Greg Licholai: Breaking through the Innovation Bottleneck

Harlan Krumholz: Welcome to Health & Veritas. I’m Harlan Krumholz.

Howard Forman: And I’m Howie Forman. We’re physicians and professors at Yale University. We’re trying to get closer to the truth about health and healthcare. We’re excited to welcome Dr. Greg Licholai today, but first, we like to always check in on current hot topics in health and healthcare. What do you have, Harlan?

Harlan Krumholz: Yeah, for our listeners, Howie doesn’t think I can get this segment done.

Howard Forman: This is hard. This is hard.

Harlan Krumholz: It’s because I want to talk about an economics article, and you know these economic articles can be quite…challenging. I’ll say it like that, sometimes. So there was an article that just came out. A senior author was a good friend of mine, Ziad Obermeyer, who’s a professor at Berkeley, but also well-known; Chandra and Flack are also well-known economists, they came out with a study called “The Health Cost Sharing.” Here’s why I thought this was interesting, Howie. They made use of a natural experiment.

You may remember Malcolm Gladwell wrote about the fact that if you look at top hockey players, they’re concentrated in birth months that are nonrandom. It happened to be that they were at the end of the enrollment eligibility period for getting into school. So when they started kindergarten, they were the oldest, and so they got more attention for training and so forth. So anyway, it turns out if you look in the National Hockey League, that people’s birthdays are concentrated, I think, in the late summer because it’s sort of like as you turn to September, the people who get in in October are the youngest in the class.

Howard Forman: Which is to say, it’s not surprising because of the month, it actually makes total sense, ultimately.

Harlan Krumholz: So they’re just saying, and I think his point was how life just works this way. Depending on what month you were born has a lot to do with whether or not you had any chance to become a National Hockey League player, for example. Economists have been thinking about this for some time and have tried to use things like age when it doesn’t have anything to do with ... which month you’re born shouldn’t necessarily, intrinsically be associated with whether you can be a hockey player, but because of the way this works, it was sort of an experiment to see if you’re older when you go to school, did you have better chance of becoming an athlete?

Well, these guys took advantage of an experiment that also had to do with birth age, which was that when you become eligible for Medicare in this country, you can make use of Medicare Part D to cover your drug costs, but it turns out the way that they did this was, no matter when you enroll in Medicare and you enroll when you turn 65, so people are becoming eligible for Medicare in that first year of enrollment at different times of the year. You’re given the same amount of money before you enter what’s called the donut hole, where your coverage—

Howard Forman: You have basically no coverage, right?

Harlan Krumholz: Right, basically get no coverage. So it turns out that you have to pay about 25% when you’re covered, but that goes to 100% when you’ve expended the amount of money that Medicare has allocated for you, and their budget cap is $2,500. So it turns out that if you are fortunate enough to be born late in the year, you’re getting this chunk of money that you can spend on drugs, but if you’re born in January, if you’re born on January 1st, that amount of money has to stretch all year.

So they thought, “Well, this is interesting,” because we can look at whether or not there’s a relationship between people expending the amount of money that’s available to them and how that might relate to an outcome like mortality, given the premise that people may have to spend their use of drugs when they get to a point where they’ve got to incur all the costs. Following this so far, right, Howie?

Howard Forman: Yeah, totally, but it is hard to explain, so I wanted our listeners—

Harlan Krumholz: Well, so the question really is, what happens when people outrun their coverage? I mean, essentially, is there a cost to being in a system that puts you in a position where you have to start paying for your drugs? In essence, what’s the benefit of covering people’s drug costs?

Howard Forman: Yeah, and secondarily, we do studies that put people on drugs, we don’t do studies about taking people off drugs, and this is an example where that happens.

Harlan Krumholz: They also did something very clever in this study, which is, they looked at low spenders, medium spenders, and high spenders, and as expected, the people who were low spenders, it doesn’t matter what month you were born because you never hit the cap, but for high spenders, they got to a point where they expended the amount of money that was allocated for them if they were born in the early months, and then presumably were in a position where they had to stop taking medicines if they couldn’t afford it anymore.

Anyway, here’s the bottom line. They looked at the mortality rates in December, and why did they look in December? Because that was the end of the year, and that’s where people might be most vulnerable if they had to have stopped their medicines, and they compared the mortality rate by the month you were born, essentially the month you entered Medicare. What they found was that the mortality rates, the December mortality rates were correlated to when you started.

So their inference was that the people lapsing in their coverage was having even effects on health outcomes like mortality, and that this cost sharing, this idea that you got people to a point where they were no longer covered, they were saying is highly inefficient, resulting in missed opportunities to buy health at a low cost and had consequences for patient’s outcomes.

Howard Forman: Let me just point out for our listeners, this was, I think, a six-year study. I mean, this type of undertaking, and there are many elements to it that I wouldn’t be able to explain, but that involved machine learning and artificial intelligence to try to get to a sub-select population that are taking high-impact drugs. There’s so much in this, but the bottom line, as you said, Harlan, is if you go off these drugs, you are more likely to die, and the cost in terms of human life is disproportionately greater than any savings that might’ve accrued to the Medicare system.

It’s a really strong argument for why copays for these types of drugs, drugs that you need for health, there’s nothing recreational about these drugs, there’s nothing cosmetic about these drugs. These are necessary for life. They give several examples, and you know them much better than I do, Harlan, about the types of cardiovascular risks that are incurred.

Harlan Krumholz: Statins, more like statins.

Howard Forman: Statins and the beta blockers. I mean, so many things in there that we learn about this, and it’s just a great lesson about how we should be structuring benefits. It’s also interesting for our listeners to know: the donut hole is gone, so you couldn’t even do this experiment anymore, but they captured it at the right time when it still existed and used it to inform a really important question that we all had.

Harlan Krumholz: Yeah, exactly right, Howie, and I just thought it was very clever. I just want to just take, as we end this segment, just to take a few points that they made from the paper, which is really, again, it’s not so much about the current policy but just trying to understand the importance of cost sharing and what kind of jeopardy it may put people in. What they said was, “Those facing smaller budgets consume fewer drugs and die more.” Furthermore, they said, “Patients stopped taking drugs that are both high-value and suspected to cause life-threatening withdrawal symptoms when stopped.”

I mean, in other words, they’re put in a position where they had to stop taking drugs that provide them benefits, and then they were also able to look at this and see who might’ve been most vulnerable, suggesting that maybe the system could be built to ensure that those patients at greatest risk for these complications wouldn’t be put in a position where for economic reasons they might have to suffer consequences.

Howard Forman: No, it’s fascinating and unbelievable undertaking.

Harlan Krumholz: Yeah, great paper, very interesting. Anyway, I just wanted to share it. Hey, let’s get on to Greg. We have a great interview ahead.

Howard Forman: Greg Licholai is a lecturer at the Yale School of Management and serves as both the Chief Medical Officer and Chief Innovation Officer at ICON plc, a company dedicated to healthcare data and research, and we’ll talk much more about that soon. He teaches classes on sustainable innovation in healthcare at Yale and sits on the board of multiple companies and medical advisories. Dr. Licholai held leadership positions in several private-sector companies before coming to teach at Yale such as Moderna, McKinsey, and Quintiles.

In addition, Dr. Licholai is an accomplished entrepreneur. He co-founded Immunome Therapeutics in 2007, a company specializing in antibody-based cancer treatments. He also regularly publishes articles under the Forbes innovation section as a contributor. He completed his bachelor’s degree at Boston College, his MD at Yale University, and he then obtained his MBA from Harvard while he was training in neurosurgery.

So I want to eventually come back and talk about the journey, Greg, and first, thank you for joining us on the podcast, but I want to start off by having you explain to us what contract research organizations are and the role that ICON plays in that space.

Greg Licholai: Yes, thank you. Well, first of all, let me say I’m absolutely delighted to be here. It’s a great opportunity to chat with you, my friends and colleagues, on these topics, and thank you for that very flattering introduction. So a contract research organization, or a CRO, it’s a very important step in the drug approval process. So basically, we are the organization that helps pharmaceutical companies and manufacturers test their drugs to help demonstrate that they are safe and effective.

So if you think about it, you mentioned data and the need for data and paying attention to data, essentially the FDA, which is, of course, our government approval granting organization, what do they have? They have data, and we provide them data. So essentially, our role in this industry is to help generate the data, the evidence, if you will, that shows that drugs are safe and effective for human use.

Howard Forman: Just one quick follow-up to that, are you providing those services—not just you, but the industry, the CRO industry? Are you providing those services to all pharmaceutical companies or mostly smaller ones? Where do you serve compared with Pfizer and Merck doing their own clinical trials?

Greg Licholai: That’s a great question. So interestingly, my type of organization, a contract research organization, works with basically everybody. So on average, about 50% of all of this clinical development work is outsourced, and it’s outsourced to organizations like me or our organization. So that goes really across the spectrum, from the very largest companies to the very small virtual startups.

Just to follow up on that, you can sort of immediately see why a very small biotech that doesn’t have a lot of its own people and resources to do a large clinical trial, they would want to outsource that and go to an organization that does it, but similarly, the very largest companies, the Pfizers and the Mercks and the J&Js, they do also outsource about half of this clinical development work for various reasons that we can get into, but mostly, it’s around the efficiency of running a clinical trial. We happen to have teams of experts that do this, and maybe they’re going into indications that they don’t have the same level of in-house expertise and support.

Harlan Krumholz: Greg, you were a medical school graduate in ’95, you go do a neurosurgery residency, but along the way, you’ve been at McKinsey, you started a biotech, you’re deep into data science and data analytics, and you’re basically a chief innovation officer at a data company. I mean, a contract research organization in the end is all about data, quality of data, analysis of data, and so forth. Maybe you could just give us a sense of how did this path unfold for you, because it’s unusual. People can hear like, “Wait a minute, you’re a neurosurgeon, and then you’re also doing all these other things?” It’s a lot that you’ve already accomplished, and you’re still mid-career, honestly.

Greg Licholai: I really was not driven by some big master plan. It was really just curiosity every step of the way. So I wanted to go into medical school, fascinated by neuroscience, really thrilled by the opportunity to intervene in surgery. I got a chance to do that. It felt like skiing in the Olympics, to be able to train and do a little bit of practice of neurosurgery, but you go so deep in an area in medicine and surgery and science. I had really no exposure to economics and finance, and people who were ahead of me in the game had either finished residency and gotten an MBA or did it during residency.

So honestly, it just sounded fascinating, and so I asked permission and got permission to do it. So I got the MBA and just found it utterly compelling, really just opened up a whole world for me. What I found the most fascinating was that so many forces need to come together to create new innovative medicine, new innovative science. We tend to think of a genius in a laboratory, kind of a Einstein or an Edison. Sure, you absolutely need that, but in order to fund those laboratories, in order to fund that innovation, in order to regulate it to make sure that it doesn’t go off the rails, so many other forces are at work. So I was able to learn more about that and continue just to learn more and more about what are some of these additional forces that need to come together to create innovation.

Howard Forman: I want to just get your views. You’re also sort of a thought leader. We mentioned that you write a column in Forbes, but you’re a thought leader in the sense that you have said many things to me and my students years before I recognized how important they were going to be. I think you’re the first person that ever said CRISPR around me and probably CAR T therapies, and now we use these terms all the time. In the last few days, we’ve seen some remarkable progress in genetic treatments, treatments for genetic diseases using gene therapy. One that I noticed, and I’m not going to ask you specifically about them, but one I noticed is a treatment for a rare form of deafness that seemed to have enormously positive outcomes.

Unfortunately, another is a Duchenne muscular dystrophy trial where a young man died, and it just reminds us of the consequences of these trials and why they’re so important. I’m just wondering your thoughts at this moment in time, this specific moment, how optimistic are you about gene therapies, around CRISPR, any of these more advanced technologies that we’re just starting to use, sickle cell being one of them?

Greg Licholai: I think we’re entering an absolute renaissance, an absolute golden age of innovation in medical therapy. I’m glad you mentioned sickle cell. I mean, that’s an area that has incredibly high medical needs and affects many, many people, I think, for problematic reasons like access and bias in the United States and access to healthcare that despite the fact that we’ve understood the science for sickle cell disease for a long, long time, it’s really taken a very long time for it to be a primary focus of companies to develop a therapy. Again, it’s all these macro forces that weigh in to eventually something comes together and now we do have something for sickle cell disease. I do think that things will continue to be very, very innovative both on the biological creation of new medicines, but also on the delivery. I’m very hopeful about that.

A final observation here is that in order to get these very, very eye-poppingly expensive one- or two-time drugs, meaning, it really is a very important problem that we need to solve. Typically, if you’re on a chronic drug or even on a chemotherapy, you’re given multiple doses. So if you price it based on dosing, it might be expensive, but it’s just one—

Howard Forman: It’s not a million dollars.

Greg Licholai: Exactly, but that’s the problem. Then hearing a drug that costs a million dollars for one shot and it might be curative, that becomes very difficult to accept until we have a different reimbursement system such as periodic payments and risk-based, some of these phrases that you know a lot better around risk-based payment systems so that if, fine, you get the dose, but instead of thinking of the chemical, you think about the benefit. So if there is continued benefit, there should be some reimbursement. If that benefit goes away, you can take away the reimbursement and not focus so much on the chemical. I’m very optimistic that we’ll get around to creating payment systems that make that work. We’re just not there yet.

Harlan Krumholz: I wanted to circle around at the end to the issues that Howie brought up to you in the future about the contract research organizations, really the foundational companies that are helping to promote science, high-quality, rigorous science often being used for regulatory decision-making. What do you see as the key innovations that need to occur for us to get to the next step in research? We all know that there’s expense and delays, and we’re trying to get to better, faster, cheaper approaches to do science. What’s on the vanguard here for contract research organizations?

Greg Licholai: It’s an area that has a huge bottleneck. Well, clinical trials are expensive, and they take a long time. The bottleneck here is that only very few physicians actually want to do clinical trials. I’m speaking to you, but it’s probably less than 10%, maybe it’s less than 5% of physicians actually want to do clinical trials, and that’s part of the problem. That’s why it makes it go rather slowly. The industry is trying to address different sets of issues around making data easier to access and technology platforms and getting to patients. We know that over 90% of patients when they’re surveyed say they want to be part of clinical research. However, it’s still only a minority of physicians.

So I think the next innovation actually is to make it easier for doctors to be part of clinical trials, and technology, I think, will help do that. I think if you think of the broad sweep of technology, making things easier and easier such as manual typewriter to electric typewriter, to doing things on a computer, to just speaking into your phone and it types it. I mean, eventually, technology makes things easier and easier. So I think we’re getting to the point where we’re recognizing the bottleneck to make things easier for physicians to participate in clinical trials, because right now, it’s pretty clunky, it’s pretty cumbersome. The amount of time they have to spend doing this is not really worth it compared to that practice. So I think we’re moving in the right direction. So I guess it’s kind of a broad answer of technologies coming together in order to address that bottleneck.

Howard Forman: Just want to thank you, I mean, sincerely. You are a true polymath. I mean, you are a Renaissance man among Renai—you know. You’ve practiced clinical medicine, you’re a scientist, you’re a businessman and entrepreneur, and you are also a really great teacher and the students love you, and I appreciate you very much. So thanks for coming on the podcast.

Harlan Krumholz: And a good friend to all the people who are fortunate enough to know you, so thank you so much, Greg.

Greg Licholai: To hear that coming from you gentlemen, you intellectual giants, is truly, blows me away—

Howard Forman: That was the truth.

Harlan Krumholz: Well, now we’re questioning your judgment.

Howard Forman: Exactly, exactly. No, we appreciate you.

Harlan Krumholz: It was all good till then, but now we’re not sure.

Greg Licholai: Thank you so much.

Harlan Krumholz: Thank you so much. Great to have you on. Hey, that was fantastic.

Howard Forman: It’s fun.

Harlan Krumholz: Really enjoyed listening to Greg, but now I’m getting to the part of the program that I really, really, really enjoy, which is listening to you, Howie, and hearing what’s on your mind this week.

Howard Forman: So this is probably one of the more dry topics, and I think this is probably the third year in a row I’ve done this, but I still find it important and I hope our listeners will indulge me. The Medicare Trustees Report came out again this week, and it may seem like a purely bureaucratic technical budget report—maybe it is—but it reveals a lot about the largest health financing program in the country, and there is always something to learn.

So first, the good news is that Medicare Part A, the program that pays for inpatient hospital care and for which you and I and most of our listeners pay a dedicated payroll tax, is still going to run out of money, but it seems that date is now five full years later than we last thought—2036. By the way, other than big legislation like the Medicare Modernization Act or the Affordable Care Act, we’ve never seen such a shift in this date before—and even after this date, Medicare, while it’s still underfunded, is the least underfunded in its history.

So there’s numerous cautions about this. Some of this is likely due to reduced payments to Medicare Advantage plans and perhaps reduced payments to hospitals as well. So this may get reversed in the future, and if it doesn’t get reversed in the future, you’re going to see a retrenchment of hospitals and Medicare Advantage plans from these markets.

It’s also a reflection, as we pointed out last year, of the enormous toll that the pandemic took on elderly and disabled. So many people were killed off that the remaining individuals have consumed less healthcare than we would have expected.

Then lastly, and perhaps unsurprisingly, employment and economic growth over the last year has exceeded expectations substantially, and that also has helped boost the trust fund through increased tax collections.

One last thing to mention that maybe we can take a few minutes to talk about is over the years, the trustees have made assumptions about the fertility rate to basically a 70-year window that they model, and they tell us what they expect the fertility rate to be over the next 70 years. They’ve typically vacillated between around 1.95 and 2, and now this year dropped down to 1.9 itself, and for many years until recently, this seemed pretty reasonable, but our country’s fertility rate is now 1.66, down from 2.1 less than 20 years ago.

A low fertility rate puts enormous demands in both Medicare and Social Security and many other programs and also just general family structure. So we either accept that our fertility rate is low and never going to return to the level of 1.9 that the current report assumes or we got to explain how we’re going to get that fertility rate to go back up again because demographics don’t seem to support that.

Harlan Krumholz: You know how either so much in these reports—and thank you very much for giving us a view into it—it still just blows my mind that we’ve got a program that’s supporting so many people that we all depend on, that even with this extra five years is only putting us out a little more than a decade from where we are now. When you look at Congress, you’re just trying to figure out, how are we possibly…. So let me just ask you this. Congress doesn’t do anything. What happens? So it runs out of money. What happens the next day?

Howard Forman: Yeah, so it’s a great question, and we’re going to ask this when Tim Westmoreland is on in a few weeks. We’re going to ask him more, but there is no statutory authority for the federal government to write a check on behalf of Medicare unless they change the law. So once it runs out of money, they can pay 89 cents on every dollar to hospitals, but that’s all they’re allowed to do. They might come up with other things like let’s delay payments to hospitals for a while, or they could say that certain types of elective procedures can be delayed, but there’s no simple thing. It’s not like they can just write a check or print money.

Harlan Krumholz: You can’t kick the can down the road. They’ve actually got to deal with it.

Howard Forman: Not without legislation.

Harlan Krumholz: In that first year when they no longer have more money coming in or available—let me say “available”—than needs to go out the door, how much is the deficit? I mean, is it—

Howard Forman: It’s 11%. It’s 11%.

Harlan Krumholz: But just how much in real—

Howard Forman: Oh, that’s a good question. It’ll probably be like $100 billion, I imagine, at that point.

Harlan Krumholz: So it’s not small change.

Howard Forman: No, it’s not, and if you fix it now, you can apply taxes that make it less painful. Whereas if you fix it down then, it’s much more expensive because right now, you got 12 years to spread the pain and fix it. If you do nothing, the pain just gets more and more.

Harlan Krumholz: Just to finish up this topic, it just always fascinates me that we have these attitudes towards immigration, but you could imagine a day when someone is standing up and saying the solution to this problem, which is this inverted pyramid now—so many older people, not enough people contribute—both to Social Security and to Medicare is actually to enhance immigration, bring more younger people into the—

Howard Forman: It’s no question. It’s in the report. It basically says among the assumptions that the program is more sustainable with more immigration—and by the way, more legal immigration and then they say, “other-than-legal immigration.” Either one actually helps the Medicare program. The second one unfortunately means that we’re going to benefit on the backs of people who pay in but don’t ever receive Medicare.

Harlan Krumholz: Yeah. Wow. Fascinating. Thank you so much, Howie. That’s great. You’ve been listening to Health & Veritas with Harlan Krumholz and Howie Forman.

Howard Forman: So how did we do? To give us your feedback or to keep the conversation going, email us at health.veritas@yale.edu or follow us on LinkedIn, Threads, Twitter, or wherever you find us on social media.

Harlan Krumholz: We’re eager for your feedback, questions or experiences. We got a note this week. Someone had some criticism of some of the things that we’ve said. It had to do with the IVF discussion. Look, we’re interested. We want to hear what people have to say.

Howard Forman: We take it to heart. We don’t ignore it. We’re going to try to figure out how to bring more conversations to our listeners.

Harlan Krumholz: If you have feelings about the podcast, rate and review us on your favorite app. We always read the reviews like Howie says, and it helps other listeners to find us.

Howard Forman: If you have questions about the MBA for Executives program at the Yale School of Management, reach out via email for more information or check out our website at som.yale.edu/emba. Again, some exciting news to share with our listeners. In just three weeks, we’re going to do a live podcast at the Yale Innovation Summit on May 30th. Links in the show notes today. Come to the Innovation Summit, and see us interview some of the greatest health and technology innovators.

Harlan Krumholz: Health & Veritas is produced with Yale School of Management and the Yale School of Public Health. Thanks to our researchers, Inez Gilles and Sophia Stumpf, and to our producer, Miranda Shafer. They’re amazing. We’re grateful they help us.

Howard Forman: Very grateful.

Harlan Krumholz: Talk to you soon, Howie.

Howard Forman: Thanks very much, Harlan. Talk to you soon.