Ben Gilbert: commitment

Transcript context

…A big part of it is the production and infrastructure side of things, but the other part is the go to market. Pharma almost becomes like the enterprise software industry. At the end of the day, there only are a few companies at scale that have the infrastructure and the go to market to operate. Yes, you can build a big company on top of or underneath Microsoft, Oracle, Amazon, Salesforce, or Google. They're the ones with the infrastructure, they're the ones with the channels. Yeah, it's an interesting analogy. I hadn't thought of it that way. Yeah, this is a good place to try to understand the pharma value chain as it exists today. I think first off, we should say, you basically can't. I'm actually not sure there's a human who can hold all of it in their head, and we won't promise to make this comprehensive. But it is worth knowing a few key concepts and the players involved. I should say, this whole thing only applies to the US market, which many of you listening in other places will be laughing and saying, why is this so complicated? But yes, this is how the US market functions. I wrote a sentence, David, that I thought would be a fun way to break it down. That simple sentence is, a patient buys a drug. But really, actually that's not how it works. That's like a butterfly flaps its wings. A person doesn't merely buy a drug. Let's actually name all the parties, starting with the manufacturer. A manufacturer like Novo Nordisk develops a drug. They sell it to distributors like McKesson or Cardinal Health, who then sell the drug to pharmacies like CVS or your local neighborhood store. The pharmacy then charges a price at the window to a customer. So far, there's nothing different about how this is working from any retail supply chain, but here's where it gets weird. In healthcare, when a consumer goes up to the pharmacy window, they typically don't pay their own money for the price that the pharmacy actually puts on the register, their insurance company does. The insurance company doesn't want to pay whatever price the pharma manufacturer picked for their drug. They have huge scale to throw around, so they go negotiate with the pharma manufacturer to try to get some kind of discounted rate. But rather than do that themselves, insurance companies outsource that task to a new type of company called a Pharmacy Benefits Manager or a PBM. The PBM negotiates with the pharma company for a discount, often in the form of a rebate, that the pharma company pays back to the PBM. They then take that discount. They keep some of it for themselves, and then they pass some of it back to the insurance company, who can then choose to share it with the employer in some way. As you can imagine, when there are these many middlemen in a transaction... Yeah, so that's four middlemen?…

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