Founder Stories: George Scangos, former CEO of Biogen and Medical Innovation & Social Responsibility

Good evening, everyone. Welcome to the 17th Annual Robert P. Maxson Lecture. I'm John Fore, Director of the Institute of Corporate Responsibility. I'm glad you could all come this evening and join us for our lecture. I do have the pleasure, of course, of reminding you or mentioning if you would all take your cell phones and please either— well, I won't say turn them off, that's probably too much, but at least mute them for us because we are recording. Tonight. So I would like to introduce our Dean Linda Livingstone, Dean of the Business School here at GW. We were very fortunate enough to convince Linda after 12 years at Pepperdine, Dean of the Business School, to come here and be our Dean as well, and she's been Dean for about 2 years. In addition, she is a recognized scholar in the area of leadership and business and education. So I hope you enjoy the evening, and I want to ask you to welcome Dean Linda Livingstone.

Well, good evening, and thank you, John, for that introduction. It is a real pleasure to have you here for the 17th Annual Robert P. Maxson Lecture sponsored by the Business School and George Washington University. This annual lecture was established through Dorothy Maxson's generous gift to the business school in honor of her husband Robert P. Maxson, who graduated with a business degree in 1948, so just a few years ago. And this lecture is really designed to bring in prominent business leaders and executives to share about their experiences in business and how that really helps us develop our thinking about globalization, leadership, and how we can be more effective in the kind of global economy that we're facing today. And this is really very appropriate. In the business school, we're really focusing our strategy on 3 significant themes: how we leverage what we're doing here and being in the location of Washington, D.C. as effectively as we possibly can, how we think about globalization and ensuring that the experience that our students are having truly helps them understand the global marketplace that we're in, and then also how we think in a more interdisciplinary and multidisciplinary way, both in terms of our faculty research and the learning experience experiences that our students provide. And I think this lecture, particularly tonight, you will see ties very directly to those themes, and particularly the interdisciplinary theme. We'll talk about health, we'll talk about economics, we'll talk about social responsibility, all of those and how they fit together and why they are so important as we look to the future of business and certainly in what we do here at George Washington in terms of the educational experience that we provide to our students. So we are thrilled to have you here, and it is my privilege now to introduce the President of George Washington University, President Steven Knapp. He is the 16th President of George Washington. He really is focusing on priorities here at GW around partnerships with the city and with neighboring institutions, expanding the scope of the institution's research to really make us one of the global research universities, and on transforming us into a model of urban sustainability as a university. President Knapp is a champion for the business school, for the entire university. It's a privilege to work with him, so please join me in welcoming President Stephen Knapp.

Thank you very much, Dean Livingstone. It is a pleasure to join the Dean and Professor Foren, welcome, welcome you to this lecture. And as she said, it's the 17th time we've done this. I think it's a very important series. Made possible, as the Dean has mentioned, by a very generous gift from Dorothy Maxson. But gifts like this, I think, are important because they create unprecedented opportunities for our students. They really enable us to bring thought leaders to campus, connect theory to practice, and help us provide a front row seat in the theater of history to all of our students. And one of the ways we prepare the next generation of citizen leaders to address the world's most pressing challenges. And it's now my pleasure to introduce tonight's distinguished speaker. George A. Skangos is the Chief Executive Officer and Director of Biogen Incorporated. Since its founding in 1978, Biogen has grown to become one of the world's leading biotechnology companies, developing advanced therapies for neurological and autoimmune diseases, as well as rare diseases that conventional pharmaceutical companies often do not address. Before taking on his current role at Biogen as CEO, Dr. Skangos held leadership positions with Exelixis, with Bayer Biotechnology, and with Anadys Pharmaceuticals. He's also no stranger to academia, having been a professor of biology at Johns Hopkins University, and where he is still an adjunct professor. Dr. Skangos serves as chairman of the board of directors of Pharmaceutical Research and Manufacturers of America, He is a member of the Board of Trustees of Boston Museum of Science and of the Biomedical Science Careers Program and of the National Board of Visitors of the University of California Davis School of Medicine. He's also served as chair of the California Health Institute. His lecture this evening titled Medical Innovation, Social Responsibility, and Economic Realities: Responsibly Creating a Healthier Future is sure to be thought-provoking and certainly addresses a number of the themes that in our focus on interdisciplinary connections this university is especially committed to exploring. So ladies and gentlemen, please join me in welcoming Dr. George Skangos.

Well, good evening everyone. I'm very happy to be here this evening. I'm planning to talk for about 45 minutes or so, and hopefully we'll have some time for questions. And there's some interesting and potentially controversial topics that we should hopefully be able to discuss. So I'd like to make a few points. One is we are sitting at a time of unprecedented potential for improving healthcare around the world. The advances in biology, chemistry, physics, data sciences, the ability to collect and analyze huge volumes of data are all coming together. And so these days it's possible to envision cures for Alzheimer's disease, for many kinds of cancer, for diseases that have been resistant to developing therapies previously. And I'm gonna go through some of I'll show you some of the examples of that. And so it's incredibly exciting. And, you know, for the students in this room, in your lifetime, and I think my goal and the goal of the industry is that when you get to my age, you won't have to worry about developing Alzheimer's disease, that it will be taken care of. It won't be an issue. So we have amazing potential to do amazing good for millions of people around the world. At the same time, you know, and you hear all the campaign rhetoric, the industry is under increasing pressure because of the pricing policies that some companies have adopted. And there is a legitimate issue with people around the country not being able to afford their drugs. If they go to a pharmacy and they have a $500 copay per month, that is not affordable for a lot of people. And so there is a legitimate issue. And so what we collectively have to do is solve our healthcare issue in this country, find a way. And I think it's the way to solve that problem is not by crushing drug prices, and I'll tell you why as I expand on that a little later, but to make healthcare better and more affordable at the same time. And so I'm going to talk to you a little bit about how I think about those things and what we're doing at Biogen. Before I do that, you might think that pharmaceutical and biotech companies are full of scientists. They are, but they're also full of lawyers. And so this is a requirement. And what this says is everything that I say may not come true. And I'll be making statements about the future that I think might happen, they actually might not, so keep that in mind, right? So let me tell you a little bit about Biogen. Biogen was founded in 1978. It was not the first biotechnology company founded, but it was one of the very early companies. All of the companies that were founded prior to Biogen have disappeared. They've either gone out of business or been acquired over the years, so Biogen is now the oldest biotechnology company in existence since 1978, so coming on to 40, 40 years old now. Biotin is focused on neurodegenerative diseases. Most of our revenues come from drugs that treat multiple sclerosis. We're focused on, as you see, we have some business in hemophilia and, and in other rare diseases, but our main focus, and I think our main purpose for being, is to develop better drugs for the treatment of patients with neurodegenerative diseases, so Alzheimer's, Parkinson's, ALS, and others. So we've organized ourselves into kind of 3 areas: specialty medicines, neurodegeneration, and rare diseases. You know, I showed this to my wife, who's a health economist, and she said, well, the organization seems fine, but the names are awful, because to most of the world, specialty medicines and rare disease medicines mean expensive medicines. So what this says to economists is we make expensive drugs. That's certainly not the, the intent here, but we are focusing on areas where there is high unmet need, where there are no treatments or maybe marginal treatments, where patients still suffer, where their families suffer. And so we are focused on taking advantage of the advances in science to see what we can do for, for some of those diseases. At the moment, we have 9 products on the market. The top 5 here are all products for the treatment of multiple sclerosis. They act in different ways, appropriate for different subsets of patients. The middle 2 are products for the treatment of hemophilia, Alprolix and Eloctate. And the bottom 2, Rituxan and Gazeiva, are drugs that actually are sold by Roche but were developed by Biogen, discovered and developed by Biogen. And they're for the treatment of leukemias and lymphomas. So I'm not going to talk too much about Alprolix and Alloctate, our hemophilia factors tonight. But hemophilia is a genetic disease. So people are born with it. It is completely controllable by intravenous infusions of one of these factors, depending on what form of hemophilia people have. The issue that patients with hemophilia have is you have to infuse those drugs intravenously every 2 or 3 days, lifelong. And that's a significant burden. And what typically happens is when they're kids, their parents make them do it. And when the kids go off to college, like kids of that age in general, they kind of feel indestructible. They stop treating themselves so well. And they treat— they suffer joint damage. They bleed into their skulls. This is not a trivial disease where you cut your finger cut your finger and it doesn't stop bleeding. There's serious morbidity issues here. And so the advantage of these is they last longer. So for, you know, Alprolix, instead of once every 2 or 3 days, you can go once a week. And Eloctate, you can probably double the interval between things. So they offer a real advantage to patients, but I'm not going to focus on those tonight. I'm going to focus on neurodegeneration. We are the leader in the treatment of MS around the world, almost 40% of MS patients around the world are treated with one of our products. And so we'll talk a little bit about that. We have a pipeline of products, or potential products, in clinical development, in all phases of clinical development. And I don't know if you can— yeah, I guess you can read the fine print there. But most of these are not for multiple sclerosis. And this, I think, has to do a little bit with our philosophy. All of the drugs to treat multiple sclerosis now are dealing with the immune system. Multiple sclerosis is an autoimmune attack on kind of a coating that coats nerves in the brain called myelin. And the autoimmune attack destroys the myelin, which is an insulator on the nerves, and the nerves essentially short-circuit and die eventually. So all of the drugs on the market now downregulate that immune response, and they're effective. They, they slow the disease. For some patients, actually stop the progression of the disease. But the world doesn't need more immune modulators for multiple sclerosis. What we need is therapies that can actually reverse the damage of multiple sclerosis and repair the damage that's been done. That's our focus in multiple sclerosis. And then you'll see in some of the other projects here, working on Alzheimer's disease, and I'll give you a few I'll give you examples of that later on. But let me talk about a different aspect of the business for a few minutes, and that is we don't live in isolation, right? Companies are part of the communities in which we operate, and we're part of society, and we have a responsibility to behave as good citizens in that society. And so we have a number of efforts that we've done over the years. We are committed to education of students, particularly disadvantaged students. We have community labs that we run both in Cambridge, Massachusetts, where our headquarters are, and in Research Triangle Park, North Carolina, where we have a big production plant. And so far, about 28,000 kids have gone through those programs. And these are junior high school kids. And the idea is to get them some exposure to science and hopefully some excitement about science so they'll consider careers in science. We have a foundation which is fairly generous in philanthropy and we support a number of organizations in Boston, certainly, but also nationally and even internationally in Europe. And we are very committed to diversity and inclusion. I think this is incredibly important. We were one of the first companies to join the opposition to the Defense of Marriage Act. We offset taxes for same-sex couples in places where they don't get the tax advantages. And about 3 years ago, we started to offer transgender benefits to our employees. We think it's important to have an inclusive workplace. I think it's important to have a diverse workforce. It was interesting because North Carolina recently passed an incredibly regressive law last week, and so we, I think, spoke out in opposition to that law. Sustainability. We were ranked the world's most sustainable company by Newsweek last year, and we have been a leader for several years now in the Dow Jones sustainability index. And so we've done that through a number of initiatives, some of which are listed here. And my favorite metric on this slide is the bottom left, which is more interesting to those of you who might be from Boston. But we've reduced our water usage by about 70%. Our plants use a lot of water. We've reduced that by about 70%. So the annual savings is enough water to fill Fenway Park 12 times over every year. So I think when I see statistics like that, I think we have too many employees because someone has time to go through and calculate the volume of Fenway Park and the volume of our water savings. But you see some of the other initiatives that we've done here. And one that I'm particularly proud of is in the upper row, second from the left, the global hemophilia donation. Multiple sclerosis is a northern European disease. It does not affect other parts of the world to nearly the same extent. Hemophilia is an equal opportunity disease. It strikes all populations at about the same frequency. So patients around the world need treatment with hemophilia drugs, and in a lot of countries around the world, they don't get it. They just don't have access. And so we committed to donate 1 billion units of our clotting factors to the needy countries around the world. And we were doing that by donating 100 million units a year for 10 years. And the reason they need a multi-year commitment is because it takes a little infrastructure to use these products, and if it's hit or miss year to year, the countries can't afford to install the infrastructure. So this program started last year, and there are kids now getting treated. Who otherwise would be suffering severe morbidity issues. And these are kids— the initial kids have been in sub-Saharan Africa and some of the countries there, and we're expanding it to some of the countries in South America and Asia as well. Now, let me come back to what gets me most excited. Excited that we are facing— we're sitting here on the precipice of, I think, an explosion of improvements in medical care. So if you think about neurodegeneration, there have been over the past few years 120 different drugs in clinical trials to treat Alzheimer's disease. Out of those 120, 120 failed. None of them worked. But you can learn something if they're smart failures, right? And there are different ways to fail, I guess, in every aspect of life. But if you design the trial carefully so that you learn even if it fails, then that knowledge— you can build on that knowledge to be more successful the next time around. So the reason they failed is we've had very limited understanding of the biology of what causes neurodegenerative of diseases. We've had no biomarkers. So if you have to treat a patient for some years and conduct a 10-year clinical program before you know if your drug is even working, you can't develop drugs, right? You have to be able to treat patients and know within 6 months or a year whether your treatment is having the impact that you hope it would have, so that if it doesn't, you stop it and you move on. So we have better biomarkers now. Some of the early trials failed in Alzheimer's disease because maybe 35% or 40% of the patients in those clinical trials didn't actually have Alzheimer's disease. They had dementia, which is why they were enrolled in the trials, but it was from a different etiology. It was a different disease. And so you can't have a successful trial if 40% of your patients don't even have the disease you're trying to treat. And what we've learned over the years is you have to treat patients early, that by the time you get to mid-stage Alzheimer's disease, it's probably too late. And you've got to get to patients early. Like any degenerative process, the earlier you stop it, the better it is. So this is, because of our aging population, a time bomb waiting to happen. You can just read the numbers. I don't need to read the numbers to you, but the economic impact of Alzheimer's disease, if we don't find a way to treat it, will be a significant drag on this country. There will be millions of Alzheimer's patients, and Alzheimer's disease, you know, as many of you I'm sure know, affects not only the patient but the patient's family, the patient's friends, caregivers. And so for the millions of patients, there are tens of millions of affected people. We have to collectively do something about this disease. So, and just as an example, Alzheimer's disease is marked by the presence of what are called beta amyloid plaques in the brains of those patients. These are aggregates of a particular protein that you find that are the hallmark of Alzheimer's disease. And the field was in— had a controversy for many years as to whether those plaques were a consequence of the disease or were a cause of the disease. And in the past few years, there's been really good genetic data from various human populations to say that if you don't develop this little fragment that accumulates into these plaques and you prevent the accumulation of those plaques, you don't get Alzheimer's disease. So it's, it's pretty clear now that if you could stop those plaques from accumulating, you could prevent the disease. And there are drugs in clinical trials that are designed to do just that, that stop the formation of this little fragment. The problem is that these plaques accumulate, start to accumulate, maybe 20 or 30 years before the onset of symptoms. So there are tens of millions of people walking around who already have plaques. And so the next question you'd like to test is whether you can develop a drug that would remove them from the brains of patients. And if you can remove them, whether that would have an impact on their cognitive decline. And so we had one such drug, we have one such drug, which is called aducanumab. It's an antibody. And what I'm just gonna show you some data. I know this is not a scientific audience, but I'm excited about these data. So what you see on the slide is the results of a clinical trial that we did. And this was a small trial, so in each group there were only 20 to 30 patients. But what you see is a placebo group and then patients who got 4 different doses of the drug. And so from left to right, they get higher doses of the drug. And what the bars show is the decrease in the amount of beta amyloid in their brains. And so what these data show is that this drug is removing beta amyloid, it's removing the plaques, and it does so in a dose-dependent way. So the higher the dose, the more the plaques get removed. So when you see that kind of dose dependency, it gives you confidence that the data are real. And what you see on the right one is the same patients, same doses, given and assessed at a year versus 6 months. So for any dose, if you look at a year, there's a bigger reduction than there is at 6 months. So there's also time dependency, which gives you confidence. So this was the first demonstration that you could actually design a drug that would remove beta amyloid from the brain. Of patients. At that highest dose at a year, that signal that we get now, and this is done by PET scanning in the brain, is not detectable from zero. So it could be that, well, it certainly is most of the plaque is gone from those patients, potentially all of it. Next question is, does it have an impact on cognition? And what you see here are two measures of cognition that we tested, and the orange line is patients who did not have plaque removal,, and the blue line are patients who did have a lot of plaque removal. And what you see in both of these scores— one of them you get better if the score doesn't go up, and the other you get better if it doesn't go down, so it's a little, maybe a little confusing— but what you see in both is a significant divergence from the placebo group, which increases over time. So, pretty good data to say that this drug is potentially having an impact on Alzheimer's, is removing plaque and slowing the rate of cognitive decline. So we took this as incredibly exciting. It's a small trial, so it's not— doesn't prove anything. It's highly suggestive, but certainly not proof. So we're now doing two Phase 3 clinical trials to test this hypothesis. There are 2,700 patients, 1,350 patients in each of those two trials. And those two trials are costing $1 billion, just to put this into context, what it costs to run a program like this. And to make matters even worse, we— if this works, given the number of people with Alzheimer's disease, we can't make enough. And so we're building a new production plant, which costs $1.5 billion at risk, right? Because it takes 4 years to commission a plant, and if you wait until you have the data, it's too late. And so this is a $2.5 billion bet on these data, right? And we have a little more data than I've showed you, but not that much more. So just to put in context when— and I'm going to come back to this at the end— when you talk about how much drugs should cost, you need to think about how much drugs cost to develop and the kind of risk. It's all money at risk. If this drug fails, that's all poured down the drain. And so it's the right thing to do. We have good data. It's certainly a good bet to make, but there are no guarantees. Look at Parkinson's disease, and I'm not gonna talk about this too much. I'm gonna try and save a little time here, but the same principle can be applied to Parkinson's disease. There are different protein aggregates in the brains of Parkinson's patients, and so we have an approach to look at those. Multiple sclerosis. As I said, is a demyelinating disease. And we are testing drugs that would actually repair the defect and restore the myelin, restore the insulation around the nerve cells. And just some— and these are somewhat confusing data. And they're very complicated, but I'll try and simplify this because I know this is not a scientific audience. These are scans done from patients who presented with a disease called acute optic neuritis. Now, acute optic neuritis is a sudden loss of vision in one eye. So patients come in, they have the acute optic neuritis, that vision gradually gets restored over time. And so what we wanted to test was whether our drug— and that acute optic neuritis comes from a demyelinating issue. And so we wanted to test whether our drug could have an impact on that. And so what you see in the top and the bottom one is what happens to vision over time. Now, this is a technique called multifocal visual evoked potential— very complicated— but what each of those circles represents is the retina. And it starts out neutral in color,, and if the signal that's transmitted by that section of the retina is improved over time, that section turns green. If it deteriorates, that section turns red. And so what you see in the normal course of the disease is that vision, the signal from the retina back to the visual cortex of the brain, gradually improves. And if you look at the top row, which are patients treated with the drug, It's greener, right? So, you know, not exactly a quantitative measure, but it can be quantitated, and the drug seems to be improving that. What was surprising is when we look at the unaffected eye in the very bottom row, those patients actually deteriorated over the course of several months. And that's because many of these patients actually had multiple sclerosis, and their visual sign was the first symptom that they had MS, and they're undergoing demyelination. That deterioration doesn't occur when this— treated with this potential drug. So we're encouraged, and we'll see. But this would be the first attempt to actually restore function to a damaged central nervous system. I'll just give you one more example here, which is a very compelling one. This is a disease called spinal muscular atrophy. It is the most common genetic disease in infants. It's about 1 in every 6,000 live births or so. And these are kids who are born, they're apparently normal, and at about 4, 5, 6 months when they should be developing motor skills, starting to sit up or whatever, they don't. And then they gradually deteriorate. And they— most of them don't live past their second birthday. So this is a terrible, tragic disease. And these are cute babies. This is an actual kid with spinal muscular atrophy on here. And so this is— we know exactly the cause of this disease. We know it's a single defect in a single gene. We know how to fix it. And so we have collaborating with a company in California that used to be called Isis, actually, but had to change its name to Ionis for obvious reasons. And here are some data. You know, what you see in the bottom is these are plots of survival on the left. And so you see the normal kids, very few of them live to 25 months, to 2 years. The kids treated with the drug seem to be living a lot longer. And on the right, what you see is the lines going up means the kids are gaining motor function. So again, a very small study. We only have about 20 kids treated. So far, for whom we have data. But those kids seem to be getting better— sitting, some of them standing, a couple of them walking. So again, not proof, but very suggestive. And we have two Phase III trials going, and we'll have the data for that next year. So the reason I wanted to go through that— well, I can talk about ALS. I'm going to skip some of this in the interest of time. ALS, a devastating disease. Working on that one. Gene therapy, gene editing, if you wanna talk about that during the Q&A period, it's gotten a lot of attention recently. CRISPR, which is a gene editing tool, has been in the public press now as kind of a panacea. It may be a little bit overhyped, but nevertheless is potentially a very important tool that we wanna work on. Question is, all of that is potential that we might be able to bring to patients to improve the lives of, you know, old people with Alzheimer's disease, babies with spinal muscular atrophy, whatever. It is incredibly exciting to think about that. It takes money to do that. It's not cheap to run these trials. And so the question is, is the risk worth the reward? We work— we live in a capitalist system. We have investors. We're a public company. We have to provide a return to our investors, and we have to have enough cash to invest in the next generation of drugs. And so how do we balance providing drugs to patients who need them at an affordable cost with the needs the real-world needs of running a company like ours. That's— we think about that a lot. So just as to put some things into context, this is our R&D budget over the past few years, and last year it exceeded $2 billion. And that increase is not stopping. It will be more this year than it was last, and it'll be more next year than it is this year. And that's because we're getting into more late-stage clinical trials that eat up the majority of this money. So this is not a cheap undertaking. We introduced our first drug for multiple sclerosis back in '96, a long time ago. And we got criticized recently. There was an article on the front page of the Wall Street Journal that was critical of drug prices and they used this drug called Avonex as a poster child because we've raised prices on on the drug over the years, which we have. You know, and I think the article quoted a 16% annual increase in the drug price, which by some metrics is true, but what the company actually realized over these years was a 6% increase in revenues as a result of the increase in drug prices, and as opposed to a 13% increase in the rate of increase of R&D spending. But as a result of Avonex and the sales of Avonex, we were able to bring onto the market Tysabri, another good treatment, Vampira, Tecfidera, Plegridy. Those are all additional drugs for the treatment of multiple sclerosis. If we hadn't been able to charge what we did, some of those drugs would not have made it to the market. We couldn't have afforded all the R&D. And so I don't want to say none of them would have made it. I don't want to be overly dramatic here, but certainly less money coming in means less money spent on R&D, and some of these drugs wouldn't have made it. So MS patients today are way better off because of the ability to pay for the R&D that led to this generation of new drugs. And there are more coming. Zinbryde is a drug that we hope will be approved within the next couple of months, yet another drug for the treatment of MS, and then these others, anti-lingo and 61 are drugs that are actually designed to repair the CNS, and those are going to be additional costs in the future. So I think we have kind of a social contract, the industry has a contract with society that we put a lot of money at risk over a lot of years. A lot of the times we fail. When we succeed, we have a limited amount of time, typically about 10 years, to actually make money. And return money to our investors to pay for the next generation of drug, then those drugs become cheap and they become generic. And there have been abuses to the system recently, and you've all heard about Martin Shkreli and Turing Pharmaceuticals and Valiant Pharmaceuticals. Those really are abuses of the system. Those are— they've taken generic drugs that should be cheap. They should be in the third bucket here. These are after the drugs have had their run. And because of a unique set of circumstances, they've gotten a monopoly on drugs that shouldn't have a monopoly, and they've been able to artificially raise the price of those drugs. There are simple fixes for that problem that are now being implemented. There are bills in Congress now, I think, that will fix that problem. So hopefully that's a problem that will soon be a problem of the past. So I don't, I don't wanna dwell on that, but I do wanna talk about the first part of this. So when drugs become generic, they're cheap. And so today, about 90% of all prescriptions filled are generic, right? And that's increased over the years. You can see the increase in the generic prescriptions. So as new and expensive drugs have been introduced onto the market, formerly expensive drugs have become cheap, And those two things have about balanced each other over the years. And so you hear about one, but you don't hear about the other. The issue that we're facing now is that many of the drugs that are now coming off a patent are biological drugs. You can't make a generic for a biological drug. And you might have heard about biosimilars, and these are a little more complicated molecules, but they will be cheaper versions of expensive biological drugs. And we have been making some of those. We have a joint venture with Samsung, kind of maybe an unlikely partner for a biological project, but they've actually been a very good partner. And we now have two— we have one biosimilar approved and one that we think will be approved in the next month or two. So Benepali is a biosimilar version of Enbrel used for treatment of arthritis and other indications. Flixabi is a biosimilar of Infliximab, which is also used to treat rheumatoid arthritis. So— and we have more coming. And so we're trying to do our part to also bring cheaper, high-quality drugs and make them more available to patients around the world. We do have an issue in this country. We have a big issue with healthcare costs. And drug prices are rising faster than the cost of living, and so they're taking an increasing share of the GDP. That's not infinitely sustainable. But it's not drug prices, it's healthcare costs, right, are rising faster than the GDP. And as you'll see, in some years drug prices actually moderate the increase in healthcare costs. In others, they exacerbate the increase in healthcare costs, but over time, the increase in drug prices is about the same as the increase in general healthcare costs, and it's about 10% or so of healthcare costs. So picking on drugs is not the answer to this. It has to be part of the solution, but it's not certainly the whole solution. Costs are being shifted to consumers. That's in the response of insurers. And they're, they're getting squeezed too. So patients feel the pain. They have higher copays for drugs. They have higher deductibles for their hospitalization, their other medical care. And so there is a problem, and we can't just stand up here and defend high prices and not be part of a solution as to how we're going to deal with this problem, but deal with it in, I think, in a thoughtful way. The system has other inherent flaws in it. And part of it is that most components of this system are profit-making public entities. So pharma companies, biotech companies, you can see them here, diagnostic companies, equipment manufacturers, pharmacy benefit managers, pharmacies, wholesalers, you know, some physicians, some hospitals, all are profit-making enterprises. The job of the management of those companies is to increase revenues and earnings. That's what you get paid to do by your shareholders. And so everybody's trying to increase earnings, everybody's trying to increase revenues, and there's a greater system that needs to contain the cost of all of that. So there's a built-in tension here that is not easy to resolve. And I'll talk about some potential solutions to that in a couple of minutes. But I want to take a look at this. So this is the spend on pharmaceuticals, right? And what you see in the bars, the blue and green bars, are the percentage of healthcare costs over time that are allocated to drugs, right? And the blue are outpatient drugs, the green are hospital-administered drugs. So it's, you know, somewhere around 10% or 14%. Depending if you include the hospital drugs or not. What you see in the dark line is the annual rate of increase of healthcare costs, and what you see in the green line is the annual rate of increase in pharmaceutical costs. And there's some interesting patterns here because, you know, from 2008 up until 2013, the bill for drugs was increasing more slowly than healthcare costs in general, and you see that the percentage of healthcare costs allocated to drugs actually was going down in those years, and that's because so many drugs were becoming generic and went from being expensive to being cheap. What happened in 2013, '13, '14, was the introduction of drugs to treat hepatitis C. All right, this is Sovaldi and Harvoni. And these were introduced at $84,000 a year. That's the list price. In fact, no one pays $84,000 a year. It's heavily discounted. But there's so many patients with hep C that were waiting. There's a huge bolus of patients that even at a 50% or 60% discount off of that, the bill for that is huge. But it's a bolus. Once that bolus of patients is treated, that cost will come down, and you see it's expected to come down. It did come down a little bit last year, expected to come down more this year, and then stay relatively constant. So over large, if you integrate this over the years, drugs are not the main contributor to the increase of healthcare costs. And so, and in fact, I would argue that it's only the development of new drugs to, uh, treat diseases like Alzheimer's disease and cancer that can impact and, and, uh, actually reduce healthcare costs as we go out, uh, into the future. So how do we think about pricing? Well, the primary issue for us is what's the value of the product? So What does it mean? How does it alter the course of disease? Does it generate positive outcomes? Does it avoid other costs? Does it avoid hospitalizations? Does it allow people to have a better quality of life? Does it allow people to be more productive? Those are all value considerations. You know, we think about the impact on the system, right? Because if you're treating 10 patients, you can, you know, it doesn't really matter what you charge. The total healthcare costs are not going to be change one way or the other. But if you're treating 10 million patients, then obviously you can. So you have to think about the system impact. And we think about our stakeholder returns. We are a risky industry. And if you take the entire biotech industry, so 500 or so public biotech companies in this country, and you ask what are the total returns on investment, It's about 4%, right? And if you take the top 6 companies away, of which Biogen is one, it's negative. So there are almost 500 biotech companies in here in this country that are losing money. They depend on investors for their money. They sell stock, they get the money, they use it to do their research to lead to new drugs. They might make a deal with Biogen or some other larger company to to get money to develop new drugs. I was in a little company like that for 14 years and every January 1st, I would wake up and say, where the hell am I going to get $300 million this year, right? And when you're not selling any products, that's a challenge, right? But that's the kind of resources that you need. So 4% return on the kind of risk we're taking makes no sense. That industry shouldn't exist. And so the reason it exists is because people think they can pick the winners. And for those companies that do succeed, the returns are really large. And so if that large return now is mitigated by policies that impact the price of drugs in this country, then many of those companies will go away. And, you know, companies like Biogen will survive, you know, will be less profitable, but we're not going away. Those companies will actually disappear. And so they are responsible for probably over half of the drugs in this country. And so I don't think people actually appreciate the impact of some of the policy proposals that have been made. But we can talk about that in Q&A. So I don't— my view is we can't afford not to innovate. We have to have new drugs coming. We have to find treatments for diseases where we are on the cusp of that. Some of the new immunotherapies for the treatment of cancer are remarkable. People have long, durable remissions. They may be cured. They haven't been around long enough to know. And so— and that's just at the infancy of that field. It's brand new. And so if you think about cancer, you think about Alzheimer's, you think about other diseases, We have cures now in sight. And this is— I've been doing this for 30 years. And there are various waves of enthusiasm and pessimism in the industry. But this is a time when the enthusiasm, I think, is real and tangible. But we have to find solutions, right? We can't just be defensive. So there are solutions. I think some of the taurine and Valiant issue, can— we need two things. One is that the FDA can be mandated to approve a generic drug for— if that generic drug is going to break a monopoly within a period of time. And somebody just introduced a bill in Congress to do that within 6 months. That would be huge if that bill passes. The FDA is going to need some resources to do that. That's going to take some more people, but that's fixable. And then there have to be incentives, some financial incentives to develop some of those generics. Those two things are fairly easily addressable, so I don't think this will be a long-term issue, that issue. The other, I think, easy win is in Europe, for example, we sell a drug called Fampira, which helps patients with MS walk better. And about a third of the patients who take the drug have a remarkable benefit benefit from the drug. The other two-thirds don't get a benefit, or at least they can't feel any, any difference. And so we give the drug away free for two months to any patient who wants to take it, at the end of which they come back, and if they and their physician think the drug is working for them, then they start paying. If not, it hasn't cost them anything to try it. That's not possible in the U.S. because of various regulations. So this pay-for-performance scheme schemes that I think actually would be very good, could and would encourage companies like ours to work more creatively with, you know, pharmacy benefit managers and with insurance companies to actually develop creative solutions to get more appropriate use of drugs, to not sell drugs to patients who aren't going to benefit from them. And I think everybody wins. Patients wins, you know, healthcare costs will go down. And I think we win by getting better use of our drugs as well. So those are some easy solutions. There are other perverse incentives in the healthcare system. Like if you trace what happens to a drug, so we make it, where does it go? It goes to a wholesaler and from a wholesaler it goes to a pharmacy and from a pharmacy eventually it goes to a hospital or a patient. If you trace the flow of money, it looks like a complicated schematic, like a wiring diagram, because money flows and there are rebates and things. But the point is everybody in that system makes more money from more expensive drugs. Nobody's incentivized to find cheaper ways because all of the middlemen, middle people in this, get a percentage. And so they'd rather have a percentage of $1,000 than a percentage of $100. So they don't have the right incentives either. So the incentives in this should be changed. And the pharma biotech industry is now under a lot of pressure for transparency in pricing, which I think is a good thing, actually. But I think that transparency has to apply to the whole system because if it really could be understood how money flows in this whole system, there's a lot of money to be gotten out of the system that would not impede development of new drugs and that would not— it would facilitate patients getting access to them. So I think there are a lot of discussions that are going on and hopefully some of the populist rhetoric that you hear during the campaign season is just that. And I actually spent today talking to some of the policy wonks in Washington, both on the left and on the right, and they actually are both way more thoughtful than their candidates would have you believe. And so I came away somewhat encouraged and more optimistic than I went into the day. So anyway, I'll stop there. I actually have no idea how long I've been talking, but Why don't I stop there and then we'll open up, we'll leave some time for questions.

Thanks. One of the things I would like to say as we close, Dr. Skanga has talked about some of the work they do in diversity and I would like to also say he mentioned some of the things they do in the LGBT area, but he is also a tremendous champion for women in business and particularly at Biogen and they have a very talented group of senior-level women within the company. And we've had the privilege of partnering with them in the business school on a program called Raising the Bar that is to develop their women for higher-level leadership roles, for board opportunities. And now we're going to work on partnering together to expand that program so other organizations and other companies have the privilege of promoting and developing their women in the same ways that Biogen has. So we appreciate your being a champion of that initiative and being able to partner with with you on that as well. And President Knapp, if you'll come up, we just want to provide you with a little commemorative plaque recognizing your participation in the Maxson Lecture Series this year. So thank you so much for being a part of this and joining us this evening.

Thanks for having me. Great. Pleasure. Thank you.

Thank you.

All right.

No flash. Thank you all so much for being here. What an interesting and enlightening discussion, and we wish you the best. And thank you so much for joining us.