Dr Marshall sets his sights on efforts to control sky-high drug prices in oncology. Watch as he examines the complex financial landscape of cancer care, from costs to advertising to insurance, and the potential impacts of price control efforts with the inflation reduction act.
The Economics of Cancer Care: Who Pays for Progress?
John Marshall, MD: What do you guys think? What do you think I'm looking like today here in Washington D.C. In January 2025? Well, What I'm trying to look like is the new administration, which is moving in just down the street from me there.
There is an unfortunate casket, a hundred-year-old man inside, draped in the American flag. What I think of as a sort of heroic politician. And in a couple of weeks, we're going to have a parade here for next wave of politicians. So, we're all getting ready here in Washington, D.C. For the 2025 ahead. I hope you are out there as well.
Welcome back to Oncology Unscripted. My name is John Marshall shooting to you live from Georgetown University here in Washington, D.C.
And as you know, those of you who are following this, we have been trying to drill down on a government thing called the Inflation Reduction Act, and we've had a couple of episodes on that already and interviewed some important smart people in the space, and we've got another important smart person coming to you in this episode, as well. But I want to talk a little bit more about the specifics of how we got here and the problem at large.
So, let's just look at the cost of the product that we in oncology are putting out day in and day out. So, 95% of new cancer drugs in the US cost $100,000 per year, on average, more than that. And the median annual cost was almost $200,000 just for cancer drugs for one individual. And most of that's being driven by, of course, this new cooler stuff, the gene therapies and viral therapies leading the way. But very interestingly, based on an interesting paper, it didn't cost more if your therapy worked better or had some novel mechanism of action. That didn't matter. So, magnitude of benefit was not connected to cost. It's just going up and up and up.
And, oh, by the way, if you ever watch television or have a phone or have an email, you know that all of these new medicines are being advertised no matter how esoteric the disease is, or the problem is. We have national campaigns, often in the middle of Jeopardy, which makes me think that Jeopardy viewers are having the most illnesses. I know I'm a big Jeopardy viewer. My wife was a Jeopardy champion a long time ago, so I never win at Jeopardy, but I do like watching. But these ads are running all the time. What do you think an ad on national television costs? And every time I see one of those, I'm thinking, well, how many new prescriptions do they have to fill an order to pay for that ad? Based on what I just told you, maybe only one, you know, if you get one new patient at those kinds of prices, maybe it pays for the ad itself. Now, you also know that there is a new group coming to town, and one of the members of this new group, we think, is going to be this guy named RFK Jr., who is compelled to make our nation healthier. So, the first thing he's going to do is get rid of all vaccines that that'll do the trick. But I don't know if you know this one of his big pet peeves is that he would like to get rid of ads. So quit spending all of that money. And by the way, they spend close to 30 billion in 2024 on ads. So, take that 30 billion and quit spending it in direct-to-consumer marketing.
This is what RFK Jr. wants. But he also wants equal pricing. You know we've talked about this before. You're already aware of it. We here in the United States pay more for all of our drugs than anyone else in the world. And sometimes that delta can be a huge difference. And the argument has been, well, we can afford it. And that reinvestment that delta that we're providing the world is going into reinvestment for new drug development. And that's really what the IRA, the Inflation Reduction Act is all about is to try and close that gap. And so, if you thought that might go away under the new administration, it's I think maybe the opposite. They may double down on it if RFK Jr. has his way by taking away ads and leveling the playing field for new payment. And of course, this has got everybody on their heels a bit because they don't know what budgets will look like if they don't have this margin from post marketing, if you will. So, it really put a big wrench in cancer drug development as we've talked about before.
[00:05:12]
MedBuzz: Is Divorce the New Trend in Oncology Partnerships?
Let’s look a little bit of how this is beginning to trickle down into our world of cancer research and cancer care. And I have a couple of sort of high-level things. You probably heard about both of them. One of them is a very, very famous scientist and clinician, Brian Druker, who is essentially He invented Gleevec, got it to come out to treat all the diseases that has been treated, been the head at Oregon for many, many years, a dynamic leader, fundraiser and everything else. Just a couple of weeks ago, on a dime, he resigned. 69 years of age, got plenty of life left in him, I hope. And he basically said, look, we're not aligned with healthcare systems and research. We don't know how the two are going to play together. I work at a big health care system here in the Baltimore, Washington area, and we're trying to maintain an NCI designated comprehensive cancer center inside of a big health care system that values productivity and margin and all of those things. And so, we've been lucky enough at our health care system to maintain that margin, right? But a lot of healthcare systems did not maintain. And so even though there's a big nest of philanthropy that the team there has, the job all of a sudden became too much for Brian. And he said, no, I'm not going to do it anymore. And he's going to go back to his lab and do something different, more focused. It was really rocking our world that news.
I know you've heard about this, is there's trouble up there in Boston. If you remember, lots of the healthcare systems, Dana Farber, Mass General, and the Brigham were all working together. Well, they decided about a year ago to have a divorce. And so, they're splitting up as general and Dana Farber, but it's interesting because then all going to go partner with different folks. So, they're getting a divorce and then kind of remarrying, in new structure. And, and you know what, this was really a split over is that one of the institutions wanted their own cancer building in the hospital. Not like we have here at Georgetown, for example, where it's all over the place. They wanted their own freestanding building. A hard thing to do in the middle of a busy city. So, they got a divorce over what they thought should be the most appropriate cancer care out there.
[00:07:38]
I want to just sort of close this discussion about us. talked about the health care system and the troubles it's having. We talked about the Inflation Reduction Act and the impact on pharma, legislation that may come forward about ads and all of that. So, we talked about that, but what about us, the health care consumer? And you know, it really starts with us here in the United States with this concept of insurance. Now, probably everybody listening out there has car insurance, you have house insurance. That model is you put in five bucks a month and if your house burns down, everybody chips in and builds you a new house. And that works because most people's houses don't burn down that often. You don't have too many car wrecks. So, the insurance model, shared risk, works in that setting.
When health insurance first came along, it was, the only thing that was covered was sort of catastrophic health. You needed an operation. You were in a car wreck. You had something that required being in the hospital. Didn't happen all that often. We all chipped in. And you can pay your five bucks a month and that would cover it. it has evolved to managing hypertension, hypercholesterolemia, erectile dysfunction, and all the other things, you know, obesity, weight loss drugs, etc. All the other things that have become maintenance. We don't have mow-your-grass insurance, right? Where we all agree to chip in, unless you live in a big complex, you all agree to chip in to mow your grass. Then it's everybody's grass, right? So, in healthcare, we're all chipping in to pay for everybody's maintenance. So not catastrophic stuff, maintenance. But then with this health insurance model, we've been removed from the actual costs of what it is to get healthcare. It sometimes feels free. My Medicare-taking father at 90 years of age talks about, well, that won't cost me anything, but wait a second. Yes, it does. pay taxes, my salary here for my healthcare policy, I'm paying. Georgetown who pays the insurance company, right? And they're paying and they would have been paying me. So, what if I instead said, forget it. You're not getting health insurance through work. We'll just increase your salary by whatever you're paying. What we're paying now, you're on your own. To deal with health care costs. Let's go back to cancer drugs. It's $100,000 a year for a cancer drug, and that's a cheap one. If I gave you $10,000 back into your salary and said, okay, instead of health insurance, here's the cash, spend it as you would, you've got to imagine there'd be some competitive pricing. So, this whole price structure we live in in the United States As you know, is a false economy. And it's coming out of our individual pockets to create a bigger pocket, which increases the national debt, by the way, fund our health care and our health care system. So, while I'm very nervous about the upcoming administration, I do think of our health care system as a balloon is continuing to be blown up. And that one day, one day it's going to pop. And so can we be smart enough before it pops to let the air out slowly? All need to talk about this. We need to bring these issues forward. We need to develop a real economy for health care. And we need to think again about the Inflation Reduction Act, the cost of medicines and cancer care and other places as well. Our insurance model and think about how could we reshape that so that it continue to exist to provide excellent health care, but at the same time reduce that cost. And don't let that balloon pop.
[00:11:48]
The IRA’s Ripple Effect: A Candid Conversation with John Newby
Now, I promised you an interview. And the interview today is with John Newby. Now you will see that Mr. Newby is an expert in this world of drug development and costs here for the state of Virginia and this region. And so, I think you're going to find this quite interesting. So, tune in and continue to listen to our interview.
I am honored to be joined by John Newby. He is the CEO of the Virginia Biotech Association, and he is joining us today to talk a little bit about a new challenging subject of the Inflation Reduction Act and its impact on cancer care.
So, John, thank you so much for joining us.
John Newby: Thanks, Dr. Marshall. Happy to be here.
John Marshall, MD: Tell us a little bit about your role and, and what's your crossover with all of this and how the IRA may be important to you.
John Newby: Sure. So, the Virginia Biotechnology Association is a trade group here in Virginia. Our members are life science and biotech companies of all stripes all over the Commonwealth. We have over 300 members and we've been around for 32 years now. We're headquartered out of Richmond, Virginia. We're located on the campus of VCU of the Biotech Park, Virginia Commonwealth University of the Biotech Park.
and our main goal in life is to support our startup companies, survive the gauntlet of this thing called biotechnology entrepreneurship, mainly trying to help them, with obtaining funding from investors for what they're trying to do into putting solutions in the hands of patients and also speaking on behalf of the entire industry from a government relations and policy perspective, federal government, state government to make sure we're protecting our companies anyway we can.
John Marshall, MD: Know, I want to jump right in on that. So, first, thank you for what you're doing. I was just at a meeting this past weekend where a series of biotech companies were presenting to us as colon cancer experts, their ideas. And I used to joke about, there's three guys in a garage, and who are the ones who invented whatever the drug is, or the new approach is, and that's where really innovation is.
Yes, there is some in big biopharma and the like, but a lot of it comes from individuals or small groups that get together, form a biotech company, generate their preliminary data, and that part's relatively affordable, I guess, or there's ways you can get that kind of funding. I used to think that there was just the bucket load of venture capital and others that was around that people were like, let's bet on that one or that one. But that's really been tight lately, as I understand it. And so, to get from that really good idea in this case was around colon cancer too, you know, clinic is a big investment, and that's really difficult nowadays, isn't it?
John Newby: the big investment in time and effort. the larger companies you reference nowadays, typically, like to keep an ear to the ground what's happening in basic science and then translational science and then ultimately, getting that science in the hands of hands of patients, but really on the front end, the risk really is born by the inventors, in some cases, the universities. Before the larger companies come in and acquire those companies, kind of how the ecosystem works. So, it's really on the shoulders of those great folks doing presentations to you to get out there and find the capital, you know, whether it be non-dilutive at the front end with NIH grants or other things all the way through venture capital and ultimately acquisition before a patient can get that therapy in her hands.
John Marshall, MD: And that just takes too long, right? I mean, you know, there in my world, there are people dying down there in my clinic. And how do we get this accelerated so that it's not five to 10 years, but more like one to two years to bring these therapies to market? And I, this, this model of how we found this is, you know, yes some fail, and yes, bets are lost, but it seemed to me this was a very rich pot of, of opportunity that we are unnecessarily delaying.
John Newby: Yeah, we need to do all we can to support this activity at the levels we're talking about. Too many great ideas are left on the shelf, and not funded because the investment environment is challenging always for life science and biotech. We had a good go of it for obvious reasons during the pandemic period, but it's kind of returned to the very difficult periods. But here's, here's the golden rule, good companies will always get funded. Good, good teams always get funded. Good science, mix all that together, get funded. So, we need to support that.
John Marshall, MD: I agree with that. Now, one of the main themes we've been talking about is the Inflation Reduction Act, and our audience has been hearing, you know, how did we get here and, and the current, efforts that are being made to negotiate for drug prices and this kind of stuff. And was in some meetings where those who are doing the investing in new therapies are hesitant right now because of the Inflation Reduction Act and the uncertainty that that's bringing to their bottom line, I guess.
Maybe reflect a bit on that and the impact it's having on the businesses you represent.
John Newby: Well, the bottom line is just talking generically about Any investor, you or I, even on a personal level, we don't want to put our money somewhere where our chance of, achieving our gains. Are basically eliminated. Here, you know, withartificial prices being negotiated air quotes, is, is exactly that circumstance. You have, you have a company that invests millions, if not billions of dollars more often. in their drug pipeline. And if you have a drug that is now subject to this negotiation at some point in the future, whether it be nine years for a small molecule or, at 13-year point for biologics, The government's going to put a price down and, and lock it there, irrespective of how much money it took to get there. And also more importantly, John, you know, there's irrespective of the technologies and cures and treatments that can be gained from that same drug after that 13- or 11-year point that are now no longer going to be obtained as far as a return on investment. So, this is just a, not a good idea broadly speaking, but if you're looking at investors and the incentives. You're basically cutting that incentive off at the, at the hip.
John Marshall, MD: Yeah, I do, you know, I, we've talked a little bit about. US versus ex US, because I do think a lot of drug development depends on the US investment, and the current structure of how things are going. I also have been a drug developer all my career, you know, I do know that. We don't win every one we go after, so there are many medicines that we do put significant investment in that in the end fail.
So, those are losses. So, on the one side, I was hoping that we could get more efficient, like not turn off drug development altogether, but be better at picking the winners. If you will and optimizing that. But I also thought this was an opportunity for regulators to look at, you know, this relationship of drug approvals, patent half-life, intellectual property, and all of this to think about ways of. incentivizing the investment that we are making so that if you do when you get changes in your, you know, your IP or your duration of your, your patent life or something like that. Do you think that sort of evolution could happen as a result of this?
John Newby: I think the way you describe what will be a commonsense way forward is exactly why it's not going to be done anytime soon. You can't reduce all that you said to a bumper sticker. You can't reduce all that you have just said to, we're going to cut drug prices.
John Marshall, MD: Right.
John Newby: So that's the problem. That's really an issue here. it is a very complicated system that the U.S. has to get drugs into the hands of patients, but it's the best in the world. And I think the world recognizes that. And indeed, the world benefits from what we do here in the U.S. Yes, I do think that all those things that you just mentioned should be done eventually to look at things holistically and get to a better place. but that's not really how it's being approached from a political, political will, if you will. So, we have to deal with each attempt from policy makers to help and try to ameliorate the hurt that they're actually doing in this new system.
John Marshall, MD: But, you know, the other side is, as an oncologist particularly, I do a lot of trial-and-error medicine, right? We try a drug or try a therapy, see if it works. It's not inexpensive. It has side effects. You know, I need to be more efficient too. And I think about the payer side of this. Right. So, there's the private payers and then there's the federal payers that are actually funding health care. That money's coming out of yours and my, you know, our pockets, whether whoever we work for our health insurance or taxes. And. That's to a side of this that I've always struggled with the inefficiency of what we do on the other side. So, and again, this is some sort of idealistic world. I've just painted. Of that there would be more recognition of the inefficiency on this side improved development on the other side to a place where we're actually, you know, spending less money for better outcomes.
John Newby: That's the desire. Let me, let me, also throw something else in there. Not only is it the fact, and you know, firsthand this john, that it takes a lot of money and effort to develop drugs. The chances of success are lower than low in many cases. add on to that the threat of the reduced investment in this space, which is what the IRA potentially could do. So, there was a recent survey that was conducted by PhRMA, by the large Pharmaceutical Research Manufacturers Association that we're all familiar with. 78 percent of the companies that they surveyed said they expect to cancel early-stage pipeline projects that no longer makes sense given the short timelines that are being established in the IRA for setting prices for small molecules, large molecules.
So not only at the outset, is it already hard enough to get a drug. successfully through the pipeline. Now I have now I have companies saying, okay, now we're going to take away project money to begin with, because it just doesn't make financial sense, given these artificial deadlines and price, restrictions are going to be put on the drugs.
So, we're getting it from all ends, both from the scientific end, which is already difficult enough. Now the funding ends and we need to change that funding piece and deal with the uncertainties of the science because it is science. but let's not hurt ourselves with cutting ourselves off from the funders with, with such a regime that we're talking about.
John Marshall, MD: And I think it is important for our audience. I know they know this, but you know, cancer, we've sliced and diced it into subgroups that molecular profiling makes smaller and smaller markets for drugs when we get them there. And so, when we talk about trimming the sales, in terms of reinvestment and development, those small markets are the ones that are going to be lost just at a time when in fact, we understand better how to treat the different subgroups. So, I'm anxious about that along with you. Let me ask you one, one last question.
So, what's going to happen next year?
John Newby: If I knew that I, I wouldn't be talking to you right now. we don't know. But you know, I wanted to make one more point, particularly when it comes to this audience and oncology experts and the IRA. So, the IRA does something else as well when it comes to orphan drugs. Most, many orphan drugs are obviously small molecule, targeting cancer, rare diseases, you know, those, those diseases affecting 200,000 or, or, or less, Americans. Currently it really, the IRA does, really hurts incentives for orphan drugs that are primarily for cancer. It only exempts from these price setting, this price setting regime, those orphan drugs that only treat one disease condition. Now that should absolutely make everyone's head spin in this community, right? Because we all know many orphan drugs that are approved in year seven, ultimately go on to be approved for 3, 4, 5, 6 more indications in seven years, eight years, 10 years in the out years. Currently the IRA cuts off that possibility because it says only orphan drugs that are indicated for one disease can be accepted from the price setting regime. Virginia bio and many other organizations, big bio pharma are advocating to change that provision. pretty soon. but that's just yet another example specifically how this impacts this community here, given the orphan drugs are really those small molecules that are at issue in your community.
So, we all need to kind of come together and encourage our policymakers to look at big picture. This is an education process. It's like anything else in our space. Many of the folks on Capitol Hill don't have direct experience in what you do every day. So, it takes time for education, and we have gotten on Capitol Hill and my counterparts across the states and our national organizations have. But it's a process. Who knows what this new administration is going to do? And how, how well they're going to receive, our positions based in science and fact. But all we can do is continue and with your support, get the word out and, and, and encourage our policymakers to do the right thing.
John Marshall, MD: God, let's leave it right there. I think that's a, we, it's a charge and a call to action for us all in the year ahead. This is John Newby. He's the CEO of the Virginia Biotech Association, who's taken some time this morning to share his thoughts on the IRA.
John, thank you so much for joining us.
John Newby: Thank you for having me.
John Marshall, MD: I promised you that a good interview. That was a great interview. We appreciate all of the insights he brings forward as we look forward to the year ahead and all of our both scientific but also financial challenges that we have ahead of us in health care. Nowhere is that brighter shining is the issue more critical than around cancer care, where our therapies are getting more and more effective, but they are also going up and up in cost, and we're going to have to figure out how we're going to manage those two opposing factors for more people to get access to these lifesaving therapies, new innovations, new cures for patients with cancer out there. Join me next time for oncology unscripted, where we'll continue to dissect the world of oncology and healthcare in general. And what you're going to see will surprise you join us
[00:27:53]
Oncology Unscripted With John Marshall: Episode 12: The Economics of Cancer Care: Who Pays for Progress?
[00:00:00]
The Economics of Cancer Care: Who Pays for Progress?
John Marshall, MD: What do you guys think? What do you think I'm looking like today here in Washington D.C. In January 2025? Well, What I'm trying to look like is the new administration, which is moving in just down the street from me there.
There is an unfortunate casket, a hundred-year-old man inside, draped in the American flag. What I think of as a sort of heroic politician. And in a couple of weeks, we're going to have a parade here for next wave of politicians. So, we're all getting ready here in Washington, D.C. For the 2025 ahead. I hope you are out there as well.
Welcome back to Oncology Unscripted. My name is John Marshall shooting to you live from Georgetown University here in Washington, D.C.
And as you know, those of you who are following this, we have been trying to drill down on a government thing called the Inflation Reduction Act, and we've had a couple of episodes on that already and interviewed some important smart people in the space, and we've got another important smart person coming to you in this episode, as well. But I want to talk a little bit more about the specifics of how we got here and the problem at large.
So, let's just look at the cost of the product that we in oncology are putting out day in and day out. So,95% of new cancer drugs in the US cost $100,000 per year, on average, more than that. And the median annual cost was almost $200,000 just for cancer drugs for one individual. And most of that's being driven by, of course, this new cooler stuff, the gene therapies and viral therapies leading the way. But very interestingly, based on an interesting paper, it didn't cost more if your therapy worked better or had some novel mechanism of action. That didn't matter. So, magnitude of benefit was not connected to cost. It's just going up and up and up.
And, oh, by the way, if you ever watch television or have a phone or have an email, you know that all of these new medicines are being advertised no matter how esoteric the disease is, or the problem is. We have national campaigns, often in the middle of Jeopardy, which makes me think that Jeopardy viewers are having the most illnesses. I know I'm a big Jeopardy viewer. My wife was a Jeopardy champion a long time ago, so I never win at Jeopardy, but I do like watching. But these ads are running all the time. What do you think an ad on national television costs? And every time I see one of those, I'm thinking, well, how many new prescriptions do they have to fill an order to pay for that ad? Based on what I just told you, maybe only one, you know, if you get one new patient at those kinds of prices, maybe it pays for the ad itself. Now, you also know that there is a new group coming to town, and one of the members of this new group, we think, is going to be this guy named RFK Jr., who is compelled to make our nation healthier. So, the first thing he's going to do is get rid of all vaccines that that'll do the trick. But I don't know if you know this one of his big pet peeves is that he would like to get rid of ads. So quit spending all of that money. And by the way, they spend close to 30 billion in 2024 on ads. So, take that 30 billion and quit spending it in direct-to-consumer marketing.
This is what RFK Jr. wants. But he also wants equal pricing. You know we've talked about this before. You're already aware of it. We here in the United States pay more for all of our drugs than anyone else in the world. And sometimes that delta can be a huge difference. And the argument has been, well, we can afford it. And that reinvestment that delta that we're providing the world is going into reinvestment for new drug development. And that's really what the IRA, the Inflation Reduction Act is all about is to try and close that gap. And so, if you thought that might go away under the new administration, it's I think maybe the opposite. They may double down on it if RFK Jr. has his way by taking away ads and leveling the playing field for new payment. And of course, this has got everybody on their heels a bit because they don't know what budgets will look like if they don't have this margin from post marketing, if you will. So, it really put a big wrench in cancer drug development as we've talked about before.
[00:05:12] MedBuzz: Is Divorce the New Trend in Oncology Partnerships?
Let’s look a little bit of how this is beginning to trickle down into our world of cancer research and cancer care. And I have a couple of sort of high-level things. You probably heard about both of them. One of them is a very, very famous scientist and clinician, Brian Druker, who is essentially He invented Gleevec, got it to come out to treat all the diseases that has been treated, been the head at Oregon for many, many years, a dynamic leader, fundraiser and everything else. Just a couple of weeks ago, on a dime, he resigned. 69 years of age, got plenty of life left in him, I hope. And he basically said, look, we're not aligned with healthcare systems and research. We don't know how the two are going to play together. I work at a big health care system here in the Baltimore, Washington area, and we're trying to maintain an NCI designated comprehensive cancer center inside of a big health care system that values productivity and margin and all of those things. And so, we've been lucky enough at our health care system to maintain that margin, right? But a lot of healthcare systems did not maintain. And so even though there's a big nest of philanthropy that the team there has, the job all of a sudden became too much for Brian. And he said, no, I'm not going to do it anymore. And he's going to go back to his lab and do something different, more focused. It was really rocking our world that news.
I know you've heard about this, is there's trouble up there in Boston. If you remember, lots of the healthcare systems, Dana Farber, Mass General, and the Brigham were all working together. Well, they decided about a year ago to have a divorce. And so, they're splitting up as general and Dana Farber, but it's interesting because then all going to go partner with different folks. So, they're getting a divorce and then kind of remarrying, in new structure. And, and you know what, this was really a split over is that one of the institutions wanted their own cancer building in the hospital. Not like we have here at Georgetown, for example, where it's all over the place. They wanted their own freestanding building. A hard thing to do in the middle of a busy city. So, they got a divorce over what they thought should be the most appropriate cancer care out there.
[00:07:38]
I want to just sort of close this discussion about us. talked about the health care system and the troubles it's having. We talked about the Inflation Reduction Act and the impact on pharma, legislation that may come forward about ads and all of that. So, we talked about that, but what about us, the health care consumer? And you know, it really starts with us here in the United States with this concept of insurance. Now, probably everybody listening out there has car insurance, you have house insurance. That model is you put in five bucks a month and if your house burns down, everybody chips in and builds you a new house. And that works because most people's houses don't burn down that often. You don't have too many car wrecks. So, the insurance model, shared risk, works in that setting.
When health insurance first came along, it was, the only thing that was covered was sort of catastrophic health. You needed an operation. You were in a car wreck. You had something that required being in the hospital. Didn't happen all that often. We all chipped in. And you can pay your five bucks a month and that would cover it. it has evolved to managing hypertension, hypercholesterolemia, erectile dysfunction, and all the other things, you know, obesity, weight loss drugs, etc. All the other things that have become maintenance. We don't have mow-your-grass insurance, right? Where we all agree to chip in, unless you live in a big complex, you all agree to chip in to mow your grass. Then it's everybody's grass, right? So, in healthcare, we're all chipping in to pay for everybody's maintenance. So not catastrophic stuff, maintenance. But then with this health insurance model, we've been removed from the actual costs of what it is to get healthcare. It sometimes feels free. My Medicare-taking father at 90 years of age talks about, well, that won't cost me anything, but wait a second. Yes, it does. pay taxes, my salary here for my healthcare policy, I'm paying. Georgetown who pays the insurance company, right? And they're paying and they would have been paying me. So, what if I instead said, forget it. You're not getting health insurance through work. We'll just increase your salary by whatever you're paying. What we're paying now, you're on your own. To deal with health care costs. Let's go back to cancer drugs. It's $100,000 a year for a cancer drug, and that's a cheap one. If I gave you $10,000 back into your salary and said, okay, instead of health insurance, here's the cash, spend it as you would, you've got to imagine there'd be some competitive pricing. So, this whole price structure we live in in the United States As you know, is a false economy. And it's coming out of our individual pockets to create a bigger pocket, which increases the national debt, by the way, fund our health care and our health care system. So, while I'm very nervous about the upcoming administration, I do think of our health care system as a balloon is continuing to be blown up. And that one day, one day it's going to pop. And so can we be smart enough before it pops to let the air out slowly? All need to talk about this. We need to bring these issues forward. We need to develop a real economy for health care. And we need to think again about the Inflation Reduction Act, the cost of medicines and cancer care and other places as well. Our insurance model and think about how could we reshape that so that it continue to exist to provide excellent health care, but at the same time reduce that cost. And don't let that balloon pop.
[00:11:48]
The IRA’s Ripple Effect: A Candid Conversation with John Newby
Now, I promised you an interview. And the interview today is with John Newby. Now you will see that Mr. Newby is an expert in this world of drug development and costs here for the state of Virginia and this region. And so, I think you're going to find this quite interesting. So, tune in and continue to listen to our interview.
I am honored to be joined by John Newby. He is the CEO of the Virginia Biotech Association, and he is joining us today to talk a little bit about a new challenging subject of the Inflation Reduction Act and its impact on cancer care.
So, John, thank you so much for joining us.
John Newby: Thanks, Dr. Marshall. Happy to be here.
John Marshall, MD: Tell us a little bit about your role and, and what's your crossover with all of this and how the IRA may be important to you.
John Newby: Sure. So, the Virginia Biotechnology Association is a trade group here in Virginia. Our members are life science and biotech companies of all stripes all over the Commonwealth. We have over 300 members and we've been around for 32 years now. We're headquartered out of Richmond, Virginia. We're located on the campus of VCU of the Biotech Park, Virginia Commonwealth University of the Biotech Park.
and our main goal in life is to support our startup companies, survive the gauntlet of this thing called biotechnology entrepreneurship, mainly trying to help them, with obtaining funding from investors for what they're trying to do into putting solutions in the hands of patients and also speaking on behalf of the entire industry from a government relations and policy perspective, federal government, state government to make sure we're protecting our companies anyway we can.
John Marshall, MD: Know, I want to jump right in on that. So, first, thank you for what you're doing. I was just at a meeting this past weekend where a series of biotech companies were presenting to us as colon cancer experts, their ideas. And I used to joke about, there's three guys in a garage, and who are the ones who invented whatever the drug is, or the new approach is, and that's where really innovation is.
Yes, there is some in big biopharma and the like, but a lot of it comes from individuals or small groups that get together, form a biotech company, generate their preliminary data, and that part's relatively affordable, I guess, or there's ways you can get that kind of funding. I used to think that there was just the bucket load of venture capital and others that was around that people were like, let's bet on that one or that one. But that's really been tight lately, as I understand it. And so, to get from that really good idea in this case was around colon cancer too, you know, clinic is a big investment, and that's really difficult nowadays, isn't it?
John Newby: the big investment in time and effort. the larger companies you reference nowadays, typically, like to keep an ear to the ground what's happening in basic science and then translational science and then ultimately, getting that science in the hands of hands of patients, but really on the front end, the risk really is born by the inventors, in some cases, the universities. Before the larger companies come in and acquire those companies, kind of how the ecosystem works. So, it's really on the shoulders of those great folks doing presentations to you to get out there and find the capital, you know, whether it be non-dilutive at the front end with NIH grants or other things all the way through venture capital and ultimately acquisition before a patient can get that therapy in her hands.
John Marshall, MD: And that just takes too long, right? I mean, you know, there in my world, there are people dying down there in my clinic. And how do we get this accelerated so that it's not five to 10 years, but more like one to two years to bring these therapies to market? And I, this, this model of how we found this is, you know, yes some fail, and yes, bets are lost, but it seemed to me this was a very rich pot of, of opportunity that we are unnecessarily delaying.
John Newby: Yeah, we need to do all we can to support this activity at the levels we're talking about. Too many great ideas are left on the shelf, and not funded because the investment environment is challenging always for life science and biotech. We had a good go of it for obvious reasons during the pandemic period, but it's kind of returned to the very difficult periods. But here's, here's the golden rule, good companies will always get funded. Good, good teams always get funded. Good science, mix all that together, get funded. So, we need to support that.
John Marshall, MD: I agree with that. Now, one of the main themes we've been talking about is the Inflation Reduction Act, and our audience has been hearing, you know, how did we get here and, and the current, efforts that are being made to negotiate for drug prices and this kind of stuff. And was in some meetings where those who are doing the investing in new therapies are hesitant right now because of the Inflation Reduction Act and the uncertainty that that's bringing to their bottom line, I guess.
Maybe reflect a bit on that and the impact it's having on the businesses you represent.
John Newby: Well, the bottom line is just talking generically about Any investor, you or I, even on a personal level, we don't want to put our money somewhere where our chance of, achieving our gains. Are basically eliminated. Here, you know, with artificial prices being negotiated air quotes, is, is exactly that circumstance. You have, you have a company that invests millions, if not billions of dollars more often. in their drug pipeline. And if you have a drug that is now subject to this negotiation at some point in the future, whether it be nine years for a small molecule or, at 13-year point for biologics, The government's going to put a price down and, and lock it there, irrespective of how much money it took to get there. And also more importantly, John, you know, there's irrespective of the technologies and cures and treatments that can be gained from that same drug after that 13- or 11-year point that are now no longer going to be obtained as far as a return on investment. So, this is just a, not a good idea broadly speaking, but if you're looking at investors and the incentives. You're basically cutting that incentive off at the, at the hip.
John Marshall, MD: Yeah, I do, you know, I, we've talked a little bit about. US versus ex US, because I do think a lot of drug development depends on the US investment, and the current structure of how things are going. I also have been a drug developer all my career, you know, I do know that. We don't win every one we go after, so there are many medicines that we do put significant investment in that in the end fail.
So, those are losses. So, on the one side, I was hoping that we could get more efficient, like not turn off drug development altogether, but be better at picking the winners. If you will and optimizing that. But I also thought this was an opportunity for regulators to look at, you know, this relationship of drug approvals, patent half-life, intellectual property, and all of this to think about ways of. incentivizing the investment that we are making so that if you do when you get changes in your, you know, your IP or your duration of your, your patent life or something like that. Do you think that sort of evolution could happen as a result of this?
John Newby: I think the way you describe what will be a commonsense way forward is exactly why it's not going to be done anytime soon. You can't reduce all that you said to a bumper sticker. You can't reduce all that you have just said to, we're going to cut drug prices.
John Marshall, MD: Right.
John Newby: So that's the problem. That's really an issue here. it is a very complicated system that the U.S. has to get drugs into the hands of patients, but it's the best in the world. And I think the world recognizes that. And indeed, the world benefits from what we do here in the U.S. Yes, I do think that all those things that you just mentioned should be done eventually to look at things holistically and get to a better place. but that's not really how it's being approached from a political, political will, if you will. So, we have to deal with each attempt from policy makers to help and try to ameliorate the hurt that they're actually doing in this new system.
John Marshall, MD: But, you know, the other side is, as an oncologist particularly, I do a lot of trial-and-error medicine, right? We try a drug or try a therapy, see if it works. It's not inexpensive. It has side effects. You know, I need to be more efficient too. And I think about the payer side of this. Right. So, there's the private payers and then there's the federal payers that are actually funding health care. That money's coming out of yours and my, you know, our pockets, whether whoever we work for our health insurance or taxes. And. That's to a side of this that I've always struggled with the inefficiency of what we do on the other side. So, and again, this is some sort of idealistic world. I've just painted. Of that there would be more recognition of the inefficiency on this side improved development on the other side to a place where we're actually, you know, spending less money for better outcomes.
John Newby: That's the desire. Let me, let me, also throw something else in there. Not only is it the fact, and you know, firsthand this john, that it takes a lot of money and effort to develop drugs. The chances of success are lower than low in many cases. add on to that the threat of the reduced investment in this space, which is what the IRA potentially could do. So, there was a recent survey that was conducted by PhRMA, by the large Pharmaceutical Research Manufacturers Association that we're all familiar with. 78 percent of the companies that they surveyed said they expect to cancel early-stage pipeline projects that no longer makes sense given the short timelines that are being established in the IRA for setting prices for small molecules, large molecules.
So not only at the outset, is it already hard enough to get a drug. successfully through the pipeline. Now I have now I have companies saying, okay, now we're going to take away project money to begin with, because it just doesn't make financial sense, given these artificial deadlines and price, restrictions are going to be put on the drugs.
So, we're getting it from all ends, both from the scientific end, which is already difficult enough. Now the funding ends and we need to change that funding piece and deal with the uncertainties of the science because it is science. but let's not hurt ourselves with cutting ourselves off from the funders with, with such a regime that we're talking about.
John Marshall, MD: And I think it is important for our audience. I know they know this, but you know, cancer, we've sliced and diced it into subgroups that molecular profiling makes smaller and smaller markets for drugs when we get them there. And so, when we talk about trimming the sales, in terms of reinvestment and development, those small markets are the ones that are going to be lost just at a time when in fact, we understand better how to treat the different subgroups. So, I'm anxious about that along with you. Let me ask you one, one last question.
So, what's going to happen next year?
John Newby: If I knew that I, I wouldn't be talking to you right now. we don't know. But you know, I wanted to make one more point, particularly when it comes to this audience and oncology experts and the IRA. So, the IRA does something else as well when it comes to orphan drugs. Most, many orphan drugs are obviously small molecule, targeting cancer, rare diseases, you know, those, those diseases affecting 200,000 or, or, or less, Americans. Currently it really, the IRA does, really hurts incentives for orphan drugs that are primarily for cancer. It only exempts from these price setting, this price setting regime, those orphan drugs that only treat one disease condition. Now that should absolutely make everyone's head spin in this community, right? Because we all know many orphan drugs that are approved in year seven, ultimately go on to be approved for 3, 4, 5, 6 more indications in seven years, eight years, 10 years in the out years. Currently the IRA cuts off that possibility because it says only orphan drugs that are indicated for one disease can be accepted from the price setting regime. Virginia bio and many other organizations, big bio pharma are advocating to change that provision. pretty soon. but that's just yet another example specifically how this impacts this community here, given the orphan drugs are really those small molecules that are at issue in your community.
So, we all need to kind of come together and encourage our policymakers to look at big picture. This is an education process. It's like anything else in our space. Many of the folks on Capitol Hill don't have direct experience in what you do every day. So, it takes time for education, and we have gotten on Capitol Hill and my counterparts across the states and our national organizations have. But it's a process. Who knows what this new administration is going to do? And how, how well they're going to receive, our positions based in science and fact. But all we can do is continue and with your support, get the word out and, and, and encourage our policymakers to do the right thing.
John Marshall, MD: God, let's leave it right there. I think that's a, we, it's a charge and a call to action for us all in the year ahead. This is John Newby. He's the CEO of the Virginia Biotech Association, who's taken some time this morning to share his thoughts on the IRA.
John, thank you so much for joining us.
John Newby: Thank you for having me.
John Marshall, MD: I promised you that a good interview. That was a great interview. We appreciate all of the insights he brings forward as we look forward to the year ahead and all of our both scientific but also financial challenges that we have ahead of us in health care. Nowhere is that brighter shining is the issue more critical than around cancer care, where our therapies are getting more and more effective, but they are also going up and up in cost, and we're going to have to figure out how we're going to manage those two opposing factors for more people to get access to these lifesaving therapies, new innovations, new cures for patients with cancer out there. Join me next time for oncology unscripted, where we'll continue to dissect the world of oncology and healthcare in general. And what you're going to see will surprise you join us
[00:27:53]