Latest / Making Medicine / Beyond the Sticker Price: The Real Economics of a $480,000 Cancer Drug

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Beyond the Sticker Price: The Real Economics of a $480,000 Cancer Drug · Making Medicine

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  Speaker 1: At Making Medicine, we're reporting on the headlines, not making
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  Speaker 1: medical recommendations. For personal health questions, always ask your doctor.
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  Speaker 1: Nothing in this episode constitutes investment, financial, or legal advice.
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  Speaker 1: Consult your own advisors before making decisions. And we're here
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  Speaker 1: with the headline of $ 480, 000. But it's almost an irrelevant headline.
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  Speaker 1: It's not a number that is designed for an individual
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  Speaker 1: patient to pay. The reality is the $ 480, 000 is an
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  Speaker 1: input into a complex, frankly, black box of negotiations with payers.
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  Speaker 1: Welcome back to the Making Medicine podcast, where science, policy,
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  Speaker 1: and innovation meet. I'm your host, John Stanford. With Congress
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  Speaker 1: back in session, we're taking a short break from our
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  Speaker 1: How America Makes Medicine series. To make sure we cover
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  Speaker 1: all the breaking news happening in Washington and across the
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  Speaker 1: industry right now. Don't worry, we'll be picking the series
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  Speaker 1: back up in October. We've got some guests closing it
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  Speaker 1: out that you will not want to miss. But for
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  Speaker 1: this episode, let's get into everything that's been happening over
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  Speaker 1: the past few weeks. A new round of White House
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  Speaker 1: drug pricing deals. A bill in the Senate targeting biotech
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  Speaker 1: deals with China. News on PDUFA and who might be
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  Speaker 1: running the FDA next. a conversation about a new medicine
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  Speaker 1: and how it's priced, and then we'll wrap with our
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  Speaker 1: FDA approvals corner. Let's get into the show. Our first
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  Speaker 1: headline comes out of the White House and their continued
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  Speaker 1: efforts to implement MFN, Most Favored Nation, deals. On Monday,
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  Speaker 1: the administration unveiled that next round of deals, but this
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  Speaker 1: time with nine mid-sized drug makers, Alcon, Astellas, B1 Medicines,
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  Speaker 1: Bridge Bio, CSL, Kauai Akiran, Sun Pharma, Teva, and UCB.
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  Speaker 1: This comes about four months after the White House wrapped
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  Speaker 1: up its first round of MFN deals with 17 of
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  Speaker 1: the biggest names in pharma. What's notable this time is
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  Speaker 1: the geographic spread. This new group includes companies from India, Israel, Japan,
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  Speaker 1: and Australia, not just the US and Europe. These companies
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  Speaker 1: were being touted as mid-sized biotechs, a popular term that
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  Speaker 1: has come up in recent years, but in some cases,
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  Speaker 1: they're anything but. All nine are listed on the public
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  Speaker 1: stock exchanges, with market caps ranging from just south at
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  Speaker 1: $ 10 billion all the way northwards of $ 60 billion, and
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  Speaker 1: some of them have thousands of employees worldwide. Many of
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  Speaker 1: them are multinational pharmas actually specializing in generics. The smallest,
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  Speaker 1: Bridge Bio, lists just one approved drug on the market,
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  Speaker 1: but with a pipeline of half a dozen others. For comparison,
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  Speaker 1: the market caps of the original 17 companies range from
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  Speaker 1: Regeneron's about $ 70 billion to Eli Lilly's fluctuation right around
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  Speaker 1: a trillion dollars. So these are the agreements that have
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  Speaker 1: come together as we go down in size from the
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  Speaker 1: largest pharmas already announced. Under the agreements, these companies are
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  Speaker 1: committing to lower Medicaid prices on drugs, treating things like hemophilia, Parkinson's,
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  Speaker 1: macular degeneration, glaucoma, liver disease, skin conditions, and several types
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  Speaker 1: of cancer. The White House hasn't released a lot of
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  Speaker 1: the details yet, nor has HHS on which specific drugs
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  Speaker 1: are covered and what the actual discounts look like. But
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  Speaker 1: there's also a manufacturing angle here. Collectively, these companies are
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  Speaker 1: pledging at least $ 20 billion in U.S. investments. and several
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  Speaker 1: are agreeing to contribute active pharmaceutical ingredients, or APIs, to
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  Speaker 1: the government's strategic API reserve. That's aimed at reducing U.S.
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  Speaker 1: reliance on overseas API production, most of which is concentrated
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  Speaker 1: in China and India. And as with the first round
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  Speaker 1: of deals, tariff relief is clearly part of the calculus.
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  Speaker 1: UCB and B1 have both pointed to tariff exemptions as
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  Speaker 1: part of why they took these deals in the first place.
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  Speaker 1: B1 also leaned on its participation in the Generous program
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  Speaker 1: out of HHS. That's the rebate framework where manufacturers give
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  Speaker 1: discounts to states for certain drugs. And Bridge Bio is
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  Speaker 1: expanding Medicaid access to its drug Atruby under that same model.
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  Speaker 1: It's worth noting. This whole approach has plenty of critics
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  Speaker 1: and I would say incubate shares concerns. A pricing model
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  Speaker 1: that may be manageable for a diversified pharmaceutical company with
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  Speaker 1: dozens of products can look very different for emerging biotech
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  Speaker 1: or midsize biotech whose entire future may depend on a
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  Speaker 1: single asset. We know all too well that for some
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  Speaker 1: of these companies with one to three drugs on market
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  Speaker 1: is the revenues from those drugs that drive all funding
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  Speaker 1: for R & D or acquisition. That's why the concern
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  Speaker 1: with MFN has never been about the price of medicines
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  Speaker 1: already on the market. It's about what happens upstream and
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  Speaker 1: whether investors are still willing to fund the next company,
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  Speaker 1: the next clinical trial, and the next potential breakthrough if
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  Speaker 1: the inspected return on innovation keeps shrinking. So as the
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  Speaker 1: administration touts these deals ahead of a politically turbulent midterm
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  Speaker 1: election and looks to expand these agreements to a broader
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  Speaker 1: set of companies, policymakers, particularly those in Congress, should be
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  Speaker 1: careful not to treat these voluntary deals with the administration
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  Speaker 1: as a sign that wholesale codification of this pricing policy
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  Speaker 1: is a viable solution. The making medicine take on all
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  Speaker 1: of this is something listeners will have heard before. And yes,
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  Speaker 1: the administration is certainly going to tout these deals ahead
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  Speaker 1: of the election. But the reality is, is these are
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  Speaker 1: voluntary deals being struck between companies and the administrations. They're
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  Speaker 1: heavy handed, to be sure, with threats of tariffs or
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  Speaker 1: other regulatory proposals that we'll get into in a second.
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  Speaker 1: But at the end of the day, each company is
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  Speaker 1: trying to navigate what's best for it. That's wildly different
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  Speaker 1: than Congress trying to impose or codify this program and
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  Speaker 1: most favored nation pricing programs. across the entire ecosystem. And
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  Speaker 1: we'll surely hear more out of the White House about
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  Speaker 1: how Congress needs to codify this program. But for now,
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  Speaker 1: the economics of every biotech remain fundamentally different. And going
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  Speaker 1: a one size fits all drug pricing proposal approach has
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  Speaker 1: a known outcome, fewer medicines for patients, fewer investment into
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  Speaker 1: the ecosystem. We'll keep watching this as more details come
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  Speaker 1: out about these particular companies, and we're sure that the
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  Speaker 1: White House will be trying to shout on top of
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  Speaker 1: every hilltop about the outcomes with these companies and the
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  Speaker 1: 17 prior. But speaking of MFN pricing, we could be
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  Speaker 1: looking at another significant announcement in the next few days.
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  Speaker 1: CMS is expected to move forward on its Globe and
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  Speaker 1: Guard models, with the final rules expected as soon as
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  Speaker 1: this week. For those of you who confuse Globe and Guard,
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  Speaker 1: here's how I remember it. Globe with a B in it.
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  Speaker 1: covers Part B, the drugs administered in a clinic or
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  Speaker 1: doctor's office. Guard with a D applies to Medicare Part D,
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  Speaker 1: the drugs picked up at a pharmacy. Under both, if
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  Speaker 1: a drug's U.S. price is higher than what it sells
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  Speaker 1: in a set of comparator countries, Medicare reimbursement gets pulled
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  Speaker 1: down to that international benchmark. Unlike the voluntary generous model
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  Speaker 1: or these one-off White House deals, participation in Globe and
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  Speaker 1: Guard isn't optional. It applies across the board. Globe is
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  Speaker 1: slated to start October 1st, right around the corner, with
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  Speaker 1: guard following in January. Incubate, the makers of the Making
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  Speaker 1: Medicine podcast, submitted comments on these proposals back in February,
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  Speaker 1: sharing that we strongly oppose these models and urge CMS
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  Speaker 1: to withdraw the proposal in its entirety. We'll drop a
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  Speaker 1: link to our letter in the show notes. We'll keep
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  Speaker 1: you updated on CMS movement, which could happen any day now.
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  Speaker 1: I'll note that many of Incubate's members, the life science
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  Speaker 1: venture funds across the country, also commented how concerning that
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  Speaker 1: this effort to put in widespread price controls would have
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  Speaker 1: on their ability to invest in new medicines. One final
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  Speaker 1: editorial on the upcoming Globe and Guard comments and their
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  Speaker 1: final rule is that this seems to be an end
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  Speaker 1: run around Congress. In the president's State of the Union,
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  Speaker 1: he asked Congress to codify his most favored nation proposals.
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  Speaker 1: And on both sides of the aisle, There's been opposition.
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  Speaker 1: That's why we haven't seen Republicans and Democrats alike, who
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  Speaker 1: certainly in a midterm election year are talking a lot
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  Speaker 1: about drug prices and health care prices, not move forward.
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  Speaker 1: It seems that these proposals are even a bit too
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  Speaker 1: far for Congress to take action. And so as this
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  Speaker 1: comes to a final rule, another conversation will be under
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  Speaker 1: what authority these regs will be acting like laws and
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  Speaker 1: the potential impacts they could have. For our second headline,
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  Speaker 1: let's shift from regulations in the administration over to Congress.
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  Speaker 1: Back in early August, Senators Pete Ricketts and Alyssa Slotkin
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  Speaker 1: introduced the Biotech Investment National Security Act, or BINSA, in
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  Speaker 1: the Senate. It's a bipartisan effort, and it mirrors a
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  Speaker 1: House version that Representatives John Molinar and Debbie Dingell introduced
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  Speaker 1: back in June. Here's what it would actually do, since
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  Speaker 1: it's been talked about in a lot of places in media,
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  Speaker 1: but hasn't really crystallized. BINSA would amend the COINS Act,
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  Speaker 1: that's the Comprehensive Outbound Investment National Security Act, and would
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  Speaker 1: add biotechnology to the list of sectors subject to federal
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  Speaker 1: outbound investment screening. In practice... That means U.S. pharmaceutical licensing deals,
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  Speaker 1: joint ventures, and equity investments involving Chinese entities would need
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  Speaker 1: to go through a Treasury Department review before they could
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  Speaker 1: move forward. The bill would also require the Secretary of Defense,
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  Speaker 1: now the Secretary of War, to weigh in within 60
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  Speaker 1: days of enactment on whether capital flowing into Chinese biotech
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  Speaker 1: is a national security risk. If this sounds familiar, it's
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  Speaker 1: because this is simultaneous to Treasury's own authority to consider
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  Speaker 1: adding biotech into the Coins Act alongside AI and quantum initiatives.
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  Speaker 1: So there are two tracks here looking at the same issue.
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  Speaker 1: Treasury could, on its own, add biotech to the COINS
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  Speaker 1: Act coverage and talk about how it would review and
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  Speaker 1: screen outbound investment. The BINSA Act in Congress turns up
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  Speaker 1: the heat on that a little bit, and would also
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  Speaker 1: mandate it, not giving Treasury the choice of whether or
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  Speaker 1: not to add biotech. But they both get to the
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  Speaker 1: broader conversation about China's rise in biotech. Whether it's through
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  Speaker 1: the Treasury Department or efforts like BINSA, it's not a
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  Speaker 1: surprise that policymakers are taking a hard look at what
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  Speaker 1: can only be described as the rise of Chinese biotech superpower.
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  Speaker 1: We certainly have a peer in China in terms of
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  Speaker 1: developing new molecules and assets. And a number that's been
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  Speaker 1: pointed to a lot justifying this additional regulatory construct is
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  Speaker 1: that in 2025, there was announced $ 136 billion in licensing
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  Speaker 1: deals between U.S. and European pharma companies and Chinese biotechs,
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  Speaker 1: up from under $ 5 billion just five years earlier. But
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  Speaker 1: that $ 136 billion... and the concept of the scale of
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  Speaker 1: investment having there has always been something that the team
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  Speaker 1: at Making Medicine wanted to look further at. In reality,
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  Speaker 1: that $ 136 billion represents the maximum full potential. If every
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  Speaker 1: biotech out of China that has done a licensing deal
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  Speaker 1: comes to fruition, if every milestone payment is made If
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  Speaker 1: every piece of clinical data comes together perfectly, then yes,
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  Speaker 1: it's true, there could be $ 136 billion worth of deals
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  Speaker 1: going back to these Chinese biotechs. But we know that
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  Speaker 1: isn't reality. We know that in reality, most of these
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  Speaker 1: companies and out-licensing deals will fail. That's the reality of biotech.
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  Speaker 1: And while everything has been done to de-risk these assets
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  Speaker 1: before more investment comes in, it just simply can't be
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  Speaker 1: expected that everything is going to be perfect. Kendall Square
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  Speaker 1: has its share of failures. So does the Bay Area.
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  Speaker 1: So we actually have a better way of thinking about
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  Speaker 1: how much money actually transacted. And we know that number
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  Speaker 1: is probably underneath $ 10 billion. Still a substantial sum. Still
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  Speaker 1: certainly an uptick from where we were in 2020. But
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  Speaker 1: we have to have a grounded debate here. And we
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  Speaker 1: can't be telling policymakers that in reality $ 136 billion was
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  Speaker 1: entered into Chinese bank accounts. That simply isn't the case.
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  Speaker 1: And if, even if, all of these deals materialized into
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  Speaker 1: assets and all the data came in swimmingly, that would
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  Speaker 1: actually be a huge victory. Yes, the Chinese biotech industry
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  Speaker 1: would have seen the upside to the tune of $ 130 billion,
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  Speaker 1: but trillions of dollars of value would be created in
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  Speaker 1: the U.S. And that's something that seems to be missing
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  Speaker 1: in this conversation. And one of our earlier guests in
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  Speaker 1: our How America Makes Medicine episode talked about it well.
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  Speaker 1: We'll link to that episode in the comments because I
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  Speaker 1: think it's pivotal that we understand this. If China is
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  Speaker 1: seeing an upside, it likely means that the U.S. is
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  Speaker 1: seeing it as well. The value creation that happens. Take
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  Speaker 1: a look at UCB and Candid Therapeutics. So much of
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  Speaker 1: that value, north of 90% of that $ 2 billion, is
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  Speaker 1: going to stay here in the United States. So again,
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  Speaker 1: if that $ 136 billion comes to fruition... we'll know that
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  Speaker 1: trillions of dollars of value will have been created here
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  Speaker 1: in the United States and in Europe, not to mention dozens,
• 13:37
  Speaker 1: if not hundreds, of new medicines for patients around the world.
• 13:41
  Speaker 1: It's also worth covering whether Binsa or Treasury takes action,
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  Speaker 1: what it's actually doing. And it should be clear that
• 13:48
  Speaker 1: Incubate has weighed in with narrow concerns about Treasury adding biotech,
• 13:54
  Speaker 1: as well as broader concerns with Binsa, which is certainly
• 13:57
  Speaker 1: written more comprehensively. We've said in previous episodes that we
• 14:01
  Speaker 1: certainly need APIs and KSMs on Shored, or it's certainly
• 14:05
  Speaker 1: friendly Shored. But some of these additional proposals do seem
• 14:08
  Speaker 1: to go a bridge too far. That's because most of
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  Speaker 1: the capital isn't flowing out to build Chinese biotech capacity.
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  Speaker 1: The current construct is U.S. and European companies licensing these
• 14:19
  Speaker 1: promising Chinese discovered assets. A mandatory treasury review on that
• 14:24
  Speaker 1: pipeline doesn't stop China's biotech sector from advancing. Instead, it
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  Speaker 1: slows down the deals that let American companies bring those
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  Speaker 1: innovations to U.S. patients first. And review timelines matter enormously
• 14:37
  Speaker 1: in biotech. A licensing deal that sits in a treasury
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  Speaker 1: queue for months can mean a molecule moves to a
• 14:43
  Speaker 1: competitor somewhere else around the globe. It also may mean
• 14:46
  Speaker 1: that a clinical timeline slows down or slips by. There's
• 14:50
  Speaker 1: also real concern about how broadly biotech gets defined in BINSA.
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  Speaker 1: If the scope sweeps in routine research collaborations, earliest stage licensing,
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  Speaker 1: and academic partnerships alongside genuinely sensitive transactions, you end up
• 15:04
  Speaker 1: chilling exactly the kind of scientific exchange that helped keep
• 15:08
  Speaker 1: the U.S. ahead. A 60-day DOD national security determination layered
• 15:13
  Speaker 1: on top of those CFIUS-style tools creates a duplicative review
• 15:17
  Speaker 1: process without a clear sense of what gap it's filling.
• 15:20
  Speaker 1: Right now, BINSA hasn't passed, it hasn't even been considered,
• 15:24
  Speaker 1: and it's working its way through the legislative process. but
• 15:27
  Speaker 1: it's already generating real pushback from industry. So this will
• 15:30
  Speaker 1: be one we're watching closely in the weeks and months
• 15:33
  Speaker 1: ahead as the 119th Congress finishes up. And it's important
• 15:37
  Speaker 1: that we continue to have this debate in daylight. It
• 15:40
  Speaker 1: seems premature for Binza to be gaining strength when Treasury
• 15:44
  Speaker 1: hasn't even put out its proposed rule for coins. This
• 15:48
  Speaker 1: will be one of the more consequential policy fights ever.
• 15:50
  Speaker 1: heading into the fall. Another headline out of August that
• 15:53
  Speaker 1: we touched on is who's going to be running the
• 15:55
  Speaker 1: FDA at such a consequential time. On August 19th, President
• 16:00
  Speaker 1: Trump announced he's nominating Dr. Heidi Overton to be the
• 16:03
  Speaker 1: next FDA commissioner. Overton currently serves as deputy assistant to
• 16:07
  Speaker 1: the president for domestic policy at the White House, where
• 16:10
  Speaker 1: she's worked closely with HHS Secretary RFK Jr., and CMS
• 16:14
  Speaker 1: Administrator Dr. Oz. She's a physician by training and has
• 16:18
  Speaker 1: also had a stint in the first Trump administration before
• 16:21
  Speaker 1: spending time at the related think tank, America First Policy Institute.
• 16:26
  Speaker 1: This fills a seat that's been empty since May, when Dr.
• 16:29
  Speaker 1: McCary resigned after about 13 months on the job. Fast
• 16:32
  Speaker 1: forward to August and some other names thrown around to
• 16:35
  Speaker 1: be sure, but it was Dr. Overton who ultimately got
• 16:38
  Speaker 1: the nomination. But she still has to get through a
• 16:40
  Speaker 1: Senate confirmation, And early signs suggest that won't be a
• 16:44
  Speaker 1: simple process. Senator Bill Cassidy of Louisiana, who chairs the
• 16:48
  Speaker 1: Senate HELP Committee, will oversee the nomination in his committee.
• 16:52
  Speaker 1: And he's publicly said that he has, quote, strong concerns. Unsurprisingly,
• 16:57
  Speaker 1: on the other side of the aisle, ranking member Senator
• 17:00
  Speaker 1: Patty Murray of Washington has already said she'll be voting no.
• 17:04
  Speaker 1: As of this week, President Trump has said that he
• 17:06
  Speaker 1: wants her confirmed before the midterms in November. Reportedly, Secretary
• 17:11
  Speaker 1: Kennedy wants it done even faster. But the Senate isn't
• 17:14
  Speaker 1: back in session until mid-September, and it will recess again
• 17:18
  Speaker 1: to allow people to go out and campaign. So there's
• 17:20
  Speaker 1: a very tight window here to get this done. There's
• 17:24
  Speaker 1: another reason we should be watching the timing for biotech.
• 17:27
  Speaker 1: The next FDA commissioner will likely be taking over right
• 17:31
  Speaker 1: in the middle of PDUFA 8. the reauthorization of the FDA.
• 17:35
  Speaker 1: The FDA and industry just wrapped up their negotiations and
• 17:38
  Speaker 1: proposed commitment letter, which will govern the prescription drug user
• 17:42
  Speaker 1: fee program from 2028 through 2032 once Congress approves it.
• 17:47
  Speaker 1: For smaller venture-backed biotechs, there's some pretty big provisions in there.
• 17:51
  Speaker 1: The proposal keeps FDA's core review timelines in place, but
• 17:55
  Speaker 1: puts a big emphasis on earlier and more predictable interaction
• 17:59
  Speaker 1: between sponsors and the agency, something we can all get behind.
• 18:04
  Speaker 1: There are also new opportunities for companies to get clarification
• 18:07
  Speaker 1: after FDA meetings, more structured timelines for agency responses, and
• 18:11
  Speaker 1: a new framework for getting multiple FDA review divisions into
• 18:15
  Speaker 1: the same conversation when a drug crosses therapeutic areas. For
• 18:19
  Speaker 1: a small biotech, where one delayed trial or unclear piece
• 18:22
  Speaker 1: of FDA feedback means the difference between securing future financing,
• 18:26
  Speaker 1: the emphasis on predictability is welcome. There are also important
• 18:30
  Speaker 1: provisions for companies developing novel therapies. The FDA would continue
• 18:34
  Speaker 1: early consultations on new surrogate endpoints and biomarkers that could
• 18:39
  Speaker 1: support accelerated or traditional approval, could preserve resources for the
• 18:43
  Speaker 1: breakthrough therapy program, and expand work on rare disease development.
• 18:47
  Speaker 1: We're seeing that PDUFA is increasingly wrapped up in how
• 18:50
  Speaker 1: to address that competition with China. One of the more
• 18:53
  Speaker 1: notable proposals would cut FDA's application fee in half for
• 18:57
  Speaker 1: companies that anchor at least one phase one clinical trial
• 19:00
  Speaker 1: here in the United States. That's a carrot, not a stick,
• 19:04
  Speaker 1: and something that Incubate has been encouraging policymakers to consider.
• 19:09
  Speaker 1: So PDUVA aid is about much more than just the
• 19:12
  Speaker 1: company's payment fees to the FDA. It's going to be
• 19:15
  Speaker 1: the main agreement about how emerging drug developers interact with
• 19:18
  Speaker 1: the agency, how quickly they get answers. The next commissioner
• 19:22
  Speaker 1: will be responsible for turning those commitments into practice. The
• 19:26
  Speaker 1: immediate next step will be a public FDA meeting on
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  Speaker 1: September 16th for the comments and and a public comment
• 19:33
  Speaker 1: deadline of October 16. FDA is expected to finalize the
• 19:37
  Speaker 1: package and transmit its recommendations to Congress by January 15.
• 19:42
  Speaker 1: And Congress will have until September 30 to reauthorize the
• 19:45
  Speaker 1: program before its current PDUFA authority expires. So whoever is
• 19:50
  Speaker 1: sitting in the commissioner's office will be leading the agency
• 19:53
  Speaker 1: through an important reauthorization. That is why eyes will be
• 19:57
  Speaker 1: on Senator Cassidy, who, as we've said before on the program,
• 20:01
  Speaker 1: lost a turbulent primary to a Trump-backed opponent How will
• 20:05
  Speaker 1: he react to this nomination in the coming weeks? The
• 20:09
  Speaker 1: last headline for this week is one we've intentionally buried
• 20:12
  Speaker 1: because we'll include a little bit of editorializing. We've already
• 20:15
  Speaker 1: covered RevMed's exciting news for the pancreatic cancer community. It's
• 20:19
  Speaker 1: been highlighted with former Senator Ben Sasse, and it's really
• 20:23
  Speaker 1: a bright spot in innovation. We finally are making progress
• 20:27
  Speaker 1: on a medicine to treat one of the deadliest cancers,
• 20:30
  Speaker 1: and this one will double the survival time based on
• 20:33
  Speaker 1: the data that came out of the clinical trial. But
• 20:36
  Speaker 1: what everyone's talking about this week is the $ 480, 000 annual
• 20:41
  Speaker 1: list price for the medicine. In some regard, the last
• 20:44
  Speaker 1: week's headlines have been unsurprising. We get an announcement of
• 20:48
  Speaker 1: an approval, excitement from the patient community, and then comes
• 20:52
  Speaker 1: the list price. And then comes any number of articles
• 20:55
  Speaker 1: discussing about how unfair that price is. Here at Incubate,
• 21:00
  Speaker 1: we wanted to dig a little deeper and see if
• 21:03
  Speaker 1: RevMed's proposed price does stand up to scrutiny. But we
• 21:07
  Speaker 1: want to say something more broadly, in particular to those
• 21:10
  Speaker 1: reporters who are covering pricing. While we know that there's
• 21:13
  Speaker 1: limited amount of column inches in the New York Times
• 21:16
  Speaker 1: and the Wall Street Journal, it does seem that some
• 21:19
  Speaker 1: of those inches need to be reserved for conversations about
• 21:23
  Speaker 1: who actually pays the list price. fact that it's actually
• 21:28
  Speaker 1: usually a lower negotiated price, and frankly, where those dollars
• 21:31
  Speaker 1: are going. As the early stage VC voice incubates not
• 21:35
  Speaker 1: really primed to be the leader on pharmacy benefit managers, PBMs,
• 21:40
  Speaker 1: or the 340B program, but data point after data point
• 21:44
  Speaker 1: after data point, and I will shout out Brian Reed
• 21:47
  Speaker 1: here for his continued coverage in this space, suggests that
• 21:50
  Speaker 1: fewer and fewer dollars go to the actual company that
• 21:54
  Speaker 1: innovates and manufactures a medicine for patients. And that we
• 21:57
  Speaker 1: have seen explosive growth in the cost and pass-throughs and
• 22:01
  Speaker 1: rebates and money going somewhere else in the system. And
• 22:05
  Speaker 1: at the end of the line are patients. Patients that
• 22:07
  Speaker 1: are now being asked to reach into their pockets despite
• 22:10
  Speaker 1: having insurance. If we're going to have this conversation about
• 22:14
  Speaker 1: if RevMed priced this drug affordably, we have to be
• 22:17
  Speaker 1: having a broader conversation. And that's one that, frankly, the
• 22:21
  Speaker 1: media environment isn't dedicating enough time to. The question about
• 22:25
  Speaker 1: a pancreatic cancer patient accessing RevMed's medicine is a question
• 22:30
  Speaker 1: about insurance. RevMed's already made clear that for low-income individuals
• 22:35
  Speaker 1: without insurance, there'll be a totally separate pathway. That's nothing novel.
• 22:40
  Speaker 1: Almost every company offers that pathway. So if we can
• 22:43
  Speaker 1: take the uninsured conversation and the low-income conversation for whom
• 22:48
  Speaker 1: affordability and access is such an important conversation and set
• 22:52
  Speaker 1: it to the side, We're actually talking about covered insured
• 22:56
  Speaker 1: individuals and whether or not insurers and payers will make
• 23:00
  Speaker 1: this drug accessible to pancreatic cancer patients. But we also
• 23:05
  Speaker 1: wanted to look at this a different way. Is RevMed
• 23:09
  Speaker 1: justified in thinking about the money that it has put
• 23:12
  Speaker 1: into this? And there's been a lot of online discourse
• 23:15
  Speaker 1: and we tried to pull as many quality numbers as
• 23:17
  Speaker 1: we could. So let's start with the beginning. Revolution Medicines
• 23:21
  Speaker 1: was founded in October of 2014. It has lost money
• 23:26
  Speaker 1: every single year since. Every single year. By June of
• 23:31
  Speaker 1: this year, 2026, its accumulated deficit was $ 4 billion. 15
• 23:37
  Speaker 1: months before that, it was $ 2 billion. So in a
• 23:39
  Speaker 1: little over the last year, it has doubled its amount
• 23:43
  Speaker 1: of debt, not in the millions, but in the billions.
• 23:46
  Speaker 1: So half of everything this company has ever lost in
• 23:48
  Speaker 1: its entire existence It lost in the final sprint to
• 23:52
  Speaker 1: the approval of this one medicine. Digging in even deeper,
• 23:55
  Speaker 1: let's look at the numbers closely because they're staggering. 2025's
• 23:58
  Speaker 1: net loss for this company was $ 1. 1 billion on 987
• 24:04
  Speaker 1: million in R & D spending alone. That's not overhead
• 24:08
  Speaker 1: and consultants. That's real R & D money going out
• 24:11
  Speaker 1: the window. The year before in 2024, the loss was
• 24:13
  Speaker 1: $ 600 million. And now in 2026, the company is guiding
• 24:14
  Speaker 1: to a 1.6% $ 1. 7 billion range for operating expenses. So
• 24:24
  Speaker 1: where's all that money actually coming from? Well, there have
• 24:27
  Speaker 1: been ongoing stock sales, more opportunity for investors to get in.
• 24:32
  Speaker 1: There was also a buying out of EQRX, which was
• 24:34
  Speaker 1: mostly just for its cash, and selling off future royalties
• 24:38
  Speaker 1: to Royalty Pharma. Convertible notes. Basically, this company has done
• 24:43
  Speaker 1: whatever it could to keep the lights on. And here's
• 24:46
  Speaker 1: the part that puts that in perspective. That kind of
• 24:49
  Speaker 1: spending sits in an industry... where the baseline numbers are
• 24:52
  Speaker 1: already brutal. Almost every study under the sun puts the
• 24:55
  Speaker 1: average cost per launch drug north of $ 2 billion. Deloitte
• 24:59
  Speaker 1: cited it as $ 2. 2 billion in 2024 and climbing to $ 2. 7
• 25:03
  Speaker 1: billion in 2025. Oncology, where RevMed has invested all of
• 25:09
  Speaker 1: its time, runs even higher than that, with a median
• 25:11
  Speaker 1: near $ 2. 8 billion for every drug that gets to market.
• 25:16
  Speaker 1: Built into that cost can be the cost of some failures,
• 25:19
  Speaker 1: and RevMed has had plenty of dead ends baked into
• 25:22
  Speaker 1: its own number. There was the SHP2 program that Sanofi
• 25:26
  Speaker 1: walked away from, the mTORC1 asset, eight years of platform
• 25:30
  Speaker 1: work that didn't produce anything sellable for its newest molecule,
• 25:35
  Speaker 1: actually came through. Then there's the science itself, which honestly
• 25:38
  Speaker 1: might be the wildest part of this RevMed story and
• 25:41
  Speaker 1: probably not something I'm super qualified to tell. So we'll
• 25:44
  Speaker 1: have to get a great guest from RevMed to come
• 25:46
  Speaker 1: on and explain this in greater detail. But KRAS was
• 25:50
  Speaker 1: identified as a human oncogene back in 1982. It spent
• 25:55
  Speaker 1: 40 years, four decades, simply being labeled undruggable. RevMed spent
• 26:01
  Speaker 1: from 2014 to 2022 just building out a platform, the
• 26:04
  Speaker 1: tri-complex approach, before its drug was ever dosed in a
• 26:09
  Speaker 1: single patient. But once it did, the drug moved from
• 26:12
  Speaker 1: first in human to approval in about four and a
• 26:15
  Speaker 1: half years. Compare that to the industry average, where phase
• 26:18
  Speaker 1: one to filing a loan now runs past 100 months.
• 26:22
  Speaker 1: It took 12 years from founding to the company's first
• 26:25
  Speaker 1: dollar of revenue to capital that could have gone to
• 26:27
  Speaker 1: zero at any point along the way. With that background
• 26:31
  Speaker 1: behind us, let's look at the actual price and thinking
• 26:34
  Speaker 1: about it. What would it have to be for this
• 26:36
  Speaker 1: bet to pay off? You take your price, you multiply
• 26:39
  Speaker 1: it by duration, multiply it by the number of patients,
• 26:42
  Speaker 1: and that has to cover what's already been spent and
• 26:44
  Speaker 1: fund next, all inside a window that isn't open forever.
• 26:48
  Speaker 1: So after all of that saga, we're here today, and
• 26:52
  Speaker 1: we're here with the headline of $ 480, 000. But it's almost
• 26:57
  Speaker 1: an irrelevant headline. It's not a number that is designed
• 27:01
  Speaker 1: for an individual patient to pay. And that is what
• 27:04
  Speaker 1: drives so many folks to be upset when they see
• 27:07
  Speaker 1: that announced. The reality is the $ 480, 000 is an input
• 27:13
  Speaker 1: into a complex, frankly, black box of negotiations with payers.
• 27:17
  Speaker 1: They're going to come back with their rebates. We've already
• 27:20
  Speaker 1: talked on previous episodes that those rebates are perversely incentivized
• 27:24
  Speaker 1: on the insurer side. to be higher, not lower. So
• 27:29
  Speaker 1: RevMed is pricing something with a pressure for it to
• 27:32
  Speaker 1: be higher so that payers can get a larger rebate.
• 27:36
  Speaker 1: Congress has begun to address that, but it's got some
• 27:38
  Speaker 1: more work to go. But then we bring that even down.
• 27:42
  Speaker 1: We'll find some sort of discount that will come out.
• 27:45
  Speaker 1: The reality is there is no reasonable price for for
• 27:49
  Speaker 1: RevMed to recoup its investment, that sunk $ 4 billion, that
• 27:54
  Speaker 1: an individual could pay for. And that's the point of insurance.
• 27:59
  Speaker 1: And in all the coverage of RevMed's incredible innovation here
• 28:03
  Speaker 1: and what it means for patients, there really hasn't been
• 28:06
  Speaker 1: much discussion. And this is a perfect test case because
• 28:10
  Speaker 1: RevMed's data is incredible. It is almost impossible to deny
• 28:14
  Speaker 1: that it will improve the outcome for a pancreatic cancer patient.
• 28:17
  Speaker 1: And yet there will be a long game with individuals
• 28:20
  Speaker 1: and their insurers about whether this will be covered. There
• 28:24
  Speaker 1: will be battles over prior authorization. And so instead of
• 28:28
  Speaker 1: one of the drugs that have come through in recent
• 28:30
  Speaker 1: years where the data might be debated, here we have
• 28:33
  Speaker 1: a $ 480, 000 drug that has proven that it works. And
• 28:38
  Speaker 1: now we will go through this payer system that will
• 28:41
  Speaker 1: lead to a fierce debate over whether RevMed set the
• 28:45
  Speaker 1: price too high. The reality is RevMed has set the
• 28:49
  Speaker 1: price where it needs to in order to recoup its
• 28:52
  Speaker 1: investment because there's an entire pathway that we don't talk
• 28:56
  Speaker 1: about on this show where RevMed's data is bad and
• 28:59
  Speaker 1: Revolution Medicines goes out of business. As investors, That community
• 29:05
  Speaker 1: has to back the failures as much as they have
• 29:07
  Speaker 1: to do the winners. So while all of the oxygen
• 29:10
  Speaker 1: in policymaker and media circles will focus on the price
• 29:13
  Speaker 1: and not the innovation, we have to begin shifting this
• 29:17
  Speaker 1: conversation to be saying this is why we have insurance
• 29:20
  Speaker 1: in the first place. If it were priced at $ 5, 000,
• 29:25
  Speaker 1: maybe some American households could pay out of pocket for it.
• 29:28
  Speaker 1: but Revolution Medicines would never recoup their money. So we'd
• 29:32
  Speaker 1: never have another Revolution Medicines. On the flip side, if
• 29:35
  Speaker 1: it's priced at half a million dollars, there's such intense
• 29:38
  Speaker 1: pressure against the company. So where we have a win
• 29:41
  Speaker 1: for patients, it becomes a lose, whether it's in the
• 29:44
  Speaker 1: business side or the PR side. And that's something that
• 29:47
  Speaker 1: we all have to do a better job talking about
• 29:49
  Speaker 1: the process in which payers decide whether or not they're
• 29:51
  Speaker 1: gonna cover a medicine. Revolution Medicines is the perfect candidate
• 29:55
  Speaker 1: for this debate. It's likely not to be acquired. It's
• 29:58
  Speaker 1: gonna try to go on and become the next great
• 30:01
  Speaker 1: pharmaceutical company bringing innovation to patients. Hopefully, there'll be more
• 30:06
  Speaker 1: in this platform. Now that Orphan Cures is passed, there
• 30:10
  Speaker 1: will be incentive to look for secondary indications. Unfortunately, it's
• 30:15
  Speaker 1: a small molecule, which also means that the pill penalty
• 30:18
  Speaker 1: we talk about so much on this show is in
• 30:21
  Speaker 1: play here. Revolution Medicines had to price this drug in
• 30:24
  Speaker 1: the context of only having nine years to recoup it.
• 30:27
  Speaker 1: This is why Incubate and so many others are fighting
• 30:30
  Speaker 1: to undo a nine-year reality because as we called out,
• 30:34
  Speaker 1: it forces people to price their drugs higher. So whatever
• 30:37
  Speaker 1: lane you look at it from, the 480,000 is not
• 30:41
  Speaker 1: the headline we should be talking about. We should be
• 30:43
  Speaker 1: talking about a system that is putting pressure against small
• 30:46
  Speaker 1: molecule medicines. We should be talking about a system where
• 30:49
  Speaker 1: patients will have to fight through their insurers to access
• 30:53
  Speaker 1: a drug that clearly works. We have to talk about
• 30:55
  Speaker 1: a broader healthcare conversation that's gonna actually get this squared away.
• 31:00
  Speaker 1: Then individual manufacturers pricing should be something we talk about.
• 31:05
  Speaker 1: So I hope some extra column inches can be devoted
• 31:08
  Speaker 1: to uncovering what that 480,000 really represents instead of clickbait
• 31:12
  Speaker 1: that says this drug was priced too high because there's
• 31:15
  Speaker 1: almost no price below that, that the next revolution medicines
• 31:19
  Speaker 1: could come along. That final story from the bully pulpit
• 31:22
  Speaker 1: segues into absolutely the best part of this show, the
• 31:26
  Speaker 1: FDA approvals roundup, where we look at all the drugs
• 31:29
  Speaker 1: that have been approved by the FDA and will be
• 31:32
  Speaker 1: making their way to patients. Now, with the How America
• 31:34
  Speaker 1: Makes Medicine series, we didn't quite cover everything out of July,
• 31:38
  Speaker 1: and of course, we have August to get through. So
• 31:40
  Speaker 1: let's start on July 14th, when the FDA approved Revtorpic
• 31:44
  Speaker 1: from Salcuity. It'll be for adults with a specific type
• 31:47
  Speaker 1: of advanced or metastatic breast cancer. On the 16th, Merck
• 31:51
  Speaker 1: got the green light for Lipfendra, an oral PCSK9 inhibitor
• 31:56
  Speaker 1: lowering LDL cholesterol. On July 22nd, GSK had Jadetro approved
• 32:01
  Speaker 1: for adults with previously treated ROS1-positive non-small-cell lung cancer. On
• 32:07
  Speaker 1: July 24th, the FDA gave us two approvals. Litevna was
• 32:11
  Speaker 1: approved to treat wet age-related macular degeneration. And Symmetrio was
• 32:16
  Speaker 1: approved to treat ADHD in adults. And closing out the
• 32:19
  Speaker 1: month came Gwinlo, a once-weekly contraceptive patch. Moving into August,
• 32:25
  Speaker 1: it continued the hot streak. FDA has been approving things
• 32:29
  Speaker 1: at a rapid pace, which is terrific news for patients.
• 32:32
  Speaker 1: On August 5th, Takeda's Orzifil was approved to treat the
• 32:36
  Speaker 1: underlying cause of narcolepsy type 1. And the next day
• 32:39
  Speaker 1: on the 6th, Tudrevkev was approved in combination to treat
• 32:43
  Speaker 1: unreselectable advanced cutaneous melanoma. On August 13th, BMS picked up
• 32:49
  Speaker 1: approval for Zenbexis, used in combination with other drugs for
• 32:54
  Speaker 1: multiple myeloma patients who have already tried at least one
• 32:57
  Speaker 1: other line of therapy. I'll take a quick moment to
• 33:00
  Speaker 1: note that several of these therapies are in combination with
• 33:03
  Speaker 1: other drugs for whom the underlying drug did not work well.
• 33:07
  Speaker 1: That's another exciting part of innovation, not just figuring out
• 33:10
  Speaker 1: what's new what works, but something what's new that works
• 33:13
  Speaker 1: well with something that already existed. August 19th was a
• 33:17
  Speaker 1: two-for-one day on the rare disease front. Regeneron's Pasutro became
• 33:21
  Speaker 1: just the second ever approved treatment for fibrodysplasia ossification progressiva.
• 33:27
  Speaker 1: It's an ultra-rare genetic disease where muscle and connective tissue
• 33:31
  Speaker 1: gradually turn into bone. The same day, ultragenics had genglycos
• 33:36
  Speaker 1: become the first ever gene therapy approved for glycogen storage
• 33:40
  Speaker 1: disease type 1a, another rare metabolic disorder. I think we
• 33:44
  Speaker 1: are particularly excited about innovations in the gene therapy space
• 33:48
  Speaker 1: and in the rare space because that really is where
• 33:51
  Speaker 1: precision medicine is becoming cutting edge. And then as we
• 33:54
  Speaker 1: talked about, the gangbusters approval on August 26th of RevMed's
• 33:59
  Speaker 1: Rasonic became the first approved targeted therapy for metastatic pancreatic cancer.
• 34:04
  Speaker 1: a milestone that we talked about on the show. The
• 34:07
  Speaker 1: following day on August 27th, PrioVant had Lysriah approved for
• 34:12
  Speaker 1: the first oral drug for a rare autoimmune disease affecting
• 34:15
  Speaker 1: the muscles and skin. And then to close out the month,
• 34:18
  Speaker 1: on the 28th, Takeda had another drug approved, Mimrylo. It
• 34:23
  Speaker 1: was approved as the first drug of its kind for
• 34:25
  Speaker 1: polysemia vera, a rare blood disorder. 14 new approvals across oncology,
• 34:31
  Speaker 1: rare disease, autoimmune conditions, and more in just two months.
• 34:35
  Speaker 1: As always, we'll be tracking what's coming down the pipeline,
• 34:38
  Speaker 1: but our heartfelt congratulations go out to the scientists and
• 34:41
  Speaker 1: companies that moved these forward and brought hope to patients
• 34:45
  Speaker 1: in all of our lives, not just in the United States,
• 34:47
  Speaker 1: but around the world. That wraps up this episode of
• 34:50
  Speaker 1: the Making Medicine Podcast. Be sure to subscribe on YouTube
• 34:54
  Speaker 1: and follow us on other channels. Thanks for listening. And
• 34:57
  Speaker 1: as always, keep innovating.