A Conversation with the CEO Running the Most Radical Drug-Pricing Experiment of 2023

I’m going to forgo the usual format for CCW today and use this space for something different. If you want to catch up on the week's news, check the archive page (and sign up!) for the daily email newsletter.

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At this point, you’ve probably noticed that I’m more than a little fascinated by a little company called TheracosBio . I’d never heard of them before they got FDA approval for Brenzavvy, a SGLT2 for type 2 diabetes, in January.

The approval didn’t much attention, but it turns out TheracosBio had a trick up their sleeve: they launched the project earlier this month, partnering with Mark Cuban Cost Plus Drug Company, PBC to make the med available for $47.85 plus shipping and handling. That’s a cash price. It won’t be available through insurance.

Selling a new, branded medicine at a cash price is, in 2023, a radical idea. The concept has been floated by others – EQRx is the obvious example – but I can’t think of anyone else who has executed on the strategy.

Of course, all of this raises a bunch of questions about the folks trying to pull this model off, and I was lucky enough to get bounce some of them off of TheracosBio’s CEO, Albert R. Collinson, Ph.D.

The conversation is captured below, with edits for clarity and brevity.

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Brian ??

Can you start by letting me know what the history of TheracosBio is, and then we can get into to the model and the medicine?

Al ??

The company dates back to 2001. As a privately held company, the founders wanted to see if they could do some things to exploit science that was going on in their respective laboratories. And I was tasked by the board to identify a cost-effective method to develop Brenzavvy and do that in as virtual model as we possibly could.

Once they thought it was a viable product, they brought me on as the CEO to oversee the development program associated with Brenzavvy. What we've been doing for the last 14 years is exactly that. So, we've conducted a large number of phase 1, phase 2 and phase 3 clinical studies, enrolling over 5,100 subjects throughout the world and to really get a good understanding of the properties and behaviors, benefits and advantages associated with Brenzavvy. That's what we've been doing.

Brian ??

I'm interested in the business model here because you're obviously pursuing something interesting. Can you describe what the TheracosBio model is here?

Al ??

So first off, it really helps that Brenzavvy is an internally discovered asset. We didn't license this with third party. We don't owe royalties or milestones or so forth to a third party. We ran the development program to be as cost effective as we possibly could. And the intention is to pass those savings on to, ultimately, patients.

The harsh reality is this is a novel approach to the market, and I can't tell you yet how successful this will be. But we are very eager to run the experiment. We're all a bunch of stupid scientists so we like to do experiments like this one here.

We think that there's a lot of elements that have aligned to make this model something that's pretty interesting. And the formation of Mark Cuban Company, with transparent pricing, is one of the things that was requisite to this type of product launch. Because we can't go to traditional PBMs because traditional PBMs aren't going to like the low-price model, where they're going get a small percentage of a low-price WAC and no meaningful rebate.

As we looked at the market, we concluded that SGLT2 usage is much lower than it should be. And that's despite this being a $10 billion category in the U.S. There are a lot of patients that we speak to who aren't getting SGL2, because their insurance isn't any good. Or they're in a doughnut hole. Or a whole host of reasons that price them out of their ability to use the drug.

So, some of this is genuinely good social behavior. We're providing an important drug at a price point that is lower than the than the typical copay in the market right now. Even if you have good insurance. If you have bad insurance, it's way better than to do. At the same time, let's face it, we're competing against some reasonable sized companies that are somewhat well known.

Brian ??

And I've seen that I've seen the ads, I've seen the TV ads for your competitors,

Al ??

So I can't afford to hire a singer to put on TV.

So, the question is, how else might you try to do this? You know, when we don't have 10,000 reps, who are contacting every physician in the U.S. three times a week. We don't have that. And the question is, how do you try to get traction with this in a way that is commercially viable?

So, because we managed the development program to be cost effective and efficient, and because we own this compound outright and because it's a high-potency, high-specificity SGLT2, we don't need very high doses of the drug on a daily basis. So, our costs of manufacturing are reasonable. We can have a fairly good profit margin, pricing this thing at a daily price of $1.30, net.

So, if we can do that, why not use that as the basis to drive market penetration. It provides a win for all parties. They're not worried about getting pre-authorization or prior authorization to write the script. We're here so they don't have to spend time on that, they lost revenue on that. If you're the patient, you're saving money even if you have a good insurance policy. And for us, we have a reasonable margin. We can make money.

Brian ??

You've initially linked yourself to Mark Cuban and those who are partnering with him. Where do you go from here?

Al ??

So, we initially launched with Mark Cuban. It's not contractually exclusive with Mark Cuban. We have the opportunity for multiple outlets here. And we will be exploiting those multiple outlets.

Here’s what made the Cuban company attracted to us. They're handling all of the logistics. We ship to Mark Cuban company, Mark Cuban company distributes to their systems. We don't need the infrastructure to do that.

I can think of a number of other groups that are analogous to that and I can't go into details right now because we don't have signed contracts. But whenever you're looking at a single buyer that controls a lot of lives, those single buyers typically are very, very cost conscious. And they would rather not play the big rebate games that gets played in the world right now. All they really care about at the end of the day is “what's the price that I'm paying for this drug?” and “can I get it to my patients?”

Brian ??

Why the $50 price point? I’m sure that's not a super mathematic, QALY-based thing, and I suspect, I know where it came from, but I'm curious why that's the number.

Al ??

Well, tell me when you speculate.

Brian ??

I suspect there's two variables here. One is: how does this compare with current out of pocket prices? In other words, for whom is this going to be affordable?

And then the other question is -- so the company's been around since 2001 -- so you've got collective losses over the last 22 years of. You can't just sell it at cost, plus 10%. There's a hole, presumably, that needs to be filled. My suspicion is you've got those two things pulling on either side, and at a certain point -- because no one's ever done this before -- you stuck your finger in the wind and said, “this seems like the right number.” That's what it looks like from the outside.

Al ??

I can tell you a lot of discussions at the board level, about pricing, you know, looking at return on investment for all of the monies that have come into the company, trying to figure out the rate of paying off those investments and, you know, looking at our cost of goods, saying OK, what's the number that becomes attractive? Not surprisingly, we spent some money with some groups to tell us where co-pays are in different parts of the country and in different plans.

Brian ??

Some of this hinges on people knowing about it. It's not going to be driven by formulary placement. It's not going to be driven by payer incentives. It's going to be driven by physicians, you know, knowing about it and prescribing it and patients, to a certain extent, asking about it. And given that you can't hire someone to sing your own theme song -- and obviously, Mark Cuban doesn't sing, but he's got a huge and amazing reach – so what’s the plan for making sure that folks know?

Al ??

Well, the day that we launched the product with Mark's company, he sent out his tweets and all the social networks that he's the king of that I've never heard of. So, Mark will continue to work to try to keep proselytizing our message. I think he likes our message and I think that's great.

Brian ??

Let's talk about EQRx for a second. Is there anything you learned about the market from their experience?

Al ??

The day they launched, I put a call about Alexis, just to talk about what he was doing and why.

The reality though, is they were doing it primarily in the oncology space where it's a more straightforward specialty pharma business. That's not the space that we are, we are very much a broad based primary care, mass-market drug.

And some of the issues that should have worked for them would not work for us.

I've always been very intrigued with companies that are kind of walking down the same path that we are - Population Health Partners is trying to do something very, very analogous to this as well. But I think that it's very fair to say we are the first mass primary care drug that is really coming in to do this and the fact of the matter is, but for the Mark Cuban Company having been formed and grown over the last couple of years, this is a model that really couldn't have worked.

Brian ??

That's a hell of an endorsement for where they're sitting in the ecosystem.

Al ??

Well that's a synergy. Yeah, I think we're, I think, look, I think Mark Cuban company makes our program work, but at the same time, I think bringing Brenzavvy into Mark Cuban company provides an area of differentiation for Mark Cuban company, where people can now get an SGLT2 for 50 bucks a month.

Brian ??

So to shift it to some of the clinical questions. Is there a sense that that you're coming in too late? Is the thought that essentially it's going to be hard for anyone to come in with anything other than the classic generic model that you know where you're going to be uncompetitive?

Al ??

I think the next three, four years are really going to be interesting in the space. I have a hard time seeing the price point that we can come in at as something that our competitors are really going to be able to play much around. And even the generic companies aren’t going to be able to play really strongly around this.

I think this is a really interesting experiment and I think this provides a win-win to everybody in the space. Except for our competitors.

Brian ??

Do you believe that there is a portion of prescribers that would opt for this simply because of the they're simply price sensitive, that they believe that this is the way the system should work?

Al ??

We see a lot of writings by endocrinologists and primary care docs that point out that the cost of medicines are preventing access to those medicines. We're seeing that a lot. So, we believe that the current $10 billion SGLT2 to market is actually under-prescribed. It should be a lot bigger than that.

So, our goal here is to expand that market and make it available for the people that for whatever reason, aren't getting it right now.

I think there is a market demand for this. More than that. I'm counting on the fact that there is a market demand.