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