Analyst: Can I start with the thing I'm least sure about. When you say the launch playbook changed, is that a real change in behaviour, or a story the industry tells to explain prices that were coming down anyway?
Expert: No. It's real.
Analyst: You'll have to give me more than that. The client I'm doing this for thinks it's a story.
Expert: Then the client should have sat in the meetings. Look, I'd have been sympathetic to the cynical read in 2022, because for about a year and a half nobody did anything. Nobody moved a price. Then sometime in 2024 the models changed, and once the model changes the behaviour follows, because nobody inside a company that size argues with the model. You argue with the person who built the model, and you lose.
Analyst: What was the old model?
Expert: List high. Take price every January, six, seven percent, more if nobody screamed. Then spend the next decade handing it back in rebates. Gross-to-net on a mature oncology asset in our class was running high thirties. Thirty-seven and a bit, if you want the number I'd actually defend. Everyone knew list was fiction. The system was built on it being fiction.
Analyst: And the Act broke that.
Expert: The Act made list durable. Once your asset gets selected, the price the government pays is one number, set once, and then it sits there. So you stop asking what you can take this year. You start asking what you can live with in year thirteen.
Analyst: Thirteen because of the biologic clock.
Expert: Eleven to eligibility, thirteen to a price that bites. Small molecules are nine. We re-scored the entire small molecule portfolio off that gap. Programmes that cleared the internal hurdle in 2021 didn't clear it in 2024 and the science hadn't moved an inch.
Analyst: I want to come back to that. On launch price specifically, what actually changes in the decision?
Expert: The naive version, the one in most of the sell-side notes I get sent, is high list bad, low list good, because they cut your price off list. That's wrong. Or it's right by accident, which is worse, because then you spend money on the wrong things.
Analyst: Why is it wrong?
Expert: The ceiling doesn't come off list. It comes off a net number. There's a statutory formula, a percentage of a non-federal average manufacturer price, and non-FAMP is net of every discount you've handed out for a decade. So if you've run thirty-seven percent gross-to-net, congratulations, you've spent ten years assembling the evidence that your product is worth sixty-odd cents on the dollar, and the ceiling gets built off the sixty-odd. Your beautiful high list price never enters the arithmetic.
Expert: I had that backwards for about a year and a half. So did half the market access directors I know. A decent number still do.
Analyst: Backwards how, specifically?