band service. the decision might change based on the elasticity might be affected. the third thing i wanted to talk about was price discrimination. economicists think this could be a good or bad thing. it sounds bad, but one of things i think the low income programs that have been these voluntary conditions, in quotes, have been to provide low income broadband service. this to me is a price discrimination tool, that they're able to charge a lower price to people who might not otherwise sign up. if indeed that's the way it's working, this is actually a good thing where you charge a lower price to people who wouldn't otherwise sign up. that's the definition of how economists look at price discrimination. this is a very efficient way of

providing low income service. sort of almost to make it politically good, not just politically acceptable, politically good for a company to price discriminate. >> i wasn't sure where you were headed with that. i can't think of what it is right now. but if they were to take samples of fingerprints that are on some of those voluntary agreements, you might find fingerprints somewhere. >> that's good. i think that's great. the programs are there. >> just one thing, back to yesterday's conversation. he said the one thing about the act is it allowed competition to enter. what the competition did, is before the telecomact, the prices that we had didn't make a whole lot of sense. all kinds of different cross subsidies. 25 cents a minute long distance. and what the competition did is forced all those prices to get rationalized.

the high cost fund kind of impedes that whole process. one thing, there's really -- i think the benefits in terms of incentives for investment and those other things in the high cost area, is where people could come up with new ideas and new techniques to try to serve these people. i worry that the rules and the way they're put in place is not allowing that innovation and prices to work to try to provide service that will bring lower price, higher quality service to people in low cost areas. or high cost areas, rather. >> i want to talk about the innovations the fcc has done. i wanted to ask blair, you mentioned -- maybe it was james, the importance of non-governmental programs as well. that's sort of what you've been involved in for a few years now.

trying to bring new broadband networks. maybe the communities that we were involved with are too different from unserved university communities that probably have a fairly high willingness to pay for broadband. are there lessons you learned from new networks that might be use value? >> yes, because at the end of the day, what we're trying to do is fill in a big puzzle and there are lots of different pieces of that puzzle. it was very different when we regulated cable. these things keep changing. so how you solve this big puzzle of getting everybody positioning them to be a viable citizen in the information economy is totally different. trying to explore experimentation in driving high bandwidth networks. affordable bandwidth was sort of the mantra that we kept on. but what's interesting is the way in which you see

experimentation going on that i think is really good. it's too early to know how effective it is. one of the things that's impressive is that comcast has adjusted as they've seen data. we also see in kansas city, and in other places where google is doing a completely different experience. they're simply saying they'll have a general offering that is basically free month by month. you just pay $300 for a one-time connection fee, but you can do that over time.

at the end of the day, this is the part that i think is really important. we need to run a bunch of experiments. this is really the government's obligation. this is part of the commons of our time. so if we can get from 93% to 95%, we're not going get to 100%, but we want to get in that 96% 98% of getting everybody on. i think the notion of running a bunch of experiments and then figuring out how to get to the finish line is very important. how do we look at existing assets, lower the cost of deploying to change the math of upgrades or new entrants.

>> and i think that experimentation also is important and should be -- it's a bit risky for a regulator to talk about experiments. because we've got them, and then when the results are not necessarily in sync with certain expectations, and there's a headline or two or three or four. but those are risks that i think we need to increasingly be willing to take. if you do the forensics, you might see my fingerprints in a couple of place. to encourage the private sector to have different experiments of their own. i don't want internet essentials to look like what at&t is doing, to look like another. we all know in this ecosystem, one size fits all. so these are very necessary to achieve. >> you just brought up the financing. >> why can't the rural carrier go in and say we'll show this area, but we somehow will make a commitment that you have to pay

us over time. maybe a lean on the property. there are other ways of financing this big government grants. >> why can't the rural carrier go in and say we'll show this area, but we somehow will make a commitment that you have to pay us over time. >> if you add a voucher but had to commit to some period of time, maybe that would work. a variety of different ways of doing it. another way f doing it at some point, some economist will evaluate the following. would we as a country be better off if rus said we will forgive all u loans to phone companies in exchange for a commitment to not take any universal service. because it's basically most of the country.

i do think there are a variety of ways of addressing it and that might be one. but that's part of what the problem is, the confusion between cap x and op x. >> the fcc actually has been doing a fair amount of experimenting lately. they showed that it's possible to do a reverse auction with its mobility fund. there was a whole series of pilots. does anybody have any comment on whether we can draw any conclusions from the series of pilots that the fcc did? >> the reverse auctions, where they've been trying to reduce the cost of serving high-cost areas, it was important -- the fcc worked a lot on the original cost models, where the fcc figured out, what does it cost to show this area? when they ran reverse auctions,

the results turned out to be about half the cost of these cost models. so that's where it showed that we need to have real world experience, and giving people incentives. that was a great innovation chls one of the things that we, there was a group of 71 concerned economists i think scott was part of this, that as part of the stimulus package, ntia and rus had major muojeke infrastructure grants $4.7 billion. how many dollars pe person passed or signed up and the ntia and rus go, that's nice, we're going to do it the way we do it.

we picked the best one. i looked at the stuff, i have in skill and ability to pick the best. you're only giving me two projects so i can't really evaluate it. but they did -- they ended up doing this. there's been a bunch of controversy over the programs. they haven't connected that many people relative to what they could have done. the fcc now is doing it based on dollars per connection or proposed connection. i think that's a much, much better way of doing it. trying to figure out how do you be more cost effective? as an economist, i don't care, if you want to try to connect more people, whether that person's in texas or alabama, i don't care, it's connecting a person. that's what you're trying to do, connect americans. you're going to be as cost effective as you can and use your budget as effectively as you can. do it in an efficient way. the fcc is making progress in this. i think that's really good. >> that comes with as i mentioned earlier, with levels

of pr risk. >> absolutely. >> which is probably why you see some people, you know, wanting to stay within a known quote/unquote measurable framework. and that's part of i think of what outside forces could help us with. because we will never get close to nirvana by doing things the same way that, you know, a -- work marginally. i will continue to push that even again that target grows. >> there's actually an interesting difference between -- because i was involved in both of these things. the part of the problem with rus in transition was they had to do things that were timely targeted and temporary. part of the changes at the fcc reflect that we were a bell to

step back with the plan. with the help of folks like scott and you and others actually build political capital. build an understanding of why reverse auctions would be better. part of the beauty of the plan, this isn't about our plan, this is about a planning process. part of the beauty of it is you get to step back and look five to ten years out and then build political capital towards a more rational system. when you're in a -- in there with the alligators, you're just wrestling the alligators. you're not thinking about draining the swamp. part of the political challenge i've seen in my two stints in the fellow government is how do you think long term when the pressures are all very short term. >> absolutely. >> the only thing i'd add maybe to what blair said is despite the pressure that r is under, this is in part an agency where we've seen continuing problems over time and that's not to denigrate the people who do great work and are very vigilant but it really goes to underscore

the problem of what is essentially in a competitive space deciding that you are going to provide a loan to one party and not another. we continually have these issues where we're just -- not only are we loaning to one carrier over another, but that essentially is going to prevent us from incenting more capital into that area because we're going to protect the loan value. then there's this vicious cycle that goes on between rus and ufs. i think if there's one thing we really ought to redouble our efforts on, it's trying to impose some discipline on rus to really try to get out the business to subsidize competition. >> i just want to talk a little bit about the random trials they did in terms of lifeline. i mean, if you take a look, you talk about the policy and the way the press looks at it, if

you look at the education literature, randomized trials is the state of the start. they try to see what works, what doesn't work. this is -- randomized trials is kind of cutting edge of where we are in the fcc. having the randomized trials was a great idea. i've looked for some things. you got to make sure you do these things correctly. i think what we could do -- should we have more up front fees or reducing costs over time. i mean, the goal is, when we talk about efficiency with we want to maximize the number of people on the network. but, you know, using these randomized trials shows the fcc is looking at data and wants to minimize the cost. understands there are distortions caused by taxing or using these subsidies. it's really important we get it right. let's find the best way to do

it. >> absolutely. let's go to questions. i know there's a question here. the point the commissioner made about the pilots creating a bigger target. if every pilot showed success, that would mean we aren't taking enough risk. so i'd really like to come back to the point blair has mentioned twice. there's been a great discussion of flexibility and options and flexibility on both sides. infrastructure and the kind of month to month getting users online. i really want to get some other answers to how would you do this.

what are the things that we have to do to get this done. we are dealing with the recurring costs, as well as how we get these broader fiber infrastructures built. >> so -- so i think this is something that is, capital expenditures and operating expenditures are really important but something companies in the marketplace do every single day and they put up -- whether it's making iphones or doing all sorts of things, they make these decisions and take the risks, invest and expect future revenue streams to cover their capital

expenditures. that's exactly the kind of thing we want to push towards rather than saying, this company that's the wire line telephone company gets the capital expenditure funded and the wireless and cable company don't. that seems to be a silly thing. is give them -- have them take the risk knowing that they have a risky revenue stream, some people will pay a lot of money and they don't -- it doesn't have to be the case that rural people pay the same $45 a month that urban people pay for broadband. might pay $60 but a subsidy for low-income people. you know, the higher costs of serving rural areas are part of the cost of living in rural areas, to be honest. they pay, as roger knoll left but he's talked 20 years about the fact he's happy to subsidize rural people if they subsidize his property taxes in palo alto. i'd be happy too. there are trade-offs.

some are cheaper, some are more expensive. companies do this every day and make these risks in trade-offs. that's an important piece to think about. >> there's a question here about -- a question here. >> a good discussion. i'm glad to see that greg and brad are still hard at work on this issue, despite the resistance of the politics of the situation. simply shifting from operating costs to capital costs, to subsidize capital expand urs, isn't going to solve the problem. my guess in new mexico's ted turner's ranch would get faster broadband from this. what you want is the capital expenditure targeted to underserved or unserved areas. >> right. >> but the other, very little

evidence that the high cost rural subsidies have had any affect on penetration or rates over many, many years of research, unless there's something i haven't seen recently. in addition, blair and scott agreed that the e-rate program has been rather successful. i'm not sure brad and greg agree, but i don't know of any empirical evidence on them after the austan goolsbee study which said that while a marginally transfer of the communications and expanding communications in the school from the property taxpayer in local areas to the communications taxpayer at the federal level, any evidence they've had any effect on education. is there, has there been studies done to, to justify spending and even expanding this program to schools, libraries, et cetera? >> i did a little research and found the goolsby studies, i think i found a paper in the nbr

series by ward i think, looked at texas, but i was, like you, didn't find a whole lot in terms of studies that have looked at these things. there's a lot of studies that talk about computer assisted and used to design a program that could be effective. >> what criteria is success? >> well, first of all i think it was successful in that we did achieve what congress actually asked us to do in 1996, make sure that it was no inequality in terms of, you know, high-income areas having classrooms connected and low-income areas not. by the way, in the early phase, not sure that will be true of the reform of the e-rate, but there certainly were studies that suggested that the e-rate in the years '97 through 2002 i think actually helped drive an upgrade to broadband in those

areas where you had e-rate finding. it was kind of an anchor institution that drove greater connectivity. look, i appreciate that. i think if you look at the weight of all the evidence that came in from various groups, and you can say they are biased, support for reform of the program to have wi-fi and we needed to extend the program. there's an awful lot of anecdotal evidence. i agree with you there isn't. but it gets us to the realm you get a much broader debate and goes to the paradox we see productivity everywhere in the economy except in statistics. i would just say when you talk to educator, and i feel sensitive about this because my sister is a schoolteacher and she has kind of been my conscience on this issue for a long time, pointing out that they facing the problem as a schoolteacher, it's obvious you assign, back in 2003 or '04, homework based on materials only available on the web. what do you do when the number is 30% are connected. you don't do it. then at 60%, do you do it? let me ask you this, how would

you feel when, like, all the classrooms are connected, sending your kids to a school that weren't connected? the school systems that have choice in terms of having a lot of money, they're all really connected. and they're -- that high level. that tells you something. i also think you're starting to see things like academy and other programs that are very much like solo. we're going to look backwards and be able to see where it came, but we really don't know how to measure it yet. >> i think we have time for one more question. peter? >> should private companies, cable and telephone companies, have a lot more discretion to introduce different tiers of service, to price discriminate, to expand output? should they be able to trial it? i recall one cable company that proposed to do it in four cities a few years back and it was quite an uproar over it.

>> yeah, no, i mean, i think, you know, to greg's point about price discrimination. i mean, the goal in mind is to try and figure out what other strategy we can do to get people connected to the network. if i understand your question. and i think those types of experimentation are exactly what needs to happen in the marketplace. >> and i could be wrong. whatever the number of experiments did have some tiering. i thought i remember reading that one did, but -- subject to check as you lawyers like to say. >> good. thank you all -- wait. brad? >> i was going to say. >> she's correct. they have different levels and -- >> right. >> and looked at different options.

>> thank you very much to the panelists and especially commissioner clyburn for being here two hours straight this morning. >> that's all right. [ applause ] >> we'll take a ten-minute break.

join us tonight from cspan's landmark cases series. our feature will be the case of brown versus board of education of top kai, kansas. part of it focuses on the doll test used to illustrate the impact of segregation on african-american children. watch live at 9:00 p.m. eastern here on cspan 3 an cspan. and don't forget our landmark cases companion book. it features introductions, birkhead, highlights and the impact of each case written by

tony moreau and published by cspan in cooperation with cq press. it is available for 8.95 police shipping. cspan has the best access to congress with live coverage of the house on cspan and the senate on cspan 2. over thanksgiving, watch our conversations with six members of congress. thursday at 10:00 a.m. eastern, buddy carter, republican from georgia and the only pharmacist serving in congress. at 10:30, donald nor cross, a new jersey democrat and long-term union electrician. friday at 10:00 a.m. eastern, a california democrat and former restaurant opener. at 10:30, mark walker, republican from north carolina and a baptist minister in his first elected office and saturday morning at 10:00

eastern, republican from california, former state senator who intern ed in d.c. as a college student and at 10:30, a massachusetts democrat, harvard graduate and marine who served four tours in iraq. your best access to congress is on cspan, cspan radio and cspan.org. >> john haiinckley shot person reagan and he was not wearing a bulletproof vest that day. it was a short trip from the white house. he was stalking jimmy carter before this. zpl zpl sunday on q and ark, ronald fineman author of assassinations, threats and the american presidency, talks about various asass nayes attempts and physical threats made against presidents and candidates throughout american history. >> while there's been 16 presidents who have faced assassination threats, although none directly eyeball to eyeball since reagan, but 16 presidents. i covered three candidates, i talk about huey long, who in

1935, was assassinated. and i talk about robert kennedy in 1968 who was assassinated and george wallace, who was shot and paralyzed for life in 1972. so i cover candidates as well as presidents. and it's a long list. >> sunday night at 8:00 eastern and pacific. on cspan's q and a. >> next, pharmaceutical innovation and drug costs. this portion of the hhs forum focused on value based drug purpsing programs an the impact of regular laces. the director prorides closing remarks. conference attendees included providers, employers, consumers and government officials. this is about an hour and a half.

>> if you'd take your seat, we'll get started on the final panel, where we'll devote our discussion to value based purposes, what is the potential, the obstacles. and how do we get to better value and better accessibility for patients as soon as possible. through these and other mechanisms. let me introduce our panelists. now, you've been introduced to at least the gentleman already. dan durham, senior vice president asked a question earlier. america's health insurance plans. dan, thank you for being with us. ken frazier is also with us. the president and chief executive officer of merck and company, one of the nation's premier pharmaceutical manufacturers and also, ken is serving in his role as the head of pharma. steve miller is with us from express scripts.

senior vice president and chief medical officer there. being one of the leading pharmacy benefit management companies. bernard tyson is with us. he is the chairman and chief executive officer of kaiser permanente, one u of the nation's major integrated delivery system. of course, covering i believe now more than ten million americans in many parts of the united states. and then finally with us is alan spielman, assistant director of health care and insurance, federal employee insurance operations in the u.s. office of personnel management. so, welcome to all of you. before we go into our topic today, which is the outcomes based or value based purchasing of pharmaceuticals, i'd like to ask each of you to address from your unique perspectives on various sides of this equation. the top opportunity and the top policy challenge that you see

now in bringing to market these very innovative drugs and treatments, cures and many instances, making these affordable and sustainable. for most americans and getting the best treatment of the best right patient at the right time as secretary burl said as she opened the day, so, dan, from the perspective of the nation's health insurance plans, give us your perspective. >> thank you, susan and i'd like to thank secretary burwell for inviting us to be a participant in this very important discussion. i spent four very memorable years here in aspi and i'd like to thank the hhs team. i know how hard they work in putting this together in such order was a monumental task. today, we're in a consumer driven market. consumers are demanding value. that's quality care at the

lowest possible price. and that's what health plans are focused on. we're driving value in tote's health care system by collaborating with providers and quality and negotiating on price. we do this in very innovative ways. we're building high value networks. we are focused on payment and delivery system reforms, including bundle payment, patient centered medical homes and global budgets in the like. these are changing the incentives to drive value for patients. and when it comes to prescription drug prices, i think we've reached an inflection point here. we're still very much in the fee for service world. we have to move to the value world. and that's what health plans are focused on. and there are specific examples here we're going to talk about today and we've heard about some of the barriers, but you know, recently, harvard pilgrim

reached an grimt with amgen on their new cholesterol lowering drug, focused on outcomes. we've seen this with america and sigona on diabetes drugs, lowering hemoglobin hic levels and the like and there are many other examples, but we need to see more of those. far more prevalent in europe and in other countries than what we're seeing here in the united states. so, the bottom line is driving value in the system for consumers. we need innovative medicines. health plans want to provide the best innovative medicines to their patients. but they have to be affordable. and prices have to be sustain bable. and so, we need to focus on splugss here. private sector market based solutions that drive value. so, we're paying for outcomes, we're not paying for volume. i think doug said it best this

morning. he said a few years out, it will be outcomes equal revenue. hopefully, we'll get there a lot sooner in 20 years, but value is the place we need to be and all stakeholders have an important role to play in driving rall in our system. >> great. ken frazier. >> thank you, susan. i also want to thank secretary burwell, all the people for giving us this tremendous forum for today. i hope it's the beginning of a serious discussion between all the participants in health care about how we can provide greater value to the people we intend to serve. let me start by saying the research and development efforts of the industry and bio tech industry have had an indelible, lasting effect on preventing illness and extending life and we have the potential to do even more and that's why we're spending tens of billions of

dollars each year in our quest to do that. that said, my company and the industry share the concerns that have been expressed about the rising costs of health care, particularly when those costs are passed on to patients. we share the administration's goals of creating more affordable and sustainable health care system, promoting innovation and improving patient access to new medicines. we, too, believe in the potential of value based approaches to derive greater value from health care spending and in fact, as we just heard, partner with several private insurers to try to implement these things, but it's important for us to recognize that policy and systemic changes are needed to enable us to fully realize their potential. our efforts must stop, start with a holistic patient centered focus with an accurate view of the world of innovation and

medical process in achieving better value. we also need to work together to look at the value of all components of the system. hospitalizatio hospitalizations, drug, devices and interventions. as we continue our work to better create value based approaches and while we work to address the pressing unmet medical needs of patients, diseases, we need a policy and regulatory environment that supports and respords litigation and allows bio pharmaceutical manufacturers to be full partners in the move towards this value based health system. spending on prescription drugs has not been the dominant driver of u.s. health care costs. a study was released that showed prescription drug costs are not the priority driver premium increases for 2016. medicines actually hold great promise for reducing future costs as we face growing rates of crime, disease and a rapidly

growing ageing population. even the cbo has recognized and increased the use of medicines and medicare will lead to cost savings elsewhere in the system. so, let me summarize by saying the issue we're discussing here today, the shift towards value based baseme ed payment, is a ge of how it is that we can drive to the kinds of goals we want. better patient outcomes. for lower cost in a way that's sustainable for all the participants, so thank you. >> thank you very much. steve. >> yes, susan, thanks for having me. again, i want to thank hhs for having this forum today. hopefully, the beginning of a discussion that we all need to have. as you've heard today, pharmaceuticals are the biggest challenge in hello care right now. that is, it's the most rapidly rising cost in all of hello care. and while we're paying $300 principle today, that's going to

go to h 400 billion to $500 billion ore the next few years. we need a system that rewards the manufacturers and allows them to kobt to be the xwraet sfri they are in united states, but we need to have affordability and access. so, what we're going talk about is not just value based, but indication based. outcomes base. it's all sorts of innovative new payment systems that we're going to have to adopt if we're going to be able to continue to reward these companies, but also make access and affordability available to our parents. when we started the price war for the hepatitis products, it's because it was actually a new product in the marketplace and that was form lair exclusions. i truly excluding products in the marketplace, we were able to shift market share and reward another company. so, every time we do something that's disrupted in the marketplace that looks to be antione company, it's really

pro another company because we're rewarding them with their market share and what value based indication based outcomes based plans have to do is we have to identify the ways to reward people as well as to make it clear that we can shift the marketplace. hopefully, there are tasks you take away from this of what can pharma do to make for a better future? what can government do? what do patients need to do for a better future and what to payers need to do? because without getting all the components of the system working together, the final thing i'll say the enemy for us is waste in the health care system. in the united states, we spend about $3 trillion a year. it's estimated that about a third of that is is waste. now, one person's waste is another person's profit and we have been very ineffective in the united states in going after that waste. you heard others talk this morning about adherence and the waste that causes, but we have

to root out every bit of the waste because if we do, that money is arbitrageable. it can be reallocated to pharmaceutical products, so other things that will make a bigger difference. i'm really excited to talk today. >> great. ber nad. >> thank you an it's dpraet, really great to be here. you know, i have to tell you, honestly, as i was reflecting on this topic and this discussion and how to tee up my two minutes or three minutes, i struggled somewhat because i don't want to get trapped in the latest headlines of value based something. i've talked to enough people to see we don't have a common definition for that term and depending on who's promoting value based, there's usually a view of that that one may or may

not agree with. i'm working hard every day to make health care affordable. for 10.3 million people and hopefully for the country. by demonstrating what an end to end system while we look at the entire spectrum of health care to populations from all walks of life. as it pertains to this topic, i start with a different conversation at the table with my partner across the table from me. of pricing. i start with i could bring 10.2 million members and this is the price you said, but i need this kind of a price because that's the way the system works. in this country and every industry. and i hear back, i would love to do that, but i can't because i have this problem and that problem and medicaid gets

favored status and you know, the government forces this and that. i go, well, there's something wrong with this picture. that's what i start with. value based pricing f the market would dictate that a pill is worth a thousand dollars and it's truly market based, but someone can charge $10,000 for that pill and i don't have a choice but to accept the $10,000, if i go from 10,000 to 8,000, i'm still paying more than what the market would do if it was working on my behalf as i work with my partner across the table. that for me is a starting point of a fundamental flaw we need to address now in the 21st century. i've heard debates this you're going to run innovation to the ground. no, we're not. every other industry has figured out how to do that in a free market context. and i'm not say we throw the

baby out with the bath water. the fact of the matter is i can't tell you how pleased i am that the industry is now looking at possibilities to cure diseases as opposed to continue to manage the illness. that's a major step for ward. and the whole system should be rewarded for that kind of innovation, but at the end of the day, the american people, the employer, the government, are pay, if this. and it has to fit into an affordability envelope. and so, when i see and talk to members and people around the country, who are trying to figure out how to make ends meet and they have the additional burden of a health care system, that is weighing them down that they haven't seen a real wage increase in 20 plus years, i end up saying to heist, we have to come up with better solutions to produce the value while also

making sure we have a viable and sustainable health ecosystem. and that for me at the epd of the day is what the value base is all about. are we making a dif rents to the affordability piece of the formula that people who are paying for all this can see it in tangible ways. >> thank you. alan. >> thank you, susan and thank you, secretary burwell and want to talk about the federal employees health benefit program and our strategic perspective. of course, the federal employees health benefit program is the original health insurance exchange. founded in 1960. 250 planned choices nationwide. total of $50 billion it's been and covers over 8 million people. both active employees and retirees. in the same risk pool. and the impact of prescription drugs, the economic impact on

our program is enormous. over 25% of that 50 billion, 12 billion or more, is represented by prescription drugs. and we've been on a journey for the last 25 years, in managing prescription drugs. and it started back in introducing and enabling managed care tools and techniques and promoting transparency and arrangements and now, proactively driving adoption of best practices. whether it's managed formulary, drug pricing tools for consumers or management of the specialty benefit, but we're entering a new phase and that's to link planned performance to quality customer service and resource use. a true pay for performance, we want to put our money where our mouth is. we have about half of a billion dollars out of that 50 billion. that we can apply to this.

and we're adopting measures at the population level at the planned level, consistent with our population such as controlling diabetes. so, our strategy really is threefold. wanting to leverage the individual choice market dynamics with our promotion of best practices among our plans, enabling innovation and overlaying a value equation where at the planned level create financial incentives for population health and management of cost outcomes and we think that will create the dynamics, the catalyst for continuous value innovation. >> great. well, thanks to all of you. so, to move to our topic on value based payment outcomes based payment et cetera, we've

been tossing these phrases around all day. we probably haven't done as much we could to really break rocks and explain how these arrangements work. so, i'm going to start with you and ask you to give us a sense of how the arrangement you struck with cigna was structured. give us a sense of how that arrangement came together and how it incorporates this concept of value based payment. >> well, the outset, and i think several people have alluded to that, that there is no single definition of value and that's one of the challenges we have here is that value can be difficult to define and difficult to measure. based on which person is looking at it. but in the krrk inga says, we sat down with a very important customer of ours. we realized it was very important for us to make sure diabetic patients were reaching their blood glucose goals, so we said, let's provide an additional incentive in the form of an additional rebate to sis

dlg na, that they are getting patients to their goals chlts and part of that obviously is to make sure that patients are taking their medicines on a regular basis and so, simply, instead of just paying people for the amount of market share that we get from that particular health plan, we just insent size people to make sure that patients got the benefit of the medicines and the benefit of the other interventions and getting to goal. so, you got the outcome you want. control of the blood glucose level and we were able to pay them for reaching those outcomes. i think that's a very good example of what we can do. l. >> you paid them in what form? mailed a check? >> a rebate. >> on the original cost of the drug. >> exactly. right, so, if you're going to pay us for a certain amount of

our drug, we'll give you a higher rebate if you can help patients take those drugs on a consistent base and you can show that the patients are not just taking the medicines, but they're getting the benefit we want out of them. they're hitting their goals. >> and how does the arrangement work? >> i think it's worked well. cigna's happy and merck is happy. that's one example of value based pricing and pricing arrangements. >> now, steve, you all have been involved at express stripts in other types of arrangements between payers and providers. give us a sense of how these work? i think one of you stressed indication based outcomes. leets talk about that potential approach as well. >> one of the things we have announced is in 2016, we are actually going to introduce indication based pricing for cancer products. this was an idea that i stole from someone much smarter than myself, peterback from memorial

cell pho sloan keterring. it recognizes that a drug is initially brought to the marketplace for one indication. so, let's take tarceva in lungi so let's take tarceva in lung cancer. it can extend life by about 5.2 months. they go on to study it for other indications. for pancreatic cancer, it will extend your life by 12 days. do you ever pay the exact same month for something that works 0.1 as well? in our marketplace, that's what we see. and so we've done -- to make this happen in 2016, what we've done is we had to do three things. one, is we had to change our systems so that we could actually adjudicate drugs at the

indication level and not just the drug level. we have to get the information on the indication that it's going to be used for. the second thing we needed is we needed external third-party experts who could tell us what that alternative value is. and so we again turned to peter bock and a guy named steven peterson. they're helping us not negotiate what that price is, but giving a true idea of what that value should be. third and most important thing i need is i needed tens of millions of patients that agreed to have this on their formulary. we have now gotten tens of millions of patients that are going to be following our formulary design to do this. for a handful of drugs, we're going to be doing in this '16. the reason just a handful in '16

is we have to make sure the system works. we have to make sure, number one, we're giving patients the best clinical options available to them. number two, is we have to be giving visibility to our plans that they're paying the right fee. we have to be pharmaceutical companies visibility to what's going on so they feel comfortable doing this. if it is successful in '16, we can expand it to a huge number of drugs, but we can expand to diseases outside of cancer. >> explain how this affects an individual patient who might have lung cancer and be in effect involved in this arrangement? >> there's a regulatory barrier that's prevents this from happening and still prevents it from happening in most cases. you've heard about medicare best price. the trouble with medicare best

price is if they'll accept $100 for lung cancer but only $10 for pancreatic cancer, that becomes best price. what we've had to do is we've made this actually a math problem. that is, we've said what is the net discount you would achieve? let's give that to all patients involved. the pharmaceutical manufacturers can accepted a blended rate across all patients. >> and the lower price would apply for all of the drugs in that class? >> it would apply for the contracted drugs, so those companies that don't want to contract this way may find themselves on the outside looking in. >> okay. and you say that is going to go into effect, that arrangement, for this -- >> 2016. >> so you don't know what the results are going to be? >> don't know what the results are yet.

that a my point is we have to try a tremendous number of experiments. and it is going to take cooperation with everyone in this room if we're going to be successful. >> alan, from the standpoint of an fbahp, you said you were very much moving in the direction in having these kinds of arrangements with the plans that are essentially making their products available to the federal employees and their dependents. explain how some of those arrangements would work. >> well, what we do -- and we certainly spend a good amount of time with the key pdms like express scripts that support a lot of our plans. what we try to do is sort of create the dynamics where these experiments and pilots can happen. and what's critical for us is trying to identify are their regulatory barriers that we've

had either conscious or unconscious that we can remove to enable some of these to happen. so i think every one of these innovations we have the capability to deploy in our program, the proof is in the pudding. does it result in greater value and the lower cost? what's missing from the equation is the patient engagement to actually see the demonstration of this value, and i think that's something we all need to work on. how can we better engage them so they're making decisions on which plan and arrangement to go to based on clear demonstration that they have added value? and that's part of our future agenda. >> so ken, you and others have talked about this difficulty of defining value. are we essentially going to have to define value potentially in different ways, drug by drug,

condition by condition? how are we going to approach this? this sounds like a monumental task. >> well, i do think value does vary from situation to situation. let me start by saying i think it is most important that we remember that patients' individual lives are being affected here. there's also obviously an economic perspective, as bernard said earlier. just that one example, this patient has a viewpoint, the y payer has a viewpoint. it's going to vary on the disease. it's going to vary on the time horizon. that's a big issue you can talk about. it depends on what time horizon you're measuring value in. often we have drugs that are administered today that prevent long-term hospitalizations. if you look at too short a period, you don't get the

benefit because you prevented those hospitalizations and other different ways.

>> he's going to look at all the different medications. >> we have pnt committees that develop the formularies based on -- >> therapy committees. >> based on the evidence. based on the best evidence out there to determine how to place a particular product, so there are a lot of ways to define value and the real question is is what type of product are we talking if it is a cancer medication that can extend life for a

couple of months but is very high priced, does that necessarily reduce other health care spending? not if you have to continue chemotherapy and you have side effects and the like, but that extra two months could be very important for an individual and their family. so it becomes challenging to get a specific measure of value that's consistent across all drugs. how do you measure the value ofx that may be 10, 20, 50 years

down the line? who is that rebate check going to go to someday when that benefit crops up? somebody enrolled in kaiser today may be someplace else, cigna, tomorrow. how do these -- how do you perceive that these contracts are actually going to work in the real world? >> well, you know, it's a combination of who benefits and how do you project the future risk of individuals and populations based on the result that will happen today, to put in it your analogy? in our example, we now know because we have all of our patients on the electronic health records and we have detailed information -- we know based on the population inside

of kaiser permanente, i can quantify that's going to run me an additional half a billion dollars more a year over the next several years to administer the drug to all the patients who qualify for that. so that's now, you know, a couple billion dollars that i can see into the future over the next couple of years because we're going to do the right things by our members. in return, our members are going to be healthier, but that doesn't mean they're not going to have other issues that they're dealing with. but over time the risk will be, in theory, and hopefully in reality,lessened so i get to reduce my risk factor, therefore i can take a lower ri eer rate to the market and pay the market back, my customers, my

employers, and the government in what i'm actually charging. if i can produce these savings, whether it is through prescription drugs or just sound preventive care, that means i need to have less money to take care of this individual and that population, then i give that back to my customers in forms of the rates they pay overall to do what i'm doing inside of the system. so that's how i see and that's how the ecosystem works for me within kaiser. as it pertains to the value of the patient, it really depends. it's a complicated question because if i know for a fact, as we do, that you can do certain things to prevent something from happening, then the person who you're trying to convince to do this, that, or the other because it's the right thing to do maybe

conflicted by wanting to do it but not being able to afford to do it or not willing to make that economic choice to pay for this now that could prevent something from happening in the future because it's unaffordable. if you're sitting with a chronic disease and it is interfering with your functionality and life, you're incented as the individual in a very different way to accept the medical advice and all of the things that we can bring to bear. and so over time you start to tease out the difference between someone who has cancer or diabetes or heart disease that is impacting the functionality of their everyday life versus someone who's been told you have high blood pressure and we can get this under control and the economics of you feeling fine every day and the economics of

what will it take to prevent that from turning into a stroke or heart attack in the future. dependent on how that economic is working, you might render a different decision as to whether or not you would use that drug. affordability is central to what we're talking about. the value-based formula for me starts with the equation of affordability, and that's not based on how much it costs me to provide the care. it's how much can people truly pay in that affordability envelope no matter how you define it. >> so has kaiser entered into value-based contracts with pharmaceutical companies? if so, how do they work? and how do they address this issue of maybe the benefits really are way downstream. the rebate check may be coming, but it may be 15 years from now. >> it's a combination of things.

we use the same tools you're hearing from rebates to areas we can contract we contract. we have different ways in which we manage the drugs inside kaiser. we spend more energy focused on trying to make sure our members are adhering to taking the drugs, which is a major problem, as you know. you've got people in our health care systems in our country who might start taking a drug but then stop after awhile. we invest in those systems that helps our members to stay motivated to take the prescriptions and to allow us to make sure we have that kind of partnership. so the things that i invest in around the pill is, for example, a pharmacy system that will let us know if a member hasn't refilled their prescription. and over a period of time if you have 30 days worth of medicine and you haven't refilled it

within 60 days, we want to know what's going on with you. we build signal systems like that that allows us to help manage the person in a holistic way around taking drugs. that was a long-term return because we are keeping the patient as healthy as possible. and so that's part of the ecosystem that i'm able to build inside of a system like kaiser because our interest is in the long-term health of that individual who more than likely is going to stay with us for many, many years. >> so another concept that has come up in today's discussion is the notion of shared risk, shared risk between manufacturers and providers, potentially also pbms. let's talk a bit about those kinds of models. what do you see as the viability of those models? how broadly could those be

extended and what difference would those make to this whole question of enabling manufacturers to bring to market these important products, new treatments, new cures, but also make the price more sustainable? >> i think there are a number of contracts where we do share the risk today with our customers, and i think that one of the challenges that we face in frankly some of the public contracts that we have is that we're restricted in some of the tools that we can use in risk sharing. >> so give us an example. >> i would just say a couple of things. first of all, in order to have a good sense of what the true real-world risks are and benefits associated with medicines we sometimes have to look beyond what is in the label in the drug, but we're restricted in communicating those things to our customers by fda regulations, so that would be one restriction.

>> let's talk a specific example. the drug in the clinical trial has shown to be effective in this potential condition, but we think there's another condition it could be effective in. build out that example. >> we measure certain outcomes, certain chemical outcomes. one of the things you hear people say often is that the drugs span as a percentage of g aggregate health care spent has gone up. that's not always in the clinical trial. we didn't study the impact of this drug on hospitalizations over a five or ten-year period, but when the drug is out in the marketplace, when we have post-marketediing data, that wo

us to talk to our customers about arrangements that we could share the risk for that patient subsequently being hospitalized for a heart failure for example. but that's a tough thing for us to do in a world where it was difficult to get that drug approved. >> we need some leeway from the fda on some of those discussions. >> that's one of the many restrictions we face. >> let's broaden the question a bit and talk about incorporating value-based payment and some of the new alternative method payment models that are coming online courtesy of cms. bundles, for example. could we think about incorporating new contractual arrangements around prescription drug use into bundles?

dan? >> yes, that's critical. health plans have been doing this for quite sometime. we're working collaboratively with cms to bring these from the private space into government programs. and it's critical. >> what's a good example of one of those? >> you can see what they're doing on hips and knees now. bundle payments. something health plans have been doing in the private sector. just like with these risk-sharing arrangements with prescription drugs. we do it with providers by collaborating with them on the quality metrics and then on the price side the risk-sharing arrangements through bundle payments, through global budgets and the like, the incentives are to get the outcomes, quality outcomes, and not volume.

i think that's key. there's no silver bullet here. when it comes to prescription drugs these types of risk-sharing arrangements work when you have competitors in category or class because then the pharmaceutical manufacturer has an incentive to differentiate themselves from their competitors. but when you're a single source drug with no competitors, what's the incentive? you have a monopoly. health plans were price takers. we had no leverage to negotiate. that changed when a competitor came on the market. steve and health plans were able to negotiate to get discounts, but the real challenge is how do we do with those single source drugs that have no competitors? >> so what's the answer? >> when you talk about risk sharing, there are other innovative ways to risk share.

when it comes to hepatitis c, one of the things we were really proud of is not only did we get the price down, but if a patient didn't adhere, we refunded the money. if we're going to treat these patients and in this case it is 84 days, when you look at the price difference, i could sent a nurse out to the house every day to give the patient their drug for what it's worth. but we developed predictive models. we were actually able to develop cell phone apps and other tools to help the patient adhere. and we're doing the exact same thing in a different way with the pcs canines. we're accepting the risk to the total budget of our plans so if we don't do utilization management well, we'll backstop the plan at a pmpy.

same thing goes for bundles. there are innovative ways to think about bundles. if you have a pharmaceutical manufacturer that makes all the drugs in a disease like diabetes, could you offer a pmpy? >> pmpy being -- >> per member, per year. where the doctor could choose any product by that company. the docs love it because they don't have much paperwork. they can use every class of the drug. the manufacturer loves it because they're getting the entire market share and we like it because it is easy to administer. there's not just regulatory burden. there's administrative burden. when you do outcomes-based contracting, the administrative

burden will continue to eat up the savings. you have a drug for diabetes. you're going to guarantee the blood sugar. ken says the patient didn't take the medicine. they're not adhering. i don't owe you any money. the patient didn't take the medicine because they had a side effect with the drug. >> it's a long conversation. >> but it's every single patient, so you're adjudicating every single patient, so it eats up all the savings. that's why we're excited what some of the newer contracts where the definition is simple and the flow of the monies can go back very quickly so the patients and the plans can benefit. >> alan, i know you wanted to get a word in. >> we need to strive more to include pharmacy in the bundles. there's a lot of surgical bundles for a variety of reasons

a lot of them are administrative. not being able to include pharmacy costs in it. that's a goal for all of us, i think. >> some health plans are doing that with cancer care. united and other plans are including the price of cancer medication in the bundle to change the incentive because the oncologist is based on average sales price, plus 6%. so if you have an oncology medicine and that's $2,000 and that works as well as another one that's $100,000, in the bundle arrangement, you're going to use the cheaper drug because that's how you're going to get rewarded. we need to continue down that road. >> can i just build on this? i'm in total agreement. there are a lot of innovative ways to do the things that we're

describing. one of -- and that's exciting quite frankly in terms of thinking differently how to do it, how to ultimately drive costs down, drive quality up, access, et cetera. the challenge inside of that for me, though, that i see and feel every single day because i have all of it is that i can look at the innovation that we have going on that ultimately will reduce hospital days. so -- >> or liver transplants. >> i invest billions dollars in our diagnostic systems in hospitals. why? because the quicker our physicians can nail what's going on to start the treatment, the quicker our patients can get out of the hospital. they want that. we want that. then there's a warm handoff to the outpatient. so you end up with a whole

ecosome -- ecosystem for how you care for that person end to end. when you begin to slice different parts, you might create that economic value here, but somewhere else is going to go up and down that may still end up with a health care system that's unaffordable and still out of whack. so part of this challenge is how do we think about, in particular, the specialty drugs that will impact large populations and produce no question about it a real value to someone? the fact that we have a drug that can cure hepatitis c is a beautiful thing. the question is can we afford it at $100,000 a treatment? i think we all will come to that answer. we'll bankrupt the whole system.

how do we start solving to a value-based system for large populations who it is inevitable that the direction that we're going with the innovation is we'll be able to pick over time these massive illnesses that we have all dealt with, heart disease, cancer, diabetes, and start to move away from -- >> not to mention alzheimer's where we don't have a drug. >> and start moving away from how do you manage that illness to how you eradicate that illness. hepatitis c gives us a ray of hope that this might be possible. how do you think about the financial models that will support a combination of innovation, curing diseases, and people hopefully living much healthier lives and taking on more responsibility for the overall health as opposed to managing to a sick care system

that's only there to deal with episodic cases? i think that's where the value-based conversation ultimately needs to get to at a population and individual level because health care is not just one interaction. it's a series of things that goes on to help people to live healthy lives. >> i think this discussion also raises another aspect of what period of time do you measure the value of a new drug in. bernard said a couple times we can't pay $100,000 for a hepatitis c treatment. that's a general comment. because we had competition, we were able to drive those costs down into the near term. >> an an effective price is now closer to $50,000. >> which is interestingly enough essentially the cost per patient of the last series of drugs, where you cured essentially one

out of three patients, so you spent 150,000 to cure one patient. and now you're almost 100% svr. so it's actually per cure much cheaper. i also make the point -- because i was at merck. people were building hospital wings to house aids patients. that drug, which is 20 years old, we heard very similar conversations about the affordability of the drug. the drug now, of course, is available at a generic rate. you look at what statins have done to the population. statins are available today for pennies a day. the only point i'm making is how

you judge the cost and the value of the medicine depends in large part on what time period you're talking about. from our perspective, because we have these relatively short patents and because we now get so much competition the way we did in hep c, that return on investment is made up front when the value of the drug is an annuity, is my point. >> what i was saying earlier to this exact point, what i was saying earlier is i don't want to pay that $150,000 when i know over time that drug really should be priced at $50,000. but right now, unlike another part of my industry, i can work it down to $50,000 because there's a mutual win that i get the win on my affordability agenda for 10 million plus people i take care and the person on the other side of the table will win because natheir company gets the masses of 10 million, if you will, to offer

their product. but to sit across from someone and to be told, i wish i could give it to you for $50,000, but guess what. i can't. i'm restricted. i need to get my return back or whatever the mental mind-set is. if it isn't set up correctly, you end up with this kind of dynamic that has gone on, but i do not want my members to have to pay $150,000 because they're at the front of the line, which is what we're talking about, and then people who are later on in the system might get it for $50,000. while i feel good about the 50,000, i promise you i've already paid for the investment in the $150,000, which is the way this thing is calculated. i'm sitting here going that is not how the free market is supposed to work. >> so let's stay on this point about the free market.

all of you with the exception of alan are in the private sector. alan is primarily dealing with plans that are in the private sector. you've all talked about your preference for private sector solutions. you perhaps heard our earlier panel of patients who came down very hard on the side of we need some more government intervention. we need to have the secretary able to negotiate prices on medicare. we've left on the table the problem of single source drugs. it doesn't appear that there's a competitive private market response readily at hand for single source drugs. what aspects of public sector regulation do you think do merit exploration? is it having a secretary negotiate medicare prices? should there be particular steps

in the area of single source drugs where you don't have a negotiating partner or another company you can shop the business with because there's only one supplier? ken? >> i think the concept of the medicare part d plan as it has been constructed is a construct that actually balances a lot of interest. it's high patient satisfaction. it has been one of the few government programs to my knowledge that has come in so far in under any projected budget. it is probably one of the most efficient government programs in the history of government programs. it has -- with exception of the federal employees. which is also based on a private model. >> exactly. >> the simple fact of the matter is you will be able to find this single source situation that will be a problem. but across those plans, i can tell you we are negotiating like

mad for access to that. and you have to take a step back and say, well, what's so broken about a system that has high satisfaction and is substantially below any projection that's been made about what it would cost? that doesn't mean that it's perfect, but let's be clear. there is no such thing as a perfect system. this testimony, i do belie -- t strikes a balance between incentives for companies to come up -- because the solution to a single based drug came from a competitor in that program. if you take away those incentives in the marketplace, the single source situation is a longer term problem than it would be otherwise. >> so what would be the regulatory role, if any, in that situation? and particularly now it's not so much even in these newer drugs.

we have single source suppliers of older drugs that are driving up the pricing substantially? >> again, i want to be very clear. i can only speak for merck when i'm talking about pricing. there have been people who i believe have abused market breakdowns to charge more than they should have charged for individual drugs. i don't think that's typical situation. when we price a drug -- we just came to market with a very important cancer drug in treating melanoma. we made the choice to price it equivalently with the prior drug, even though it is substantially more effective and substantially less toxic because we're saying what's the value to the patient, what's the value to the system, what do we have to do about access, so we have to balance those things.

our challenge is not to maximize profit and pricing, but to optimize short term and long term. we want today's patients to have access to today's patients, but we also want tomorrow's patients to have access to the disease modifying agents that have not yet been invented. alzheimer's is going to bankrupt us. not single source drugs. alzheimer's in 2050 will cost our society in the u.s. $1.1 trillion if we don't get a disease modifying agent. so we want to be able to balance today's patients with tomorrow's patients. >> steve? >> so susan, i think there's things that fpharma can do. they have to show great leadership and in the past they have. we need that. we need moderation in pricing, but we also need to quit rising

the price of old existing products in the marketplace. when we see the price of a cancer agent go up by threefold over a decade, it really is unacceptable. you cannot imagine apple increasing the price of an old ipad. nobody would pay for it. you have to come up with new features. in pharmaceuticals we pay more each year even though the product hasn't changed at all. we need great leadership at the pharmaceutical manufacturers. we need to support biosimilars. we need to quit playing these patent games of pay for delay or evergreening because all that does is keep old expensive products in the marketplace and doesn't allow them to get to generics. we need to quit this international price disparity. we cannot have america paying 33% more -- we're 4.6% of the world's population.

we're 33% of the world's drug spent. so 300 million americans are paying for all innovation where we need to really spread that out over 600 million. what can government do? we need to modernize the fda. you've heard this time and time again. the fda is underfunded and they need to treat every drug as a breakthrough, which is what you want. you want the first drug, the second drug, the third drug to get breakthrough designation because if i can get his hepatitis product into the marketplace also, think about what we can do to leverage that to drive down prices even faster. we need not just the first drug to get breakthrough designation. we need all drugs. right now the generics market is dysfunctional. it takes too long to get your generic back in the marketplace for the market to be self-regulatory. we need to fund the nih.

if you want things the industry will not develop, an ebola vaccine, you can direct money for an ebola vaccine. finally, people say they want outcomes research, but we have stripped the opportunity to look at the cost of drugs. they're not allowed to consider economics. then we've got to add the ability to haadd dollars as onef the features. for consumers, we have do make sure the co-pays make sense. this idea that we have patients on the hook for these incredibly high co-pays -- yes, they need economic incentive in the co-pay. we know it just drives down

adherence. finally we need to advocate. the less we have the patients advocating and the payors advocating, we're not going to change the system. so i'll stop filibustering there. >> as you can see, it is a short list of activities, but a very important one. once more for our final session, we're going to open it up. oh, boy. in 15 minutes, we're going to try to get through as many of these as we possibly can. we probably won't make it through all of you, but we'll do our best. please. >> michael sherman. applaud the discussion. pharma is lagging behind other providers. some companies have been at the table. others have said no thank you. we don't need to do this. how can we encourage them to be part of the solution? and i'm wondering along those

lines if a company can't explain their price in a way that makes sense, tied to value, tied to their cost of acquisition, tied to reasonable return to shareholders, why can't we allow importation into europe? >> i'm going to stop you there. ken, take that first part of that question. how do we get all the pharmaceutical companies to the fable for these value-based and outcome-based discussions? >> i think the reason they should come to the table is the reason why merck did because we think we have a responsibility to the system. it's not just to our sharehol r shareholde shareholders. patients are important to us. ultimately, we all have to think about the sustainability of this system. if we don't think about the sustainability of the health care system, there won't be any

health plans. there won't be any hospitals. there won't be any pharmaceutical companies. i don't know how to encourage the other ones to come to the table, but let's just demand that they do. >> let me suggest that you take up the importation discussion perhaps at another time. let's move to our next questioner. >> thank you for taking my question. i'm lisa gill with consumer reports. a couple of weeks ago we heard a lot of public outrage about pharmaceuticals price hike of a drug. their ceo became one of the most hated men in america and by public pressure all over the internet and twitter feeds he relented and brought the price down. hang on, he promised. he did. i think it is a very important point. my most important question here is to ken to give us a little

bit more context. from a consumer standpoint, we look at that and we say there's only one guy that makes that drug and he can charge whatever price he wants. how is this situation different? i mean, we are struggling with that. everybody has tried to distance themselves from this situation, but it is the same thing. you have a lock on this problem. >> let me answer the question by saying the first thing is that is an aberration. >> how is it different? >> there's a drug that is used for bladder cancer patients. we were one of three suppliers. two generic suppliers went out of the market. we haven't charged one penny more because we think of ourselves as a responsible company. the other two guys are out of the market. we can jack up the price.

i want you to understand that that is a hedge fund manager masquerading as a pharma company. the researchers at merck come together every day because they want to make a difference in the world. >> this is a bernard question too. >> is valiant a one-off situation? >> those of us who invest $7.5 billion of our shareholders money in areas like alzheimer's spending money where we've had 400 drugs fail in a row do that because we believe this company has to have value to multiple shareholders. you don't get to be 125 years old. you don't get a nobel prize if you haven't been doing this for

years. i don't want to comment about valiant except to say their model is to not do any research. >> i really appreciate that question. i want to offer just a slightly different perspective without talking about individual companies, but just what i see in terms of a flaw with the model here. because that example is not just an individual. there are big pharma companies who buy smaller companies who spent all their time inventing a drug and innovating a drug. they buy that company and then they charge what we see happening. i believe the government should be sitting at the table with this purchasing power saying, we will negotiate a price for this population. not that they're going to break ken and his company. ken has to make a return. it's inside the market-based

system that we all respect in this country. but the idea that i get to sit back and produce this wonderful drug and i can decide whatever price i want to charge at the end of the day because there are no forces that will effectively address that issue, at least over a period of time, to me, that says we're not on a level playing field yet, and that's what i think the government needs to look at. how do we make sure that the field is level? the government should not be in pricing control and doing all those kind of things, but to make sure that the economic value is being had inside of that marketplace. so this gentleman, who is an investor, said this is a wonderful opportunity to make a lot of money. bought a company. charged what he wanted to charge.

i don't believe the price has come down yet. i can show you a lot of examples where innovative smaller companies that were bought up by bigger companies. i get the $100,000 bill. so there's something wrong with the whole ecosystem that we have to address in a holistic way. >> let's move to the next question. >> amy cohen. we've heard on this panel and throughout the day talk of hepatitis c and hiv and the treatment advances and the impact on individual health outcomes, which i think cannot be overstated, but we haven't talked about the public health implications as much and the idea that treatment with hiv is prevention and that with a cure we're preventing and averting new infections. that puts hiv and hepatitis c apart from the other conditions we've talking about.

should we and how can we measure the public health impact on value when we're talking about these tremendous new treatments and interventions? >> i want to thank you for making that comment. value gets measured by different constituencies different. it is hard to evaluate the impact of the person who doesn't get hiv, but we know it exists, right? we can start to think about eradicating hepatitis c if we cure enough people. there's tremendous societal value. our company, we have 4.5 million children born every year. 42,000 would have a serious illness if you didn't have vaccines. we don't ever measure the impact on the health care if we didn't have that. we need to make sure these kinds of cures are affordable and they're available to people in the prison population, for

example. that, to me, is very important. >> the reason we wanted to get the price down is because we wanted everyone with hepatitis c treated. we were only treating those with the most advanced disease. to your point from a public health standpoint, even someone with early disease can transmit it to someone else. treating everyone is the right thing to do. there's more and more diseases we need to do this. if jonah salk had priced the polio vaccine like we have seen the prices today, we would still have polio. we need companies that are actually out there trying to find the patients, engage the patients, and get them treated. >> thank you. >> all right. thank you. now to peter bock, who was attempting to pose a question earlier. sorry we didn't get to you. go ahead. >> that's okay. i ask the same question no

matter who i'm asking it to. thanks for the comment. my group invented the drug abacus. ken, you made a comment about the sort of broad landscape of value definition, something that resonates with me. i want to ask a fairly granular question. is it that we can't define what the domains of value are, or we don't know the relative contribution of each of them? and the reason i ask this question is i created the drug abacus as a way of looking at cancer drug prices, but built it in a flexible way so you can manipula manipulate it in a way where prolonged life mattered.

am i in the right place? do we know what the domains are, but we don't know how to weight them so we can come to a value-based price? or are we before that stage still? anyone who wants to give me an answer, thank you. >> we're big proponents of what peter does. we are actually using the drug abacus in our evaluations of drug because peter has been thoughtful. what i value versus what you value versus what you value is going to differ. so value is in the eyes of the beholder. seeing my daughter walk down the aisle in three weeks maybe really, really valuable versus prolonging my life but having a lot of side effects for another year. you heard it earlier today. we have got to figure out how to add value at the individual level because oftentimes the individual actually will requestlerequest

less care, not more case, less expensive care, not more expe e expensive care. >> we heard that in the panel before. so next question. >> i'm edith mitchell. i'm a professor of medicine in oncology at thomas jefferson university and i'm president of the national medical association. my question is related to the changing demographics in our country. it is well recognized that minority populations are increasing in numbers significantly and at a rapid pace. so in using all the information that you have discussed today, i wonder if one of you can comment on how we're using these processes to address the disparities that occur in minority populations, specifically with poor outcomes

in most disease states? how are we utilizing our information to determine the effectiveness in disparate populations? >> that's another example of what i was saying are the challenges associated with saying that we can only proactively communicate what's in the label because those sub s -- hypertension drugs is a classic example of that. we need to be able to talk about the value in the real world versus subpopulations who need that care. >> i appreciate you using that term, equity, because the other piece is in having the information in the database and

the systems to know that a drug can be very effective to a given population, but if there are challenges in how that population is taking that drug or other issues, to tailor how you administer that drug to the other population becomes a leg up in dealing with the disparity issues. it's how do we think through the best way to take care of our different subpopulations that we're responsible for. >> okay. i hesitate to disenfranchise our last four questioners, so let's make an attempt at a round r robin. >> thank you very much. cat davis. i'd like to ask how can the system incorporate the patient perspective, including the data that we bring to the table with registries for example?

are there formal mechanisms that we can put in place to be sure the patient perspective and relevant data is incorporated? >> thank you. we'll put that to them. >> just following up on the discussion and all the issues, what's the one specific change that you would recommend government make in law or policy or practice at fda or cms that you think would improve the space here? >> great. >> patient engagement has been talked about as the blockbuster intervention of this century. i want to hear from the payor community how are you working on patient engagement. they have amazing value in their data registries, and we're having a really hard time getting through to the payor community that they want a seat

at the table, they want to be participants in this conversation. in the biopharmaceutical industry, the train has left the station. we're not getting there in the payor community. i want to hear about how you're working on that. >> the last one. >> my question is more pragmatic. it is really on these new risk and outcomes-based models? how scaleable are those so we can quickly bend the cost curve? >> let's incorporate the patient perspective and getting more patient engagement particularly with the pairs. >> we're in a consumer-driven market. that's what health plans with focused on. the plans that will survive are focused on the consumers, and the consumers are demanding value and plans are responding to that with tools on their websites to help patients find the best value for their money

and we'll continue to do that. >> on the question of shared risk and these other outcomes-based models, how scaleable are they? can we do this fast enough so we can get out ahead of these enormous price increases and this big pipeline of specialty drugs? steve, can you get to that? >> no. >> we need other tools. >> the reality is we're already behind the curve. we already can't afford what's already out there, so it can't happen fast enough. >> speed is of the essence and we're already behind. one important change at the fda or cms in the short run that would do the most to make a big difference. let me have ken on that perhaps and bernard and alan, you can weigh in as well. >> fda restrictions on our company's ability to communicate broadly on our products would be

helpful and clarification to the kickback statute. >> because those could, in fact, be apparent violations. >> helping somebody to adhere, is that an incentive that violates the kickback law. >> we wake up one day and turn on the news and secretary burwell is telling all of us effective 1/1/17 we're going to be negotiating prices. >> in medicare. >> in medicare. >> spoken from a man who has a medicare advantage plan or two. >> i don't pretend to suggest what the government should do in law, but i think in general i think more rr -- research and development. >> all right. well, i think as you've heard

very eloquently stated these value-based and outcome-based strategies critically important, critically important. they're probably not -- have to strategies employed, whether it's more government intervention. whether it's more regulation, whether it's looking at some of these other aspects. what is going on at the fda, etc. it's a big job. it's a long list. you heard steve's list. we could probably add about 20 more things to that based on the conversation all of today. but we've come to a very important ending. i want to ask you all to join me in thanking this panel for getting us there. a terrific discussion. thank you. >> i want to welcome to the stage, mina, director of the office of health reform at the department of health and human services. she helps to drive strategy and manage the implementation of the affordable care act and delivery

system reform, and previously she practiced as a head and neck surgeon in san francisco. >> what an incredible discussion today. and thank you for moderating the discussion. you really made it very productive. and it is much appreciated. >> and thank you to all of you who have joined us here in the great hall, and also to all who have participated online. the consumers, the health care professionals, employers, manufacturers, insurance issuers, government representatives and all of our other partners. as a provider, i know how powerful pharmaceuticals can be in promoting health and treating and curing illness. but the high and growing cost of drugs has created hardship for families, employers and states. so today's discussions really reflect the perspectives of the diverse group of stakeholders

impacted by the rise of cost of drugs. and echo the complexity of transforming our health care system into one that delivers quality over quantity and puts the patient at the center. we set out here with the goal of bringing stake holders together on a discussion on how our nation can lead an innovation and deliver access to high quality affordable medicines. and today, we made progress toward that goal by identifying common ground to work together, and heard ideas about how to protect access to important drugs while we continue to improve affordability and promote innovation. >> we heard on the challenges facing patients and providers in accessing innovative life-changing therapies such as how the cost of prescription drugs are affecting family budgets. patients and providers value innovative therapies and cures. but consumer and patient advocates talked about the

struggle to access therapies that promote quality and health. we also heard ideas on how to provide patients and providers with relevant information to support better health care decisions. and in particular, we saw that the patient perspective needs to be at the core of how we define value. keeping drugs accessible and affordable is on the minds of all the stake holders in this room. and our panel after lunch focused on how to balance access and affordability. the panelists talked about current purchasing models in the public and private sectors. we discussed the important role of generic drugs in curbing drug spending and providing patient choice. we also heard how states, health plans and employers are innovating with utilization management tools to control overall drug spend and also make

sure individuals are accessing the medications they need. for example, our panelists discussed using formulary and plan design to make sure that the right people get the right drug at the right amount at the right time. importantly, data such as comparative effectiveness can help make more informed decisions at the point of care. but as we see, there's much more to be done. taking a cue from a delivery system reform efforts, we can deliver better care, spend our dollars in a smarter way and put patients in the center. you just heard from our last panel. they discussed value based and outcomes based purchasing strategies. what has worked and what the hurdles are in expanding these models. merck and novartis spoke to their arrangements to drugs

treating diabetes and multiple sclerosis, creating a win/win where the manufacturer, the payer and the patient all benefit of. we also heard of innovations in indications based pricing and the need to better engage patients. it is clear from the discussion that all of us in the room have a stake in working together around value-based reimbursement and fair drug pricing. just in this last panel, we heard from a payer, a manufacturer, an integrated health system, a plan, and a pharmacy benefit manager on how they're working on innovative models to promote better health and share decision making. although we have our work cut out us, we reward value. keeping health care affordable for the long-term is a priority for the department. we want americans to have access to the latest innovations and

pharmaceuticals that save lives and improve the quality of life for people with illness. our goal is to health care a foster system that leads an innovation, delivers the most affordable, highest quality medicines and results in healthier people. as you've heard, this is a complex problem and there is no one solution. however, the most effective solutions will be a result from all of us working together. the consumers, the health care professionals, employers, manufacturers, insurance issuers, government representatives and all of our other partners. thank you, again, to all of the stake holders engaging with us on this issue and to those of you joining with us today. we look forward to continuing this discussion and the important work to foster innovation and increase access

and affordability to prescription drugs. thank you very much. live coverage at 111:30 a.m. on c-span. >> c-span has the best access to congress with live coverage of the house on c-span and the senate on c-span 2. over thanksgiving, watch our conversations with six freshmen members of congress. thursday at 10:00 a.m. eastern, buddy carter, republican from georgia and the only pharmacist serving in congress.

at 10:30, mark walker, republican from north carolina and a baptist minister in his first elected office. and saturday morning at 10:00 eastern, it's mimi walters, former state senator who interned in d.c. as a college student. and at 10:30, seth molten, harvard graduate and a marine who served four tours in iraq. your best access to congress is on c-span, c-span radio, and c-span.org. >> john hinckley, of course, was the person who shot president reagan and president reagan was not wearing a bulletproof vest that day. it was a short trip from the white house. the thing is, john hinckley was stalking jimmy carter before this. >> on q & a, ronald findman,

author of the book "assassinations, threats and the american presidency" talks about various attempts and physical threats made against presidents and presidential candidates throughout american history. >> well, there's been 16 presidents faced assassination threats, although none directly eyeball to eyeball since ronald reagan. i also covered three presidential candidates. huey long, who in 1935 was assassina assassinated. and i talk about robert kennedy in 1968 who was assassinated and george wallace who was shot and paralyzed for life in 1972. so i cover candidates as well as presidents. and it's a long list. >> sunday night at 8:00 eastern and pacific on c-span's q & a. >> in a moment on c-span 3, our live landmark cases series continues. tonight's show features the u.s. supreme court case brown versus board of education.

then a conversation on the use -- we'll hear from officials from the technology companies pandora and spodify. and later, a look at civil liberties and privacy. >> all persons having business before the honorable, supreme court of the united states, give their attention. >> landmark cases, c-span's special history series produced in cooperation with the national constitution center. exploring the human stories and constitutional dramas behind 12 historic supreme court decisions. >> number 759. petitioner versus arizona. >> we'll hear arguments on number 18.