZATIONS, THERE 250 MAKE MONEY. WE ACTUALLY OWE THEM A LOT BUT WHEN WE HAVE A SITUATION LIKE THIS WHERE IS THERE A WAY WE'RE LOOKING AT IT, WE HAVE A HEALTH STATUS WHERE THERE IS A CURE, IN THE NATION CAN'T AFORD TO PAY THE BILL FOR THAT CURE. AS IT'S PHRASED NOW. WE HAVE THE THINK ABOUT HOW DID THAT PRICE DAG ACTUALLY GET THERE? AND I THINK THAT THERE ARE TWO EXPLANATIONS, I DON'T KNOW THE ANSWER. ONE IS GREED. SIGNS THE DEMONSTRATORS ARE CARRYING. IF IT'S GREED WE AS A NATION NEED TO DO SOMETHING ABOUT -- WE TALK ABOUT THE SOCIAL CONTRACT. WE AS A NATION TO DO SOMETHING ABOUT IT AND MAYBE REGULATE TO A POINT WHERE WE SET A CAP. ON THE OTHER HAND, IF THAT PRICE TAG IS ACTUALLY REFLECTING THE DEVELOPMENT COSTS WHICH I'M NOT SURE THIS IS THE CASE, BUT IF IT IS, THEN I THINK WE HAVE TO ASK, COME BACK TO OURSELVES AS THE FEDERAL GOVERNMENT AND MAYBE ASK THE QUESTION THAT I'VE NEVER SEEN ANSWERED. THAT IS, WHAT IS THE COST EFFECTIVENESS FOR REGULATORY PROCESS? WHEN THE -- WE ARE AS A NATION IMPOSING A HUGE BARRIER ON MEDICATIONS IN TERMS OF SAFETY, MAKING SURE THAT NO ONE GETS HARMED, WHAT IS THE PRICE TAG ON THAT? AND I DON'T KNOW IF YOU HAVE THE ANSWER ON HOW THE OVERALL PRICE IS DETERMINED. BUT I THINK THAT'S AN IMPORTANT ELEMENT TO BRING TO THE DISCUSSION. >> YEAH. OBVIOUSLY THE NEWSPAPERS HAVE SHOWN SOME EGREGIOUS EXAMPLES OF WHEN DRUG COMPANIES ARE RAISING GENERIC DRUGS, 1500%. OBVIOUSLY SOME OF THEM ARE BACKING AWAY FROM THAT. I'M NOT A PRICING EXPERT. I BELIEVE THAT IT WOULD BE REASONABLE TO SAY IS THIS DRUG COST EFFECTIVE USING STANDARD WAYS OF DEFINING IT, AND IN AT A'S WORLD HERE IN THE U.S. IT'S PROBABLY ABOUT 100 TO $150,000 PER YEAR OF LIFE SAVED. IF YOU USE THAT FRAMEWORK, THESE HAVE -- THESE HEPATITIS C DRUGS ARE COST EFFECTIVE. I WOULD, IN SOME RESPECTS, STOP THE DISCUSSION THERE WITH RESPECT TO THE DRUG COMPANIES. YOU'VE COME UP WITH A SAFE, EFFECTIVE, CLINICALLY DESIRABLE DRUG WHICH IS COST EFFECTIVE. THE FACT THAT THIS IS A LOT OF PEOPLE THAT CAN BENEFIT IS REALLY SOCIETY'S CHALLENGE. AND THIS ARE MANY WAYS TO BE THINKING ABOUT IT. NOW, IF THE DRUG IS SO COSTLY THAT IT DOESN'T HAVE PROPER VALUE, MEANING IT'S NOT COST EFFECTIVE, I THINK IT'S REASONABLE TO SAY TO THE DRUG COMPANIES YOUR PRICE IS TOO HIGH. BUT ONCE IT IS COST EFFECTIVE, THEN I THINK IT'S SOCIETY'S CHALLENGE TO SAY WE'VE GOT A CURE FOR HEPC, FOR ALZHEIMER'S, THIS IS WHAT WE WANT. WE JUST NEED TO FIGURE OUT COLLECTIVELY HOW TO SOLVE IT. >> I WOULD AGREE WITH SOME OF THAT. I THINK THAT -- I'M ALL ABOUT TRYING TO LET A MARKET WORK. AND IF WE CAN LOOK AT COST EFFECTIVENESS AND SAY THAT ONE IS NOT, SO WE'RE NOT GOING TO COVER IT, LET'S MOVE ON. THIS ONE IS IS, THAT'S GREAT. BUT I DON'T THINK THAT -- THAT'S CERTAINLY NOT HOW THE SYSTEM ACTUALLY WORKS. YOU CAN LOOK AT [INDISCERNIBLE], A COMPLETELY HAM STRUNG IN ANIABILITY TO LOOK AT COST EFFECTIVENESS. AND I WOULD LOOK, AGAIN, SORT OF LOOKING INWARD AND MEDICAID. MEDICAID DOESN'T ACTUALLY HAVE THE ABILITY TO SAY THAT DRUG IS NOT COST EFFECTIVE, WE'RE NOT GOING TO COVER IT. WHEN YOU DIG INTO HOW MEDICAID WORKS, THIS IS A BARGAIN STRUCT LONG AGO. WE GET DISCOUNTS. WE GET THE CHEAPEST PRICE BUT WE'RE OBLIGATED OBLIGATED TO COVER EVERY SINGLE DRUG THAT IS APPROVED BY THE FDA. WE CAN PUT LIMITATIONS BUT WE HAVE TO COVER THEM ALL. SO WE'RE NOT A FREE MARKET HERE IN MEDICAID. HALF A TRILLION DOLLARS A YEAR. AND AGAIN, OUR PATIENTS DON'T PAY ANYTHING. SO I THINK THE -- IN THE GRAND ZOOM OF THINGS, WHY ARE THEY PRICED THE WAY THEY ARE? BECAUSE THEY CAN. >> LET ME JUST ADD A TINY DATA POINT EVEN MORE CHALLENGING. VERY SHORTLY, WE WILL HAVE JEAN THERAPIES THAT YOU GUYS HERE ARE HELPING TO CREATE. THERE IS ONE IN EUROPE RIGHT NOW. INJECTION, YOU'RE CURED. THOSE ARE BEING PRICED AND WILL LIKELY BE PRICED AT A MILLION DOLLARS. SO IF I THINK THE CHALLENGES ARE INTERESTING TODAY, THEY'LL GET MORE INTERESTING. NOW, IT WILL BE A LIFETIME OF BENEFITS, MAYBE HIGHLY COST EFFECTIVE BUT THE COSTS ARE EXTRAORDINARILY FRONT LOADED. >> DID YOU WANT A LAST SHOT AT THIS. >> I KNOW WE HAVE OTHER GREAT COMMENTS. THE QUESTION THAT YOU POSE, THE STATEMENT IS THAT THE SYSTEM WE HAVE DOES IN SOME WAYS REFLECT OUR VALUES AS A COUNTRY AND WHAT WE WANT OUT OF OUR DRUG DEVELOPMENT SYSTEM. AND MY CONCERN, PART OF MY CONCERN IS THAT WHAT ARE THE LESSONS? THIS IS A TEST CASE. WE HEARD ABOUT THE COMPANY THAT JACKED UP THE PRICE ON THE GENERICS, AND GOT KICKED OUT OF THE -- THE TRAIT ASSOCIATION HERE IN WASHINGTON. THE CEO OF GILEAD WAS ELECTED BY HIS PIERS AS THE CEO OF THE YEAR. AND BASICALLY, THE LESSONS LEARNED FROM THE BOARDROOMS IS THAT THIS IS THE WAY TO GO. SET A HIGH PRICE, HUNKER DOWN, RIDE OUT THE STORM AND YOU'LL BE THE BEST COMPANY, THE BIGGEST DRUG LAUNCH BY A FACTOR OF TEN IN HISTORY. TEN TIMES THE PROFITS IN YEAR ONE OF ANY OTHER DRUG IN HISTORY. THE QUESTION IS YES, WE HAVE INNOVATION, BUT SOMEWHERE IN ALL THE COMPLEXITY WE HAVE TO REALIZE THAT SYSTEMS THE PRICE IS JUST TOO DAM HIGH. >> DAVID. >> I'D LIKE TO FOLLOW UP ON THAT THOUGHT A LITTLE BIT. SEEMS TO ME THAT COST EFFECTIVENESS CAN'T BE A SUFFICIENT CONDITION FOR A PRICE BEING REASONABLE WHEN YOU THINK OF THIS PROBLEM SYSTEMICALLY. BECAUSE IF A DRUG IS CONSIDERED COST EFFECTIVE, BUT IF EVERY ONE WHO NEEDS IT USES IT, AND IT ACCOUNTS FOR HALF OF THE TOTAL MEDICAID EXPENDITURES WHICH I THINK THE FIRST SPEAKER SUGGESTED WOULD HAVE HAPPENED, RIGHT, OBVIOUSLY THERE IS A HUGE SYSTEMATIC PROBLEM. AND ONE WAY TO LOOK AT IT IS IN TERMS OF THE PRIORITY THAT OUR SYSTEM IS CURRENTLY GIVING TO THE PROPERTY RIGHTS OF DRUG COMPANIES. AND THE WAY IN WHICH IT'S RESPONDING OR NOT RESPONDING TO THE MORAL RIGHT OR AT LEAST THE MORAL IMPORTANCE OF PEOPLE IN THE UNITED STATES, INCLUDING TAXPAYERS WHO ARE PAYING FOR A LOT OF THE DRUG DEVELOPMENT, TO GET ACCESS TO MEDICATIONS THEY NEED. SO GOOD PROPERTY RIGHTS CAN BE LIMITED OR CURTAILED IN RESPONSIVENESS TO THE OTHER MORAL CONCERN ABOUT NEEDED ACCESS TO HEALTHCARE, THEN THAT WOULD IMPLY ANOTHER FACTOR SO THAT IT'S NOT SUFFICIENT THAT A DRUG BE COST EFFECTIVE IN THE SENSE THAT DR. DUBOIS MENTIONED FOR THAT TO BE ADEQUATE. SO I DO THINK THERE IS ROOM FOR SAYING YES, THAT PRICE IS TOO DAM HIGH IN SOME CASES, WE SHOULD BE MORE RESPONSIVE TO PEOPLE'S ACCESS TO HILLARY CLINTON AS A FUNDAMENTAL -- HEALTHCARE AS A FUNDAMENTAL VALUE. >> A COUPLE PIECES OF IT PUZZLE. I'M NOT ARGUING WE SHOULD PRICE DRUGS BASED ON FAILERS, I DON'T CARE WHETHER ANDROID HAS A PROBLEM COMING OWL WITH ITS FLEX PHONE. IF IT'S GOOD I'LL PAY FOR IT, IF IT'S NOT, I'LL NOT. THERE ARE 4 DRUGS FOR ALZHEIMER'S, NONE OF WHICH ARE PARTICULARLY GOOD. THERE IS A HUGE NUMBER OF FAILERS, WE DO FOCUS ON THE SUCCESSES, BUT IN GID YARD LINE'S CASE, IT'S -- GILEADS CASE, IT'S A HUGE ONE. LET'S SEPARATE OUT DRUGS FUNDED BY THE NIH. YOU CAN GET INTO INTERESTING DISCUSSIONS WHERE IF 80% WAS FUNDED BY THE NIH, THEN MAYBE THERE IS SOME GOVERNMENTAL CONCERNS ABOUT WHAT HAPPENS ANNIVERSARY. BUT LET'S POSIT A DRUG WHERE THE DRUG COMPANY TOOK THE RISK, IT DID BASICALLY ALL THE WORK, AND THERE ARE CERTAIN PROFITS. AGAIN, TO POINT TO A DRUG COMPANY AND SAY IT'S REALLY EXPENSIVE FOR SOCIETY, YOU HAVE TO SOLVE IT, EVEN IF IT'S COST EFFECTIVE, DOESN'T FEEL RIGHT. WE DON'T SAY TO THE SCHOOLS IF WE HAD A NEW INTERVENTION THAT WAS WONDERFUL, I'M SORRY, YOU HAVE TO LOWER YOUR PRICES OF THIS NEW TEXTBOOK. WE WOULD SAG HO, IT REALLY WORKS, THIS IS WHAT SOCIETY SHOULD BE PAYING FOR. IF IT'S BEEN DEVELOPED WITH A LOT OF PUBLIC MONEY, WHOLE DIFFERENT BALL GAME. >> WELL, THAT'S EXACTLY WHAT MY QUESTION WAS. STEVE HAD A LIST OF VARIOUS COSTS OF THIS DRUG AFTER THE NIH PUT THE MONEY ENAT THE BEGINNING. YOU DIDN'T TELL US HOW MUCH NIH PUT IN. NOR HOW MUCH THE GOVERNMENT IS GETTING BACK. ANOTHER EXAMPLE, FOR INSTANCE, THAT'S WIDELY ACCEPTED NOW IS IF NIH PAYS FOR LABORATORY RESEARCH AND IT GET PLEASURED AFTER 6 MONTHS. -- PUBLISHED AFTER 6 MONTHS. IN A ON PUBMED IN THE PUBLIC DOMAIN. >> I DON'T KNOW THE EXACT NUMBERS OF THE FUNDING. IN TERMS OF HOW MUCH IT WAS. >> DO YOU HAVE A BALLPARK? IT'S NOT $10. >> ACTUALLY, I DON'T. I SHOULD TRY TO FIGURE THAT OUT. BUT THE NIH OBVIOUSLY FUNDS A LOT OF RESEARCH THAT ALSO DOESN'T PRODUCE SPECTACULAR SUCCESS. >> IN THIS CASE. >> IN THIS CASE -- >> WHAT IS THE GOVERNMENT GETTING BACK? >> THE GOVERNMENT IS GETTING BACK -- A GREAT LONG TERM QUESTION. [LAUGHTER] THE SHORT-TERM IS THAT THE GOVERNMENT PAID FOR A FAIR AMOUNT OF THE RESEARCH, THE DEVELOPMENT THROUGH PHASE 2. NOW PAYING A LOT THROUGH MEDICAID AND MEDICARE. SO IT'S NOT QUITE CLEAR WHERE THE GOVERNMENT WINS ON THE BACK END OF THAT. >> DON'T THEY GET A STAKE IN THE LICENSING OF THIS? >> NO. >> SOMETHING IS MISSING SOMEWHERE. >> YES. >> TO PREVIOUSLY COMMENT -- BRIEFLY COMMENTER FOR EVERY DRUG AVAILABLE, NOT JUST THE HARVONI, THE GOVERNMENT DOES GET MONEY BACK. MANDATED PRICE REDICTIONS IN ALL OF MEDICAID AND ALL THE VA. THAT'S NOT JUST THIS ONE DRUG. IT'S ALL DRUGS. JUST ANOTHER SORT OF -- DATA POINT. >> YES, BUT I THINK IT'S A LITTLE DANGEROUS TO SORT OF CLAIM THAT AS A VICTORY. THAT'S KIND OF LIKE COMING BACK FROM THE CAR DEALERSHIP SAYING I GOT $2,000 OFF THE MSRP, I GOT A GREAT DEAL. WELL, MSRP IS A MADE UP NO. AND ARTIFICIALLY INFLATED SO THAT AFTER THE DISCOUNTS, THEY HAVE TO GIVE, THEY CAN STILL MAKE THEIR PROFIT. SO LET'S NOT GOING BANKING ON ALL THOSE SAVINGS. >> TO BE FAIR THERE IS SUCH A RULE AT MEDICAID BEST PRICE. THAT MEANS THERE CAN BE NO COMMERCIAL INSURANCE COMPANY THAT GETS A BETTER DEAL THAN MEDICAID. THEY GET THE LOWEST PRICE EVERYWHERE. THIS IS NOT SEEING THE 50% OFF SALE AND SAYING I GOT A LOT OF GREAT DISCOUNTS. THEY GET THE ROCK BOTTOM PRICE. >> ALL RIGHT. YES. >> SO WE HAVE A GREAT HISTORY OF DRUG DEVELOPMENT. AND NOW WE ARE FACING SOME OF THE OTHER PART OF THE COSTS AND HOW WE'RE GOING TO PAY FOR IT. SO WHY NOT DOUBLE UP THE MODEL? WE HAVE ALL THE DATA. WE HAVE -- WE KNOW THE FACTORS. WE KNOW WHAT THE GOVERNMENT PAID. WHY NOT DEVELOP AN ECONOMIC MODEL TO SEE HOW MUCH A DRUG SHOULD COST? SO WE KNOW HOW MUCH MONEY IS SPENT. HOW MUCH IS THE PROFIT MARGIN FOR GILEAD, FOR EVERY TABLET. ANY IDEA? >> I DON'T. I CAN'T SPEAK TO IT SPECIFICALLY, NO. >> BUT -- OKAY. APPROXIMATELY, SAY -- SO IF IT IS VERY HIGH, WE WOULD SAY THIS IS WHAT IT'S COSTING FOR YOU TO MAKE IT. YOU COULD MAKE MAYBE 100% PROFIT. OR AT LEAST THERE SHOULD BE SOME LIMIT ON THAT NUMBER SO -- >> SOUNDS FAR TOO RATION TOOL WORK IN THE UNITED STATES. -- RATIONAL TO WORK IN THE UNITED STATES. MANY OTHER DEVELOPED COUNTRIES, MOST, ALMOST AUG, HAVE SOME SYSTEM IN WHICH THE FEDERAL GOVERNMENT TAKES AN EVALUATION OF NEW DRUGS, COMPARES THE CLINICAL EFFECTIVENESS. THINKS ABOUT COST EFFECTIVENESS, AND NEGOTIATES AROUND A PRICE THAT REPRESENTS WHAT THEY VIEW AS A REASONABLE VALUE. NOW, WE DON'T DO THAT. IT OF GETS CAUGHT UP WITH DISCUSSION OF DEATH PANELS OR OTHER THINGS. BUT IT'S SOMETHING THAT I THINK ACTUALLY SOFOSBUVIR AND OTHER DRUGS IN THE PAST YEAR HAVE TRIGGERED RENEWED LOOKS AT THE OPPORTUNITY TO THINK ABOUT VALUE BASED PRICING, WHAT THAT WOULD MEAN. THE RISK -- I MEAN LINKING IT TO THE COST OF PRODUCTION IS PROBABLY NOT THE WAY THAT WE'LL GO FORWARD, BECAUSE SOME DRUGS ARE JUST MORE EXPENSIVE TO PRODUCE. SOFOSBUVIR ACTUALLY IS LITERALLY LESS THAN A DOLLAR A PILL TO PRODUCE. >> [INDISCERNIBLE] IN THIS PRICE ISSUE. IT WILL COME UP REPEATEDLY. IF YOU GO -- >> SORRY. COULD I -- TWO OTHER PEOPLE I WANTED TO GET BEFORE. SO LET'S DO THIS. COULD YOU GUYS BOTH GIVE POSSIBLE QUICK -- YOUR QUESTIONS, THEN GIVE BOBBY AND MATT THE OPPORTUNITY FOR LAST QUICK WORDS. >> SURE. FIRST, I WANTED TO MAKE A COMMENT. THAT IS, THE DATA SHOWING THAT THESE MEDICATIONS ARE COST EFFECTIVE, DOESN'T APPLY TO EVERY POPULATION. REALLY, THE DATA SHOWED THAT'S COST EFFECTIVE IN PATIENTS WITH ADVANCED DISEASE. SO I THINK MAKING A GENERAL STATEMENT THAT'S COST EFFECTIVE IS NOT QUITE ACCURATE. MY QUESTION ACTUALLY IS TO GET BACK TO WHAT MANY OTHER PEOPLE WHO HAD A CHANCE TO SPEAK BROUGHT UP. THAT IS -- THIS DRUG WAS LAWFIRMLY DEVELOPED WITH ADDS FUNDING. AND THE COMPANY THAT'S ACTUALLY MARKETING IT DID NOT ACTUALLY DO ANY R AND D. THAT'S WHAT THEY'RE BASING THEIR COSTS FOR THE PRICES. THEY'RE SAYING WE SPENT -- WE HAVE TO RECOVER ALL OUR R AND D DEVELOPMENT. SO THE QUESTION IS, AT WHAT POINT -- THERE HAS BEEN NO DISCUSSION REALLY ABOUT GOVERNMENT REGULATING THE COST OF PRICES ANYMORE. PRESIDENT REAGAN INTRODUCED HIS BILL TO PREVENT THE GOVERNMENT FROM NEGOTIATING PRICES. AND IS THERE ANY DISCUSSION GOING ON ABOUT TRYING TO REGULATE THE COST OF PRICES SO THAT SOCIETY CAN BENEFIT FROM IMPROVEMENTS IN MEDICAL THERAPY? >> EASY QUESTION, NUMBER ONE. [LAUGHTER] >> A QUICK ANSWER. IT'S NOT TRUE THAT GILEAD PUT NO MONEY IN FOR DEVELOPMENT. THEY DID ALL THE PHASE 3 TRIAL IN TWO AND THREE DRUGS FAIL IN PHASE 3. THAT'S DATA POINT NUMBER ONE. SECOND, THERE IS DISCUSSION AROUND SOMETHING CALLED INDICATION BASED PRICING. SO IF A DRUG CAN BE USED FOR SEVERE PATIENTS AND MILD PATIENTS, OR ROOM TIED ARTHRITIS PATIENTS, SEAR RICIS, THAT EACH ONE WOULD HAVE ITS OWN SEPARATE PRICE REFLECTIVE OF THE VALUE IT BRINGS TO THOSE PATIENTS, HASN'T HAPPENED HERE. IT HAPPENS IN AUSTRALIA, SO THAT'S A SECOND POINT. THE THIRD IS MORE FUNDAMENTAL. WHICH IS DO WE WANT THE PHARMACEUTICAL INDUSTRY TO BE A REGULATED UTILITY? WHERE THERE ARE SET PROFIT MARGINS AND THAT'S THE WAY DRUGS ARE PAID FOR? THIS IS A HUGE DOWN SIDE IN TERMS OF THE DESIRE TO TAKE ON RISK TO GET THE BEST PEOPLE, THE BEST VENTURE CAPITAL, IF WE MOVE IN THAT DIRECTION. SO BEWARE OF WHAT YOU ASK FOR. >> LAST, MAKE IT REALLY QUICK. >> SO REALLY QUICK. ONE THING IS IS IT TRUE SINCE 2003 MEDICARE IS NOT ABLE TO DIRECTLY NEGOTIATE DRYING PRICES? >> -- DRUG PRICES? I WANTED TO VERIFY THAT. MEDICAID DOES NOT DIRECTLY NEGOTIATE DRUG PRICES. >> PERSONALLY SPEAKING, THIS HAS TO BE A FEDERAL OR GOVERNMENTAL ISSUE THAT THEY NEED TO BRING THAT BACK. AND ADDITIONALLY, I THINK -- I FEEL THERE IS A PARADIGM SHIFT THAT NEEDS TO OCCUR. WHY IS THE MSRP A CERTAIN NO. AND WHY DO DIFFERENT PEOPLE PAY DIFFERENT AMOUNTS? EVEN IF YOU HAVE INSURANCE OR NOT. THE ASKED PRICE SHOULD BE EXACTLY THE SAME. I THINK THAT'S A PARADIGM SHIFT. I THINK THAT'S NOT SOMETHING THAT WE'LL RESOLVE HERE. BUT FOR ONCOLOGYLIC DRUGS, WE SEE THAT SPECIFICALLY. THE HAASE COMMENT, A LOT OF INDEPENDENT SOCIETIES HAVE LOOKED AT PHARMACEUTICAL DEVELOPMENT OF DRUGS. IT'S ABOUT 4-25% OF THE ACTUAL TOTAL EXPENSE THAT THEY SHOW. WITH WHICH THEY LINK THE ACTUAL COST OF FINAL DRUG. IS ACTUAL DRUG DEVELOPMENT. A LOT OF IT IS STOCK SURPRISE CHANGES AND OTHER THINGS. >> OKAY. SO LAST -- EVERYBODY GETS 30 SECONDS IF THEY WANT IT FOR LAST COMMENTS. MATT? >> SURE. QUICKLY, I THINK WE'VE TALKED ABOUT A LOT OF DIFFERENT TYPES OF DRUGS. AND THIS ARE CHALLENGES WITH ALL OF THOSE. WHETHER IT'S GENERICS, THE MILLION DOLLAR DNA TREATMENTS. BUT WE'RE FOCUSED ON HEP C. I THINK IT DESERVES A UNIQUE SPECIAL ARRANGEMENT. PRIMARILY BECAUSE -- AND THE IRONY HERE IS WHEN MEDICAID SAID WE'RE NOT GOING TO COVER EVERYBODY, IT'S GOING TO BE THESE PRESIDENTIALS. YOU KNOW WHO WAS -- PROTOCOLS, YOU KNOW WHO WAS HITTING US THE HARDEST, BANGING THEIR HEADS AGAINST THE WALL WITH THEIR PHRASESTRATION? THE VA. THE VA WAS AT MY DOOR ALL DAY LONG SCREAMING ABOUT HOW UNTENABLE IT WAS FOR MEDICAID NOT TO COVER EVERY ONE. WELL, GUESS WHO RAN OUT OF MONEY DOING WHAT THEY THOUGHT WAS THE RIGHT THING TO DO? HEPATITIS C IS AN INEFFICIENCY DISEASE, A COMMUNICABLE DISEASE. THE CDC CALLS IT THE BIGGEST PUBLIC HEALTH THREAT IN THIS COUNTRY. >> THAT'S YOUR MINUTE. >> WE NEED A SPECIAL SOLUTION TO THAT? WHAT DID WE DO WHEN WE FIGURED OUT SMALLPOX OR POLIO? DID WE SAY WE'VE GOT THESE CURES. WE'LL FIGURE OUT HOW PEOPLE CAN PAY FOR THEM? NO. WE HAD A FEDERAL STRATEGY. THAT'S WHAT I THINK WE NEED. >> SHOULD YOU COME DOWN AFTER AND ASK YOUR QUESTIONS. WE'RE GOING TO GIVE THESE GUISE -- >> THIS IS ON BEHALF OF THE PATIENT. THE PATIENTS. I'M A PATIENT. AND [INDISCERNIBLE] WALK INTO THE DIALYSIS CENTER. I'VE SEEN THE FACE OF HEPATITIS C. MY QUESTION IS SINCE WE HAVE ALL THIS ISSUE ABOUT COVERAGE, WHAT DO YOU GUYS RECOMMEND THAT THE PATIENTS DO? A LOT OF PATIENTS ARE SUFFERING AND THEY WANT TO BE TREATED. I'M ONE OF THOSE PEOPLE. >> OKAY. THANK YOU. BOBBY, YOU GET ONE MINUTE FOR THAT AND ANYBODY ELSE. GO. >> I'D BE HAPPY TO TALK WITH YOU PRIVATELY. IT'S MORE THAN A 30 SECOND ANSWER TO THAT ONE. >> OKAY. >> SO THIS IS A COMPLICATED SET OF ISSUES. I WOULD RECOMMEND WE TAKE A LONG VIEW. A LONG VIEW ABOUT THE COST OF THESE THERAPIES W AND THE SAVINGS THAT OCRY. THE FIRST LONG VIEW. THE SECOND LONG VIEW IS THE PRICE TODAY IS NOT THE PRICE FOREVER. IT WILL BECOME GENERIC. AND THAT SIMPLE SOLUTIONS FEEL GOOD, BUT RARELY LEAD TO THE DESIRED OUTCOME AND THERE ARE ALWAYS UNINTENDED CONSEQUENCES. WE ABSOLUTELY HAVE A PROBLEM WE HAVE TO SORT THROUGH. WE HAVE TO TO THIS CAREFULLY, NOT JUMP TO A SIMPLE SOLUTION, LIKE LET'S HAVE THE GOVERNMENT REGULATE EVERYTHING. >> STEVE. LAST WORD. >> I WOULD SAY THE OUTRAGE AROUND THIS SITUATION IS REAL. I THINK IT'S REALLY IMPORTANT. AND THE REASON THAT THIS IS A GREAT TOPIC FOR AN EPICS GRAND ROUNDS. THE SOLUTION IS NOT SIMPLE. SO AS FLIPPANT AS I CAN BE ABOUT THE PRICE IS TOO DAMMED HIGH, WE CAN MAYBE AGREE ON THAT, MOST OF US. BUT NOT EVERYBODY. AND THE MECHANISMS DO ACHIEVE THE RIGHT KINDS OF ACCESS WITH THE INNOVATION INCENTIVES THAT WE STILL WANT, I THINK, IS A TRICKY SUBJECT. ONE THAT I REALLY DO THINK THAT AMERICANS NEED TO GET MORE INVOLVED IN. >> ALL RIGHT. JOIN ME IN THANKING THESE GUYS FOR A GREAT. [APPLAUSE]. >> THANK YOU FOR A GREAT BEGINNING ETHICS GRAND ROUNDS.