Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is Bloomberg BusinessWeek with Carol Messer and Tim Stenebeck
Speaker 2: on Bloomberg Radio.
Speaker 3: Doctor Mariana Sokeal is Associate scientist in the Department of
Speaker 3: Health Policy and Management at the Johns Hopkins Bloomberg School
Speaker 3: of Public Health. She joins us from Brazil this afternoon,
Speaker 3: Doctor sol, good to have you with us. I should
Speaker 3: note the Johns Hopkins Bloomberg School of Public Health. It
Speaker 3: is supported by Michael R. Bloomberg, the founder of Bloomberg
Speaker 3: LP and Bloomberg PHILANTHROPIEES. So is that it is it?
Speaker 4: So?
Speaker 3: Is it so easy now? Now Florida can import drugs
Speaker 3: from Canada?
Speaker 4: Is that it?
Speaker 2: Well? It's an important step. It's a new program. It's
Speaker 2: the very first time we've have that initiative approved in
Speaker 2: the United States and it will definitely bring some change
Speaker 2: that we're excited to see how it will go.
Speaker 4: Well.
Speaker 3: I want to get to the core of why this
Speaker 3: is an issue. It's because in the US. I don't
Speaker 3: need to tell anyone who's listening who lives in the
Speaker 3: US that drugs in the US are so expensive, our
Speaker 3: healthcare system unbelievable. Some people would argue, Carol, yeah, that's broken, yes,
Speaker 3: and that it's way too expensive for a lot of people.
Speaker 3: Given that how expensive insurance premiums are and how much
Speaker 3: companies spend for employer sponsored healthcare, why is it so
Speaker 3: much cheaper to get drugs from Canada?
Speaker 2: Doctor Sokel, Well, you guys are absolutely right. My research
Speaker 2: showed that on average, we're paying three to four times
Speaker 2: higher prices than other countries like Canada. And the surprise
Speaker 2: here is that it's not only for new drugs that
Speaker 2: you know are new launches. We pay the most for
Speaker 2: drugs that have been in the US market for a
Speaker 2: long period of time. So other countries do have mechanisms
Speaker 2: to bring prices down over time, and in our country
Speaker 2: there are some transactions and negotiations going on, but they
Speaker 2: typically do not favor directly the consumer. Typically they happen
Speaker 2: at the health plan level, and the health plans decide
Speaker 2: and determine how much people need to pay to get
Speaker 2: their drugs. So, on the one hand, we don't have
Speaker 2: strong pricing mechanisms to bring prices down over time, and
Speaker 2: these prices are very non transparent. And in the other hand,
Speaker 2: unlike other countries, we also have a higher typically a
Speaker 2: higher requirement. We allow our plans to charge higher prices
Speaker 2: from people. So it's very usual to see, especially for
Speaker 2: a high cost drug, plans require a person to pay
Speaker 2: a twenty percent of the drugs cost when they get
Speaker 2: to the fullacy counter.
Speaker 4: Doctor Soka.
Speaker 1: I feel like we've been talking about this for years.
Speaker 1: I think go back to the Clinton administration right when
Speaker 1: they first try to put some kind of health care
Speaker 1: plan through. So this idea of the Americans paying higher
Speaker 1: drug costs right, not a new thing my understanding though,
Speaker 1: And I think what cut our attention is, like, ooh,
Speaker 1: is this going to be an opportunity for individual citizens
Speaker 1: of the United States to pay cheaper drugs? My understanding.
Speaker 1: I'm looking at a column that was put out by
Speaker 1: the Bloomberg editorial board about mid January. For more than
Speaker 1: two decades, US pharmacists and wholesalers have been allowed to
Speaker 1: import medications from certain countries, including Canada, provided their safe
Speaker 1: and delivered savings to consumers. The Trump administration, certainly when
Speaker 1: he was in the White House, Donald Trump helping to
Speaker 1: move some of this along, having said that don't ultimately
Speaker 1: pharmaceutical companies kind of control supply and can they not
Speaker 1: potentially hold back what they sell to Canadian distributors distributors
Speaker 1: excuse me, that will ultimately kind of make it difficult
Speaker 1: maybe for American buyers state buyers to tap into that.
Speaker 1: I mean, it's still not going to be so easy, right.
Speaker 2: Well, it's just mentioned you know that the US market
Speaker 2: is so many levels of magnitude bigger than the Canadian
Speaker 2: pharmaceutical market. I mean, we're over twenty twenty times larger market.
Speaker 2: So you know, if it wasn't just a state program,
Speaker 2: if we were to depend on Canada for our drugs,
Speaker 2: of course, that would put place an incredible strain on
Speaker 2: the Canada drug supply. And know not to mention that
Speaker 2: Canada also suffers drug shortages and all sorts of different
Speaker 2: supply product problems as much as we do here, So
Speaker 2: there is an incredible risk to the supply in Canada
Speaker 2: as well, if you know, these product programs were to
Speaker 2: be more widespread and we were to depend most more
Speaker 2: on the Canada supply in order to provide drug for
Speaker 2: our people.
Speaker 1: How do you see it from your research? Is it
Speaker 1: a case of we've really got to get to the
Speaker 1: core of why is it so much more expensive here
Speaker 1: in the United States, Like there's negotiating that goes on
Speaker 1: right for medicare and so on and software. But why
Speaker 1: is it ultimately so expensive? Is it because individuals can
Speaker 1: sue companies? I try to understand why is it so
Speaker 1: much more expensive for medications and pharmaceuticals here in the
Speaker 1: US versus certainly in Canada and elsewhere around the world.
Speaker 2: Well, first of all, you know, we have what is
Speaker 2: called the market based pricing system, so companies they can
Speaker 2: charge whatever the market can bear. So that's the first thing.
Speaker 2: We don't have specific structures mechanisms that force prices to
Speaker 2: go down over time. That's one thing, so we have
Speaker 2: a free market. The other problem is that the intermediaries
Speaker 2: that typically are in charge of negotiating these prices, they
Speaker 2: do profit from the difference between whatever price is announced
Speaker 2: and the final price that they are able to obtain
Speaker 2: through price concessions such as rebates and discounts. So these
Speaker 2: intermediaries that are very unique to the US, they're called
Speaker 2: the pharmacy benefit managers. They don't exist anywhere else in
Speaker 2: the world. They are a US entity. These entities they
Speaker 2: can't profit off of the rebates and discounts that they negotiate.
Speaker 2: So this represents an incentive for smaceutical manufacturers to continue
Speaker 2: increase in pricing over time, even if they haven't made
Speaker 2: any changes to their drug just in order for these
Speaker 2: intermediar is to also make a profit and to keep
Speaker 2: their drugs in the formulary in being covered.
Speaker 3: We only have twenty seconds left. But what's the solution
Speaker 3: that you would prescribe here?
Speaker 2: Well, transparency is important. I'm eager to see the prices
Speaker 2: that the Medicare Drug price Negotiation will announce. That will
Speaker 2: bring transparency in the market, and ultimately that will also
Speaker 2: help consumers. So the Florida importation prices that we will
Speaker 2: know will be helpful, the Medicare negotiation prices that we
Speaker 2: will know will be helpful. So all these added elements
Speaker 2: of transparency will bring a lot of benefit to the
Speaker 2: US market.
Speaker 1: Right the Infation Reduction Act empowered Medicare and negotiate I
Speaker 1: think an initial list of ten older widely used drugs
Speaker 1: in terms of pricing, so we'll be watching all of that.
Speaker 1: Doctor Marianna SoCal, Associate scientists in the Department of Health
Speaker 1: Policy and Management at the Johns Hopkins Blueberg School of
Speaker 1: Public Health, Thank you so much. This is Blomberg.
Speaker 3: Allison Taylor. She's professor of ethics at NYU at the
Speaker 3: Eastern School of Business. She's also the executive director at
Speaker 3: Ethical Systems. She's got a new book out. It's called
Speaker 3: Higher Ground, How Businesses can do the right thing in
Speaker 3: a turbulent world. Professor Taylor joins us from Woodstock, New York.
Speaker 3: Professor Taylor, good to have you with us. How are you.
Speaker 5: I'm doing very well. Thanks so nice to be here.
Speaker 3: Well, thanks for joining us. What do you make of
Speaker 3: what we heard from the CEO of Mondaleze earlier today
Speaker 3: that you know the company hasn't felt pressure from its
Speaker 3: shareholders to actually stop doing business in Russia.
Speaker 4: Well, I mean, I think we tend to have had
Speaker 4: a pretty simplistic discussion in the press about whether companies
Speaker 4: are in or out. I think the picture beneath the
Speaker 4: surface is a lot more complicated than that. Companies have,
Speaker 4: for example, been criticized for selling their assets to local nationals,
Speaker 4: and so if we're thinking about human rights, a company
Speaker 4: like Manz, arguably right has some argument for being in
Speaker 4: Russia and continuing to sell essentials, at.
Speaker 5: Least to Russian consumers. It's not like it's a democracy.
Speaker 4: And I think the reality is that this picture is
Speaker 4: much more complicated and nuanced than people suggest. I believe
Speaker 4: that companies like Unilever and Neesle are actually also still
Speaker 4: operating in Russia.
Speaker 1: But what do you make of the argument? Take China
Speaker 1: for example, the argument was always better to be if
Speaker 1: you're a multinational, be there on the ground, helping an
Speaker 1: agent for change overall. And yet here we are. I
Speaker 1: feel like the beginning of my career was all about
Speaker 1: the opening of China, specifically in every company who was
Speaker 1: a global multinational wanted to have boots on the ground,
Speaker 1: if you would, or have some kind of collaboration so
Speaker 1: that they could tap that domestic market. Here we are later,
Speaker 1: and it is a bit of a tortured relationship, it
Speaker 1: feels like, and I feel like everybody is yep, still
Speaker 1: want to be in China, But I'm also working on,
Speaker 1: you know, diversifying my global supply chains and maybe reducing
Speaker 1: some of that risk exposure. So I do wonder, you know,
Speaker 1: I don't know. I don't know what the answer is
Speaker 1: about what role companies can play or that they want
Speaker 1: to play ultimately in doing the right thing in a
Speaker 1: world that, as you rightly set rightly right, is very
Speaker 1: turbulent and getting more so. It feels like every day.
Speaker 4: Yeah, so I think, you know, back in the nineties
Speaker 4: early two thousands, we used to tell ourselves this very
Speaker 4: nice story that we should have foreign direct investment going
Speaker 4: into authoritarian countries and that would lead to economic liberalization,
Speaker 4: and then that would lead to democracy, and they'd all
Speaker 4: be this sunny story to progress in the end of history.
Speaker 5: It has not really worked out that way.
Speaker 4: We're in a far more multi polar, geopolitically fraught world,
Speaker 4: and I think the reality is that many companies, especially
Speaker 4: in consumer led businesses, are getting trapped between the kind
Speaker 4: of sella of Western consumers' expectations that they tackle human
Speaker 4: rights issues, they tackle climate change, et cetera, et cetera,
Speaker 4: with the reality that they still need to make money
Speaker 4: for their shareholders, and then that also if companies pull
Speaker 4: out of countries like China. There's been a big flood
Speaker 4: out of my Ammar recently that doesn't necessarily benefit human
Speaker 4: rights on the ground. So we've just had a ban
Speaker 4: on projects from Jinjang on human rights grounds. That's very complicated.
Speaker 4: Most of our solar panels can't currently come from that region.
Speaker 4: So I think there's like this nexus of really messy
Speaker 4: trade offs between environmental and social issues and between the
Speaker 4: expectations of consumers and governments all over the world. There's
Speaker 4: rather a crazy expectation, I think from everybody that companies
Speaker 4: are perfectly consistent at all times and not hypocritical. But
Speaker 4: we have really come to a consensus on whether we
Speaker 4: want Western businesses to pull out of all these problematic places,
Speaker 4: and then what the second order consequences of that would
Speaker 4: even be. So I think the conversation is just really
Speaker 4: messy and really fraught, and companies trying to chart a
Speaker 4: nuanced path light Mondolei's sometimes seem to be getting the
Speaker 4: most lack of ale.
Speaker 3: How do you define what is right in business? And
Speaker 3: the reason I ask that is because I think a
Speaker 3: lot of us know fundamentally what's right and wrong, but
Speaker 3: there are disagreements that happen in the business world that
Speaker 3: aren't so clear cut. And you open by talking about
Speaker 3: Starbucks and the fight for unionization that some of the
Speaker 3: employees at stores, the baristas at stores around the country
Speaker 3: are doing right now, and you make the point that
Speaker 3: even some white collar workers in the Seattle headquarters through
Speaker 3: their support behind these baristas. But there's certainly a way
Speaker 3: that management thinks what's right in this situation that's different
Speaker 3: than what the baristas who are fighting to unionize feel
Speaker 3: is right. So how do you define right?
Speaker 5: Yeah?
Speaker 4: Well, I mean one of the problems is we don't
Speaker 4: agree on this topic at all as a society, and
Speaker 4: we don't even have the right language to talk about
Speaker 4: it anymore. You know, terms like ethics and ESG and
Speaker 4: purpose kick around. But I think we've completely lost sight
Speaker 4: of this question. And I find the Starbucks example so
Speaker 4: fascinating because Starbucks is by most measures, considered an ESG
Speaker 4: and sustainability leader. It tips all the boxes. Even how
Speaker 4: it treats its employees is up there in various credible
Speaker 4: ratings and rankings with the best companies in its business.
Speaker 4: And yet this unionization issue has really brought it a
Speaker 4: lot of flag and really made it be regarded in
Speaker 4: a different way. There's also been this tendency to treat
Speaker 4: these issues as very, very partisan. You know, it's all
Speaker 4: about WoT business, or it's all about people trying to
Speaker 4: get their political agendas completed.
Speaker 5: If you read a lot of the rhetoric out there.
Speaker 4: I would tend to argue, however, that I don't think
Speaker 4: at the end of the day that many questions are
Speaker 4: actually that partisan. So there've been examples recently. We can
Speaker 4: think of the North what Southern train derailment. We can
Speaker 4: think of there was a settlement with Huts where Huts
Speaker 4: was having its customers arrested and accusing them of stealing cars.
Speaker 5: Or we can think of.
Speaker 4: Amazon workers being forced to work next to a dead
Speaker 4: body all day, and I would just ask how partisan.
Speaker 5: Those issues really are.
Speaker 2: I think I think at.
Speaker 4: The end of the day, we need business to clean
Speaker 4: up its own mess and treat people with dignity and
Speaker 4: respect before starting to go out there and yodel about
Speaker 4: saving the world.
Speaker 1: Totally agree, and I do think there is a point
Speaker 1: where if you like, there's all these studies that you
Speaker 1: know rate workplaces, and I do think employees are pretty
Speaker 1: picky when they can be that if they're in an
Speaker 1: not a graad work environment, they're going to leave. Having
Speaker 1: said that, one of the things that you know, Allison
Speaker 1: tim and I think always grapple that if you're a
Speaker 1: publicly held company, every quarter you are measured by financial metrics, Ultimately,
Speaker 1: I'm not saying that there might be there might be
Speaker 1: some views based on management does or if they break
Speaker 1: the laws and regulators are going to come down. But
Speaker 1: you know what I mean that, I feel like you
Speaker 1: have a learn in your book a leadership obsession with
Speaker 1: hitting goals, sales goals generally tends to trump compliance processes.
Speaker 1: And you were talking about Goldman Sachs here and also
Speaker 1: coming off of Wells Fargo. But how do you know,
Speaker 1: how is that balance really playing itself out among corporations.
Speaker 1: Is it really a true debate.
Speaker 5: I don't think it's still a debate.
Speaker 4: You know, we saw all this rhetoric from Larry Fink
Speaker 4: from the Business Roundtable.
Speaker 5: You know, we're moving to the new era of stakeholder capitalism.
Speaker 4: There was the golden eraror of this, you know, Pete,
Speaker 4: Larry Fink, right before the pandemic.
Speaker 5: I think it.
Speaker 4: Would be one thing if we'd all agreed when we're
Speaker 4: moving in that direction. But as you're rightly pointing out,
Speaker 4: those short term shareholder value pressures are just as pressing
Speaker 4: as they ever were.
Speaker 5: So now it's really more.
Speaker 4: Of an everything everywhere, all at once problem where I
Speaker 4: think leaders are really rea the harvest of this rhetoric
Speaker 4: that they were putting out there in the late twenty tens.
Speaker 4: They're only struggling to balance all these different voices and
Speaker 4: certainly employee leaks, employees speaking up reputational pressures. Ethical missteps
Speaker 4: can tank your stop. They can have a very very
Speaker 4: serious negative financial effect. I think one of the things
Speaker 4: that makes this so tricky is different businesses can be
Speaker 4: treated in very different ways on social media and in
Speaker 4: the public domain for the same conduct. So we tend
Speaker 4: to talk about reputational risk as if it is some
Speaker 4: sort of predictable formula.
Speaker 5: Absolutely not.
Speaker 4: It can feel like it's coming out of nowhere, and
Speaker 4: so I think that's part of why it's become so
Speaker 4: difficult to run a business.
Speaker 3: Professor Taylor, we got to leave it there. Alison Taylor's
Speaker 3: got a new book out, Higher Ground, How Business Can
Speaker 3: do the right thing in a turbulent World. Joining us
Speaker 3: from New York