Big Ideas in 2024: Democratizing “Miracle Drugs” with Julie Yoo

1. 0:00 – 1:39

   Big Ideas in Tech 2024

   1. SSSteph Smith0:00

      Precision delivery of medicine, entertainment franchise games absolutely exploding, small modular reactors and the nuclear renaissance, plus AI moving into very complex workflows. Now, these were just a few of the major tech innovations that partners at a16z predicted last year. And our partners are back. And we just dropped our list of over 40 plus big ideas for 2024, a compilation of critical advancements across all our verticals, from smart energy grids to crime detecting computer vision, to democratizing miracle drugs like GLP-1s, or even AI moving from black box to clear box. You can find the full list of 40 plus builder worthy pursuits at a16z.com/bigideas2024, or you can click the link in our description below. But on deck today, you will hear directly from one of our partners as we dive even more deeply into their big idea. What's the why now? What opportunities and what challenges are on the horizon? And how can you get involved? Let's dive in. As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any a16z fund. Please note that a16z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com/disclosures.

   2. JYJulie Yoo1:35

      [on hold music]

2. 1:39 – 2:35

   Democratizing “Miracle Drugs”

   1. JYJulie Yoo1:39

      Hi, everyone. I'm Julie Yoo, General Partner on the BioHealth team here at Andreessen Horowitz, and this is my big idea for 2024. It is about democratizing miracle drugs. In 2023, a wave of therapies hailed as miracle drugs, including GLP-1s and cell and gene therapies, had a profound impact in patients' lives. But our current healthcare insurance system is just not set up to bear the cost of these therapies or to accurately gauge their value, given that some are curative, nor are our healthcare providers prepared to manage the complex logistics, data collection, and clinical operations needed to realize the full benefits of these therapies. [lip smack] We look forward to seeing builders innovating at the intersection of policy, biopharmaceutical manufacturing, financing, and clinical operations so that we have a viable means to bring these miracle drugs to market without bankrupting or breaking the system.

3. 2:35 – 8:32

   How a GPL-1 works and the potential impact of the drug

   1. SSSteph Smith2:35

      All right, Julie, so I feel like this will be a rarity, but for listeners who may be unfamiliar, let's start with GLP-1s. Why are people touting these as miracle drugs?

   2. JYJulie Yoo2:45

      Yeah. So GLP-1s are all the rage, as you're implying. Um, but, uh, so the premise of GLP-1s is that it's-- a, a GLP-1 is actually a hormone that is naturally occurring in our bodies, and it's, uh, generally secreted in response to food intake. So when we eat, um, this hormone is secreted by our intestinal tract, and the main job of that hormone is to help manage blood sugar levels. And so the initial core use case for the drug form of this hormone was to treat di-- uh, type 2 diabetes. And obviously, type 2 diabetes is a huge-- um, has huge prevalence in the American population. It affects over eleven percent of us. And so one in ten of the people that you know are likely to be diagnosed with type 2 diabetes at some point in their life. So, um, that in of itself is obviously, uh, hugely impactful. Um, but, uh, I, I think probably what's driving more of the sort of popular awareness of GLP-1s is that it has this, quote-unquote, side effect that, um, it also has been shown to lead to weight loss. And, uh, part of the reason for that is that it actually suppresses appetite as part of the mechanism of action. And so, um, therefore, on the basis of that observation, a subset of GLP-1s have actually been approved for treating obesity. And, you know, obesity opens up the aperture even broader in terms of the applicability across our population. Um, sadly, it affects forty-two percent of the American population, which is remarkable. And so, um, and there's, you know, uh, there's been a wave of celebrities on TikTok touting, you know, their ability to lose the upwards of twenty percent of their weight from taking these drugs. And, um, there's this, uh, popular analogy that people say GLP-1s are to obesity what eyeglasses are to nearsightedness. And so it has, you know, that level of sort of societal impact in terms of, um, fixing a disease that has su- such, uh, negative implications for health, uh, of our population. So there's been a lot of hype about these drugs. I think the miracle part of it, you know, sort of stems from two things. One is it's, um, it's, it's, uh, weight loss capabilities. And obviously, we as a society are just, you know, obsessed with weight loss in general. And so that's obviously been one reason that these drugs are part of the zeitgeist. Uh, but then two, from a clinical perspective, I think what we are all so excited about is that there appears to be a really compelling set of side benefits, um, related to all of the comorbidities of obesity. So if you are obese, you're very likely to have other illnesses, uh, namely things like cardiovascular disease that lead to heart attacks and strokes and, you know, early death, basically. And, um, there's been a number of recent studies that show very-- potentially very significant benefits of these drugs as it relates to cardiovascular benefits, which, you know, as we'll get to, has, um, very big significant implications, uh, in terms of how health insurance companies would look at this and in general, how we think about this as a, a benefit to, to society from a healthcare perspective.

   3. SSSteph Smith5:32

      Yeah, absolutely. And I mean, the case is compelling, and I hadn't heard the eyeglasses analogy, but I think it's, it's pretty spot on. So you mentioned one in ten, uh, for type 2 diabetes and forty percent, forty-plus percent of Americans are obese. How does that compare to the number of people who are actually on these drugs? And maybe where does cost or insurance come into play there as it relates to how many people have access?

   4. JYJulie Yoo5:59

      Yeah. So just to baseline, um, everyone's, uh, sort of view on this. So the, there's a drug called Humira, which was the best-selling drug ever in the history of American drug industry. And, um, that drug was used, uh, by roughly 300,000 Americans each year. And so, you know, it had a huge level of impact. Um, but you know, a fairly finite number of, of, um, humans who were impacted by it. Um, in the case of GLP-1s, uh, there was a study that showed in 2022, based on prescription claims data analysis, that there was roughly, uh, 3.6 million prescription claims for GLP-1s, um, in that year. And, and the, the interesting thing is that I think we're just getting started, right? So that's obviously a small subset of those who are, like, clinically eligible, technically speaking, um, as far as type two diabetes and obesity go. But the insurance policies for covering these drugs are still very, very immature. And that's a lot of the sort of, um, recent media attention that's been paid to these drug, this drug class, is that you hear about all these insurance denials and, you know, people struggling to get coverage for these, these drugs through their employer-sponsored benefit plans and, um, you know, even on, on Medicare and Medicaid. And so there's still a ton of questions about under what circumstances it actually makes sense to reimburse for these drugs because they are very, very expensive, as we'll talk about. And, um, you know, that they're-- if, if these drugs also, if you stop taking them, will lose-- are, are likely to very much lose their benefits. So you could revert in terms of your, your weight loss and your type two diabetes management. And so there needs to be probably some degree of demonstration of compliance with the drugs in order for, uh, health insurance companies to get comfortable reimbursing them into perpetuity over the course of your life. And so, um, that same study that I referred to s- uh, showed that it's probably only about a fourth, twenty-five percent of employer-sponsored insurance plans that today cover these drugs in terms of the benefit. And so, you know, I don't think the floodgates have even been close to the opening on, on these drugs being made accessible to all those who might actually medically qualify for them.

   5. SSSteph Smith8:01

      Absolutely. And I wanna get into where insurance plays a role. But before we do that, you also mentioned curative cell and gene therapies. Can you give a couple more examples of those? 'Cause it sounds like maybe it's not just GLP-1s that are poised to potentially make a greater impact in a way that maybe our providers or insurers aren't quite ready.

   6. JYJulie Yoo8:21

      Yeah. I would even argue that cell and gene therapies are probably the more extreme version of what we just described with GLP-1s, both in terms of the miraculous nature of what they do, but also in terms of their, the cost burden

4. 8:32 – 11:21

   Curative cell and gene therapies

   1. JYJulie Yoo8:32

      and the clinical burden, um, to our current healthcare system. So, um, there are many, you know, chronic or fatal diseases that stem from, uh, genetic code mishaps. So you might be born with a gene mutation, uh, in your actual, you know, native genetic code that results in some kind of debilitating disease. Um, one common example is sickle cell, uh, anemia, which, uh, in which there's a single gene mutation that arises during, um, uh, when you're born, and that impacts the shape of your red blood cells and has all sorts of, uh, very negative implications on your health status throughout your life. And you actually have to get sort of, um, ongoing blood transfusions basically is kind of the current state-of-the-art of how we treat that. So it's both expensive but also extremely, um, uh, taxing for, uh, both patients and providers. Um, there's also other types of diseases like cancer in which mutations might arise during your life, um, so after you're born. And, um, and so historically, uh, we've, we've had a thesis that, you know, if you were to be able to program drugs, uh, cells and genes, essentially, to be able to address those kinds of diseases, that you could actually cure, uh, entirely cure those diseases so that, you know, you no longer have to deal with that for the rest of your life. And so we now are in, in an era where we finally have the first versions of those diseases-- or sorry, those drugs that are now available on the market. Um, these are, you know, programmable medicines, as we call them. So you're either programming a cell to go target a certain cancer, uh, type, uh, within your body, and it'll, like, be programmed to kill those cancer cells, um, to completely eradicate it from your body. Or you can do a gene therapy which actually changes the genetic makeup of your body, uh, so that the disease that you were born with is completely gone. Um, and so, uh, those genes are, generally speaking, um, you know, orders of magnitude more expensive than really anything that we've seen, uh, you know, in society to date. And so, uh-- and they're also very, very complex to administer. Um, and we can talk more about that. But, um, these e-effectively, the way I'd put it is that our, our current system just is not designed at all to be able to handle the adoption and absorption and access to these kinds of therapies today. The ones that are available on the market today are, are administered in a very, I would say, bespoke and kind of one-off fashion in terms of how insurance companies cover them, in ter-in terms of how doctors are, uh, sort of managing the therapeutic, uh, administration piece and how patients are being handled, um, as far as their patient journeys. And so it's a huge, uh, problem. And there, there are dozens of drugs, uh, of this ilk that are, uh, projected to be approved and brought onto the market in the next several years. And so we think there's a, a very sort of imminent why now dynamic around why we need to solve for this sooner than later.

5. 11:21 – 15:16

   Drug costs and insurance systems

   1. SSSteph Smith11:21

      Yeah. And I mean, these are the kind of drugs that we've always wanted, right? We've always wished for. You used the term miracle drugs. So why is it that our healthcare system isn't really poised to cushion the introduction of these drugs and the GLP-1s that we talked about earlier? What really needs to change in order for the insurers and the providers and the patients to get access, but also, as you said, not completely steamroll or break down the system?

   2. JYJulie Yoo11:48

      Yeah. So, um, the original sort of, uh, you know, blurb here referred to two things. One is that we could bankrupt the system, and one is that we could break the system. So on the bankrupting of the system side, um, some of these cell and gene therapies that I mentioned can-- it can be a one-time cost of, you know, two to $3 million and sometimes more. And so if I'm a health insurance company- And you're telling me, "Okay, I've got this, this individual I obviously want-- would love to administer a drug that can, like, literally save their life and change and eradicate this disease that they would have to, um, deal with for the rest of their life," but it's gonna cost me $3 mil- million upfront. And, um, as an employer who covers the health insurance benefit for my employees, you know, the average tenure of any employee in my company is maybe three to four years on average, um, and even lower for tech companies. And so what incentive do I have to pay, you know, this upfront fee for something that will benefit this person over the entirety of their life, but that person is gonna leave my insurance plan in maybe two or three years? And so, um, I'm not gonna see-- I'm not, I'm not actually gonna reap the sort of the benefits of that upfront cost for many, many years, uh, after that person's gone. And so the cur-- That's, that's kind of the premise of how the current insurance system is designed and why it's not set up to incentivize people to be willing to pay for these drugs upfront. Um, and so there needs to-- That's, you know, one huge area where there just needs to be sort of fundamental innovation on just financing mechanisms to underwrite that risk profile in such a way that any individual payer only really has to pay their fair share, let's call it, uh, while that person is on their plan, and that you can sort of spread the risk as the person moves across insurance plans, or create a portable product that sort of follows that person throughout their entire life. And that just requires a lot of, again, innovation on the underwriting side in terms of the services that need to wrap around that and, and lots of other things that, uh, relate to that. So that, that's kind of the financing piece. Um, and then on the, uh, the sort of breaking the system piece, um, you know, these drugs, as I mentioned earlier, are very, very complicated to administer. So in the case of cell and gene therapies, which are probably the most extreme case, um, you are literally, you know, removing cells from a person's body who has been diagnosed with cancer. You need to transport them to a manufacturing facility where you reprogram the cells. Uh, you, you genetically engineer them, you regrow those cells, and then you package them to be sent back to a hospital that is trained and qualified and certified to actually deliver this highly complex therapy. Um, the-- these cells are infused into the patient, and you need to really, like, monitor the patient while this is happening because you might have an immune response that could be really, um, severe and, and things of that sort. Uh, and then that patient generally needs to be monitored in the hospital for many, many weeks, um, subsequently so that you, uh, can see that the drug is working. And, um, and all of that, it requires highly specialized expertise on the clinical side, on the operational logistics side, on the manufacturing side. There's entire companies that are being built, um, just to create competencies around manufacturing these kinds of therapies because it's so fundamentally different than, um, any of our previous sort of, you know, pill-based therapies or even the injectable therapies. It's, it's just a very different paradigm. And so all of that whole landscape is also something that, again, the current status quo biopharma, um, value chain is just not suited to handle, and therefore, we need new capabilities to handle it.

   3. SSSteph Smith15:15

      Yeah, absolutely.

6. 15:16 – 17:36

   The changes needed to enable drug access

   1. SSSteph Smith15:16

      Could you speak to maybe the GLP-1s a little bit there, just in terms of the therapies that you just mentioned are curative, and that introduces all types of questions around, like, what is a life worth and, you know, like, who-- uh, like you said, who gets access, and how does that get kind of rationed over a lifetime? But in the case of something like a GLP-1, can you just speak to maybe, like, the logistics or insurance changes that are required when we're talking about something that is not necessarily curative, but certainly-

   2. JYJulie Yoo15:45

      Mm-hmm

   3. SSSteph Smith15:45

      ... helpful and certainly also has downstream effects, right? If, if someone's no longer obese, like you said, their cardiovascular risk is lower. But also the way that they operate in the world, what they're buying, what they're involved in also changes. So what are your thoughts around maybe what needs to happen there?

   4. JYJulie Yoo16:00

      Yeah. So GLP-1s are also relatively expensive, cheaper than cell and gene therapies, but we're talking, you know, $1,000 a month roughly speaking for this class of drugs. And so, you know, tens of, tens of thousands of dollars over the course of someone's tenure at a given employer that you would have to cover, um, with the hope that, again, in that, in that time horizon, you are also gonna see the cost savings associated with that person avoiding certain downstream health implications. And so, um, there is probably a certain price point at which it becomes a no-brainer. So if you think about something like a high blood pressure drug, which are these, you know, pills that people-- like the, the, you know, vast majority of the population in the US is popping these pills on a daily basis. They cost, um, you know, maybe a few dollars, um, you know, per, per month, uh, for, for the, the health plan. Um, and so at that price point, it, it's really a no-brainer because y-y-you know that over the, over the, you know, um, whole-- the-- over, over a, a whole p- population, uh, you'll, you'll see the financial benefit. Um, the threshold for that financial benefit is relatively low. Uh, and so, you know, there, there is actually hope that there's a whole pipeline of cheaper versions of the current GLP-1 therapies that are in the pipeline expected to be approved in the next several years. But, you know, between now and then, it's really that price point that makes it really, really challenging to justify, um, again, paying, uh, this annual cost when you're not sure that you're gonna actually see the cost savings associated with it within the time horizon, uh, that the person is on, on that given plan.

   5. SSSteph Smith17:28

      That makes sense. Well, maybe as a final question, we are looking to 2024 for this big idea, so I guess I'm gonna bunch a few questions in here.

7. 17:36 – 20:48

   What solutions are being built?

   1. SSSteph Smith17:36

      What solutions are you already seeing built? Maybe what also roadblocks do you expect on the, on the road to implementing some of these changes? And also, where do you think policy might play a role? What do you see really coming in 2024?

   2. JYJulie Yoo17:50

      Yeah, so the exciting thing is that we've already seen, uh, quite a number of great entrepreneurs who are out there building various aspects of solutions that address, um, all the different components of that problem space that I just described. So there are companies that are, uh, certainly innovating on the manufacturing side, as I mentioned, um, to, uh, you know, just systematize and really industrialize the-- what today is a highly bespoke process to actually produce these cell and gene therapies in a, in a scalable fashion. There are companies who are helping hospitals and physicians deliver the of- operational and clinical logistics services related to everything from, you know, transporting the drugs to kind of the care management services that the patients need, um, you know, both pre and post the administration of these drugs. Even things like hardware for remote monitoring of these patients, um, such that they don't have to stay in the hospital for many weeks on end. Um, there are companies really, uh, addressing the data aspect of this. So one of the, um, the-- one of the things that I always think about as an ex-product person is, like, imagine as a product manager if you just never-- if you didn't have any closed loop of data on how your product was being used in the real world or any feedback from your end users. That is unfortunately, like, the state of affairs for many drugs that we have on the market today, is that once the drug is prescribed and it's out there, there's not really great ways for the bi-bi-biomanufacturing companies to get feedback back. But in the case of these, like, really expensive therapies, you obviously-- it's critical to have, uh, some degree of, of, uh, feedback loop, both to continually justify the price of, um, of those therapies and make sure that they're working, but also frankly to iterate and just make sure that you understand any of the side effects, um, and, you know, potential implications of those drugs. And so there's companies that are just building really data infrastructure to enable the collection, um, in a continuous fashion of how these drugs are performing post-market. So-- And then the last piece is on the financing side. I think we've seen, uh, both, like, traditional incumbent insurance companies, um, trying to spin up new solutions for this area, but they still tend to be pretty one-off and not systematic and scalable across the full class of drugs that could benefit from those approaches. Um, and so we are seeing a number of startups start to say, "Okay, how can we design sort of new fintech approaches basically, um, to be able to spread this risk in a very different way?" So, so all of those things are out there today in sort of what I would call kind of point solution form. And, you know, I think the big opportunity and, and why this is kind of a hard problem space to go after is that there is a bit of a cold start problem, right? To actually build kind of a holistic solution that solves the entirety of this problem space, you actually need to convene payers, you need to convene providers, you need to convene manufacturers, and obviously also the patients themselves who require a ton of services to get this right. And so, um, I think that's, um-- that remains sort of the big unmet need and, and huge opportunity for entrepreneurs to go after, is can you thread the needle on bringing together these multiple players with a holistic solution that can actually unlock this cold start problem to be able to address this at scale across the entire industry?

8. 20:48 – 23:48

   Policy, the FDA, and CMS

   1. SSSteph Smith20:48

      Do you think innovation will be able to basically thread that needle and ensure that people who need these drugs get them? Or coming back to that question around policy, do you think that there needs to be a role played there which basically says that-

   2. JYJulie Yoo21:01

      Yep

   3. SSSteph Smith21:01

      ... you know, we need to get these drugs out to the people that need them?

   4. JYJulie Yoo21:04

      Yeah, I think policy will definitely play a critical role in the long run, and we already have seen, uh, certain, um, you know, sort of guidance, uh, you know, briefs come out from various, um, government bodies a-around this particular issue, uh, a lot of requests for feedback, uh, from the sort of private sector on how they should be approaching this. But I think probably namely two bodies, so the FDA, um, I think there's gonna need to be a lot of change in terms of how they handle approvals of these drugs because they are so different, and also ongoing monitoring of these drugs, um, to be able to sort of design the right, uh, type of approach for, for these therapies. And then, um, CMS, which administers Medicare and Medicaid, uh, the government-sponsored insurance programs in our country, uh, they generally tend to be at the tip of the spear of any payment innovation, um, for new classes of drugs and new classes of services. And so the expectation is that they will likely roll out some sort of program that, um, you know, teaches the industry, uh, how they should be approaching, uh, these kinds of therapies and, and financing them. And so-- But, you know, we're in an election year, and so I think expectations are that that cycle will be slow. Um, uh, however, we are, I think, getting to a tipping point where both the number of these kinds of drugs that have already been approved, that are already on the market, that are already crippling, uh, individual companies and, and employers and, um, insurance companies and even the manufacturers are already hitting a tipping point where people, you know, lots of companies are, you know, potentially going to go bankrupt if they have to pay for these drugs if they have, have even one employee who ends up being eligible for one of these therapies. And so I do think there is a siren call already from the industry that will, um, sort of ignite, uh, a cycle of innovation as we're already seeing, as I mentioned, with a lot of startups that are spinning up in this space. So I think it, it-- a-as most things in healthcare, it'll be a combination of both sort of top-down regulation and policy combined with, uh, some of the bottoms-up activity that we already see starting to happen from those who are just feeling the pain today and just need to kick into action.

   5. SSSteph Smith23:05

      All right. I hope you enjoyed this Big Idea. We do have a lot more on the way, including a new age of maritime exploration that takes advantage of AI and computer vision, plus AI verse games that never end, and whether voice first apps may finally be having their moment. By the way, if you wanna see our full list of forty plus Big Ideas today, you can head on over to a16z.com/bigideas2024. It's time to build. [outro music]

Episode duration: 23:53