For those who are less familiar, walk us through Trump's executive order earlier this week on prescription drug prices and what it means for folks.

I think there are two really important points to make before I jump into the executive order. The first is that folks historically have really conflated list prices with the prices that get paid in the US. When you hear the rhetoric over the last handful of years about drug pricing, you hear folks say things like, "We're paying 10 times as much for Ozempic as other countries," or "We're paying 10 times as much for insulin." That just factually isn't true. So just to make sure folks are all on the same page, we typically pay two to three times what other similarly situated countries are paying in net price, meaning what your PBM is paying, what your employer is paying, or what your insurance company is paying.

To give you an example, Ozempic is a roughly $1,000 list price drug. The actual net price being paid by the PBM is roughly $250. So there is a real problem that is a byproduct of this: if you, as a consumer, show up at the counter and you're in your deductible and have to pay out of pocket for that Ozempic, you are in fact oftentimes paying that $1,000. But the $750 difference is going to your PBM or your employer.

For me, the thing I'm most excited about in this executive order is that they explicitly address this issue. They say that pharma has to provide competitive prices via this MFN mechanism for consumers paying out of pocket, paying direct to consumer. There are a lot of other things in the executive order we can get into, and I think they're interesting and we should talk about them. But to me, the most compelling thing, if I'm interpreting the EO correctly, is that there is a pathway here where, in short order, consumers could be paying significantly less at the counter when they're not covered or they're in their deductible, which to me is actually the biggest problem to solve.

We can debate whether we should be paying twice as much as the UK or other developed countries at net prices, and that's an important debate to be had, and that's what I think everyone is debating. But I think it's hard to argue that consumers shouldn't be getting effectively net prices rather than paying the list price that is exorbitantly more expensive.

Why is it that folks are saying they're paying, say, 10x more today? Is that just the headline marketing number? Because when you actually pass it through the system, the net result is, as you said, two to 3x more expensive. Where are those numbers coming from, by and large?

The differential between those two prices is really a byproduct of rebates, and of PBMs having negotiated rebates as a way to, in theory, drive down cost. In the first Trump administration, they tried to go after that issue directly. They tried to eliminate the safe harbor that's in place that allows these rebates to exist, to try to solve this exact issue I'm describing. They got pretty far along in that process and ultimately got shut down by the CBO, because you can argue that these rebates underwrite premiums. They keep premiums down, because you're taking money out of a consumer's pocket and giving it back to an employer or an insurance company.

So they failed in the direct attempt, but it was a real effort. I think what you're seeing here with this call-out to direct-to-consumer pricing is an interesting end run to solve the same problem. They don't have to deal with the complexities that came along with trying to eliminate rebates. Instead, they're coming up with another mechanism which says, "Hey, pharma company, you need to have prices comparable to your list prices in other countries for consumers to be able to pay a cheaper price."

The way I interpret the EO, the point of leverage they have is: if you don't have that price option available to us, we're going to revisit the reimportation laws, and consumers will just be able to buy these drugs from other countries. That's a perfectly reasonable solve. If folks are talking about whether this is price controls or price setting, I think it really depends on the exact implementation, because that version is not. It's actually just opening up the market. So again, it depends on a lot of specifics here. But this is all a byproduct of rebates in the current supply chain, and PBMs and other middlemen.

How did we end up in this situation in the first place? How did we end up in an environment where the US consumer is paying a good chunk more than folks in other developed countries?

Again, there are two issues on the rebate side. It's really a byproduct of the fact that the purchaser here is not the consumer. It's the employer, and it's the PBM.

And is that different than other countries in Europe, for example?

It's different in the sense that in Europe, it's effectively the NHS negotiating these prices. So you have one single payer that doesn't have these conflated incentives, whereas in the US, PBMs have very different incentives. They're trying to capture margin as a byproduct of being the grand negotiator. PBMs are everyone's favorite punching bag in healthcare because they are these middlemen and everyone hates them, and they're the obvious place to go. To some degree, I think that's fair. But very few folks have come up with an alternative approach that would actually work better. I think that's the more interesting question.

The work that I did at Amazon, and the thing I've been thinking about for a decade, were all around how you actually make the consumer the decision maker here, so that this starts to look more and more like a healthy retail environment and a retail supply chain. If you think about what the administration is trying to do, and this might be a generous interpretation, but an optimistic take, it's that if you all of a sudden get to a world where Ozempic really is $250 at the pharmacy counter, and all the GLP-1s are between $200 on the low end and $600 or $700 on the high end, consumers are now in a position where they're probably going to decide based on price. And manufacturers are going to start pricing to drive the right balance between demand and margin, like they do in any other category.

All of a sudden, you have a different way to manage price, which is the consumer at the center of that decision-making process, not the PBM. To me, that's the generous interpretation of what they're trying to do here: create an alternative ecosystem where you have a credible path that is not reliant on these PBM negotiations and rebates and other mechanisms to drive down price, but a more normal retail approach.

Two questions off that. For those less familiar, the executive order stated that there's a most-favored-nation clause, which essentially gives US consumers equivalent pricing power to those in other developed countries. Do you think that's the right approach? Or is there a more effective way to address the disparity? Or does it get us close enough?

It depends on the exact implementation and what we're talking about when we talk about an MFN. I think an MFN on the net price that payers are paying and Medicare is paying is going to be extremely difficult to implement in practice. Today, there's a whole slew of different net prices depending on the PBM. The federal government doesn't even really totally know what the net price actually is. And certainly other countries aren't going to be thrilled about sharing their negotiated net prices. So I think this idea that we're truly going to get to a comparable MFN on the amount that we pay net is just practically unlikely.

But I do think, again, the concept that we'll get to comparable list prices for consumers doesn't actually feel that hard to me to implement. And it borks a bunch of these rebates and other things that are blowing up the ecosystem today. To me, that's a really interesting end run around the current supply chain. I think all of the conversations about investment and R&D, and what happens if our prices really come down, are probably not the interesting conversation to be had, because I doubt we get that far along in this process. I think we end up with comparable list prices, consumers are no longer constantly getting screwed at the pharmacy counter, and you actually have a tractable path to get out of the current supply chain we find ourselves in today, if that makes sense.

So you don't ultimately think that the big pharma argument, that this is going to reduce R&D spending long term, which means fewer high-quality novel drugs, will come into play here?

Yeah, because I just don't think we're going to end up in a position where, at least in the near term, we're not paying two-ish times what other countries are paying. I think the whole goal here in the near term should be to get to rational prices, because that's step one to getting to a more rational market. And then look, if consumers and payers are unwilling to pay $500 for a GLP-1 and they're only willing to pay $300, then that's market making, and that's how it works. That's the reality of the situation.

But today we're so far away from even being able to have that conversation, because no one knows what we're paying. No one knows what the net prices are in specifics. As a precursor to doing anything interesting, you've got to fix that problem. Then, in two years, we can say, "Look, here's what we're actually paying. Let's have a reasonable debate about whether we think it's OK to pay twice as much." But we're so far away from that right now that I think the interesting debate is how we get to a point where the prices we're talking about reflect the actual prices, and then we can have the second-order debate.

Last question for now, right along those lines. You, maybe more than almost anyone in the country, understand how the drug supply chain works. If we start with this step one of giving folks more affordable out-of-pocket drug prices, and we look out three to five years, what does the two- or three-step sequence look like, from your point of view, to keep drug costs falling and reach some degree of parity with other countries?

As you can imagine, this was the entirety of the work at Amazon, and the debate about how this should ultimately play out. I think the thinking and vision is very much that this should look like any other retail category. You should get orders sent in from your physician, ideally at a GLP-1 level versus a product level. You should be on normal e-commerce detail pages, understanding what the price is for each one of your options, both with insurance and paying out of pocket, and then transact like you do in any other retail category. If you got to that place, you've ultimately moved the purchase decision from a middleman to a consumer, and it can become a much healthier ecosystem.

I don't think it's just Amazon that's going to build this. I think as soon as you have reasonable prices, the Hims and Ros of the world, and lots of new startups, could ultimately build interesting experiences around this. You now have a credible path forward that's not reliant on these backdoor negotiations, because it just looks like consumers shopping for anything.

This already works super well in generics. One thing to reiterate here is that 90%-plus of the prescriptions filled today are generics. We're not paying more. The price is reasonable. To some degree, you're probably paying too little, and we're suffering from a quality standpoint because of that. So generally speaking, generics are fine, and the shopping thing works. It's brands that all these EOs are addressing, and brands where all these conflated and convoluted pricing schemes show up.