Harsh Thakkar (00:01.178)
All right, welcome to another episode of Life Sciences 360. My guest today is Jesse Mendelson. He is the Senior Vice President at Model N. Model N, from what I know, doing some research is it's a revenue optimization platform or technology for pharmaceutical companies. So we're gonna be going a lot into pricing and stuff like that. So please welcome Jesse to the show and let's talk to him and learn what he's doing at Model N.

Welcome to the show, Jesse.

Jesse Mendelsohn (00:32.151)
Thank you, Harsh, it's good to be here. And thank you all to listening.

Harsh Thakkar (00:35.706)
Yeah, so I know you've been with the company a couple decades, so a long time. To start off, how has the company evolved from your day one to where it's today?

Jesse Mendelsohn (00:48.023)
Yeah, it's interesting. And you're right. It will be 19 years next month, which is shocking to me. I started right out of graduate school. The company has changed in a lot of very good ways. I would say that when I first joined, the solutions that we found were very operational, basically allowing manufacturers to properly administer their contracts and to accurately submit their pricing. And I think over time,

Harsh Thakkar (00:51.418)
Mm -hmm.

Jesse Mendelsohn (01:15.511)
both our company has realized and also the life science industry has realized that these applications and the results are more strategic than just operational. It's the way that you price your products and the way that you get your products to market and the way that you discount your products really is driving competitive advantage, not just boxes you have to check to stay in business. So I think the value of our products has really expanded the past two decades.

Harsh Thakkar (01:37.37)
Hmm.

Jesse Mendelsohn (01:43.031)
as well as the life sciences industry understanding of how contracting and how accurate compliance and handling the government as a customer can really improve margins and get competitive advantage versus just we need to file these numbers properly.

Harsh Thakkar (02:00.436)
So you mentioned about having customers in life sciences or pharma and having the understanding of government regulations and things around pricing. So when Model N gets a new customer or somebody who is interested in adopting the technology, what are some of the things that the company is looking for?

I know maybe the company knows, okay, we need a revenue management software. That's simple, but like deep down, what are maybe three or four other things that they're looking for and how does Model N make those modules or features available to them?

Jesse Mendelsohn (02:44.247)
Absolutely. So I'd say there's two main sides of model and pharmaceutical company, commercial and regulatory is what we call it. And most manufacturers realize that they have a need to more accurately be able to manage their commercial contracting or to have the ability to create and administer more complicated commercial contracting for the purposes of getting their drug to market. And so often what we'll see is the manufacturer will say,

Harsh Thakkar (02:50.298)
Hmm.

Harsh Thakkar (03:02.394)
Hmm.

Harsh Thakkar (03:11.386)
Hmm.

Jesse Mendelsohn (03:13.751)
You know, we have agreements with pharmacy benefit managers where we pay rebates based on prescription data. We have agreements with group purchasing organizations where they buy products at discounts. We subdivide those group purchasing organizations for the purposes of offering discounts to higher volume purchasers and, and administering this to become a nightmare. We have this enormous contract marketing team and spreadsheets and or old systems or homegrown systems.

Harsh Thakkar (03:35.994)
Thank you.

Jesse Mendelsohn (03:38.871)
And not only has it become a nightmare to administer all those pricing and products for all my portfolio and therapeutic classes, but I am limited in what I can do. I have contract marketing or I have our sales teams coming to us saying, hey, we want to enter into like an innovative value -based agreement for this new oncology product that we have where we have skin in the game and we will pay a higher rebate if the patient doesn't enter remission. And I can't enter those contracts. I don't have the technical wherewithal to do it.

Harsh Thakkar (03:39.546)
And not only is it a good night, but it's a good night.

Harsh Thakkar (03:49.946)
Hmm.

Harsh Thakkar (03:59.61)
We have skin in the game and we will pay a higher rate of this.

Jesse Mendelsohn (04:08.823)
So that's typically what we see on the commercial side. We see these people struggling with that and that's why they call Model N a revenue management company. The other side is regulatory. Now, regulatory is the area I quote unquote grew up in, it's where I'm most comfortable. And it's important for people to realize that even though the United States doesn't have Canadian or Israeli or British style single payer healthcare, the government is

Harsh Thakkar (04:09.21)
right

Harsh Thakkar (04:17.466)
Hmm.

Jesse Mendelsohn (04:37.815)
by and large, most manufacturers largest customer. Because if you think about it, even when we don't have single payer universal healthcare, if you add up Medicare, you know, people 65 or older, you add up Medicaid, which depending on the state covers a lot of people at or near the poverty level, TRICARE covering all active duty military members and their spouses and their children, the Veterans Administration due to certain geopolitical events, we have a large veterans community in this country. To add that all up.

Harsh Thakkar (04:40.794)
Thank you.

in the healthcare, out of Medicare.

Harsh Thakkar (04:58.714)
Right. Hmm.

Jesse Mendelsohn (05:07.543)
the government is still a massive insurer and purchaser of drugs. So the regulatory side is as important in some areas as more important in the commercial side, meaning that there's highly regulated ways that these government entities get their drugs priced, drugs get delivered, drugs get distributed, that these government programs get rebated down to net prices that are mandated by the various programs. And on that side, manufacturers typically say, we're concerned either from a

Harsh Thakkar (05:31.162)
Hmm.

Jesse Mendelsohn (05:37.207)
audit and compliance perspective. Like we want to make sure that we are in good faith following all these rules and regulations accurately and submitting accurate numbers, the sixth decimal on a regular way that we can audit and we can run our business without fear of some type of either mistake or even if not a mistake, an inability or an expensive response to an auditing question from a government entity or somebody on their behalf. So those are kind of the two sides that we see.

Harsh Thakkar (06:04.026)
Hmm.

Jesse Mendelsohn (06:05.495)
And then the third, to your point, is the third thing I would say is just optimizing across the whole process is better analytics as to what's happening in both those areas, how those areas interact with each other and what manufacturers could do from a pricing and compliance perspective to get better margin.

Harsh Thakkar (06:24.026)
So your platform helps them with determining the price? Is that correct? Like, is there like some statistic or algorithm or something involved that helps them, you know, maybe look at a certain set of criteria, the therapeutic, you know, area that their product is and come to a dollar value of, hey, this is a range or this is where you should price your product compared to the market or?

how does the company come to the price? Like let's say if I'm taking a cancer drug from, I don't know, Novartis, BMS, whatever, and the cost of that drug is $1 ,500 or whatever, my insurance covers some, and maybe I pay 200 or 300, insurance pays the remaining. I'm just throwing numbers out. So I'm trying to understand how does your platform help a company.

come to the conclusion that, hey, your drug should be priced at the thousand or two thousand or the $10 ,000 range.

Jesse Mendelsohn (07:29.623)
So I would say a couple things. I would say for international pricing, our platform does it very strong. We have a very large product called global price management and part of that is global launch excellence, where essentially if you were to launch a product, it is very complicated outside the US where which market you launch in first, because there are certain rules among if I launch first in France and I launch at this price, then other countries such as, I'm making this up, but this is how it works.

Harsh Thakkar (07:40.698)
Mmm.

Harsh Thakkar (07:49.082)
Right.

Harsh Thakkar (07:56.154)
than other countries such as the United States and the United Kingdom. Belgium is needed.

Jesse Mendelsohn (07:58.807)
Belgium and Sweden refer to that price, which could decrease France's price and the Swedish price. So there's a lot of machine learning and AI into strategy about exactly, you're right, what price to launch at and how that price should then be introduced to which market at which area to reduce price erosion over time while still making sure that patients in those countries have access to that therapy. Now, within the United States, it's much more complicated.

Harsh Thakkar (08:11.994)
Right.

Harsh Thakkar (08:22.774)
Hmm.

Jesse Mendelsohn (08:26.071)
And what our software focuses on is less so determining that initial price, but more so administering that price flawlessly. So once you determine the price for your product, and remember, it's not just a price, it is the list price for your product, but also what discounts you're providing both to wholesalers and also to group purchasing organizations, to hospital systems, sometimes individual physician practices, and also what after the fact rebates repaying to health plans.

Harsh Thakkar (08:48.762)
Correct.

Jesse Mendelsohn (08:55.959)
and pharmacy benefit managers to get and maintain formulary status to your point so that you have a cost sharing arrangement, you have access to that drug, even if you have a copay, what as a manufacturer agreeing to do that and in what amounts. And what our system does is it executes that flawlessly. So you have potentially 90 different price points for a drug depending on.

Harsh Thakkar (08:56.602)
Mmm.

Harsh Thakkar (09:14.842)
Hmm.

Jesse Mendelsohn (09:19.767)
whether a provider belongs to a group or organization has its own agreement, is a member of an IDN, like a health system that also has its own contract. And also at the back end, the various health plans can have tremendously different rebates depending on the formulary status they have by to a drug, that it is assigned to a drug, the volume at which they're reimbursing pharmacies for prescriptions for that drug, and so on. So what our system does is it administers those agreements flawlessly.

Harsh Thakkar (09:24.186)
given that a member of an ITN that can help us in all those things.

IC

Jesse Mendelsohn (09:48.887)
And then all of that data gets poured into government submissions. And we execute those and calculate those also follow -up.

Harsh Thakkar (09:58.202)
Okay, okay, okay. All right, so it's more, you're also handling all the documentation, the contracts, the notifying different agencies and whatnot, not just like a statistical tool to come to the price, but what do you do after you determine that price? Like how do you connect to different organizations, whether it's a hospital, pharmacy, or government or whatever? Yeah, it's interesting.

Jesse Mendelsohn (10:08.951)
Exactly.

Jesse Mendelsohn (10:26.743)
Exactly.

Harsh Thakkar (10:27.322)
Yeah, I've worked in pharma for 15 years until to this date, I have very limited knowledge, probably at the lowest level of pricing or how companies come to it. And this has been like a discussion with friends and families and they're like, yeah, you work for this company. So why is this drug so expensive? I was like, I don't know. I don't work in the pricing. Yeah.

Jesse Mendelsohn (10:53.943)
Well, it's even, it's like a harsh, I'll tell you, like even the, well, is the drug really expensive? You can, you can, you can go up a level and get more philosophical. Like, well, is this drug even expensive? You know, what value does the drug provide? You know, I remember several years ago, I think the early 2010s, I might get the date wrong, you know, Gilead essentially cured hepatitis C, but the therapy was $80 ,000 and people, you know, on one side of the, you know,

Harsh Thakkar (11:00.698)
Yeah. Yeah.

Harsh Thakkar (11:17.626)
Hmm.

Jesse Mendelsohn (11:23.735)
of the perspective, we're saying, well, you know, $80 ,000. This is insane. This is a highway robbery. But the other side, we're saying, well, you cure hepatitis C, you extend these people's lifespans by potentially a decade. You limit the need for liver transplants, which are far more than $80 ,000. And so this is a, from a value perspective, this drug isn't expensive at all. So I echo what you're saying. It's a common discussion among my family and friends as well, but you can get really deeply philosophical with these discussions as well.

Harsh Thakkar (11:27.31)
Yeah.

Harsh Thakkar (11:46.202)
Yeah.

Jesse Mendelsohn (11:53.463)
and less so just practical about why the drug was priced where it's priced, you know?

Harsh Thakkar (11:58.586)
Right, right. Yeah, that reminds me of another I think it was Novartis drug that was like a million or something. It's some crazy amount. And I didn't know it was that expensive until somebody told me, like a friend or family is like, Hey, you do you know, like, there's drugs that are like a million dollars. I'm like, No, that's not true. Like, you got to show me the link. And he sent me a link to like a blog that had, I think it was

some cell therapy or some drug from Novartis. I can't remember the name. Yeah.

Jesse Mendelsohn (12:29.303)
Exactly. No, it's yeah, so it's a drug. It's drug. It's from Novartis. Now, there's, Novartis is not the only company that has million dollar drugs, but yes, they have one and it treats a genetic disorder that's found in children. Now think about it. So think about potentially hundreds of millions, if not billions of dollars that Novartis and its affiliates had to put into discovering that drug and think of the patient population. Now these patient populations are very small. These are, this is not a,

Harsh Thakkar (12:38.746)
Yeah, yeah.

Harsh Thakkar (12:46.138)
Hmm.

Jesse Mendelsohn (12:55.159)
a large, enormous genetic disorder that millions of kids have, it's very small. So this is incredible triumph of medicine that now these kids who used to have no way of, or hopelessness now have a way to have some normalcy in their lives. But for Novartis to even hope to make back that investment and therefore invest more in treating more of these orphan or rare diseases, that's what they need to charge.

Harsh Thakkar (13:06.298)
Yep.

Jesse Mendelsohn (13:24.791)
So it's the same conversation from a value perspective, a million dollars to have a kid live a somewhat normal life versus previously be horribly debilitated life. That million dollars doesn't seem so bad, particularly because it's such a rare disease. It's not a million dollars per kid. So you see what I mean. This is often where these discussions go when you're having this conversation about drug development and drug pricing.

Harsh Thakkar (13:25.018)
Hmm.

Harsh Thakkar (13:32.922)
Yep.

Harsh Thakkar (13:41.018)
Nope.

Yes, yeah.

Harsh Thakkar (13:51.546)
Right, I mean, you know, ultimately it comes down to, I don't think you can put a dollar amount on a life -saving drug. I mean, it's all perspective, right? Like, we're not buying a car or like a house where you can be like, you don't need this, like you want it, right? But when it comes to life or when it comes to, like you gave an example, every person has a different perspective. You know, if I don't know anyone who could use that drug or it doesn't happen, you know,

to a family member, I may have a different outlook, but for somebody who is going through that, to them it might be like, yeah, this is not that bad, because I'm still gonna be able to save or cure the life of the person that I love or care. So yeah, it is a very slippery topic, yeah.

Jesse Mendelsohn (14:36.311)
Exactly.

And I agree the conversation of how do we make sure that all kids, regardless of their parents insurance situation or how much money they have, who have this genetic sort of access drug, that's absolutely a good conversation to have. And from my experience, companies like in this case Novartis are actively involved in those conversations. And because remember, I always tell people when...

Harsh Thakkar (14:49.754)
Hmm.

Jesse Mendelsohn (15:04.215)
I'm approached with the discussion of, you know, is pharma price gouging or I can't get, pharma doesn't want people to not be able to access its drugs. From a, from a both success perspective, but also just making money perspective, pharma wants people to access their drugs. That that's exactly how they make money. That's how they get market share. And that's frankly how they live their mission. That's, that's why these companies exist. So I agree that the conversation of, well, how is it? So are there kids in this country who have that genetic disease?

Harsh Thakkar (15:13.146)
right.

Harsh Thakkar (15:19.29)
Mm -hmm.

Jesse Mendelsohn (15:33.783)
but have no capability and their physicians agreed that this drug will be beneficial to them, but have no capability of getting it. That's a conversation I think it's more important to have versus, well, is this price too high? Because that gets more philosophical based on what I said.

Harsh Thakkar (15:45.778)
Yeah, yeah, I want to switch gears and go to a topic that you had when we were discussing about this episode and discussing some topics you had mentioned about the inflation reduction act. So, if can you give a listeners maybe a two or three line of what.

how that came out to be and what it is, and maybe then we can go into some other questions that I have for you on that topic.

Jesse Mendelsohn (16:17.431)
Sure. So the Inflation Reduction Act was passed by the Biden administration a couple summers ago. And what most people likely have heard about the Inflation Reduction Act is very, very broad sweeping changes to a lot of things in American life with the purpose of, yes, reducing inflation, but also spurring certain industries. But of the, I might get these numbers wrong, but I'm roughly right, of the 700 rough pages of the Inflation Reduction Act.

about 200 were specifically about drug pricing. So it was predominantly a bill focused on drug pricing. Now, what people might be most familiar with based on what's covered in the news is the Medicare for certain drugs now has the right to negotiate its price based on its size. And that is the biggest thing that's probably made the news is that, you know, for part B, which is, you know, physician administer drugs and for part D, which is,

Harsh Thakkar (16:54.49)
Mmm.

Jesse Mendelsohn (17:15.383)
drugs have gotten in the pharmacy setting, Medicare is increasing the number of drugs to which it's applying what's called a maximum fair price or an MFP based on negotiation. And that is the biggest thing that's come from this. And for a very, very long time as a concept, I remember going all the way back to the Deficit Reduction Act back in 2005, or even prior to that, during the George W. Bush administration, there was

Harsh Thakkar (17:27.066)
Hmm.

Jesse Mendelsohn (17:45.175)
discussion around Medicare should be allowed to negotiate based on its size. This is not a new concept, but the IRA is the first law that with some teeth actually put this into practice or was supposed to. That's a, that's a, I'll leave it, I'll leave it there for a background.

Harsh Thakkar (17:57.122)
Okay, so when you say Medicare is allowed to negotiate, so before the Inflation Reduction Act, there were, let's say, X number of drugs for which the Medicare could negotiate and now that number or that now the number of drugs is expanded to a bigger list or what do you mean by there's more drugs that it can negotiate?

Jesse Mendelsohn (18:27.607)
Yes, so prior to the Inflation Reduction Act, there were certain Medicare products that Medicare basically reimbursed based on the average sale for that product. So for example, for physician -administered products like injectables, Medicare Part B largely would reimburse physicians for the average price that was reported by manufacturers that that product was sold for, the average sales price.

Harsh Thakkar (18:34.842)
Mm.

Harsh Thakkar (18:39.866)
Okay.

Harsh Thakkar (18:52.442)
Yep.

Jesse Mendelsohn (18:53.943)
plus a small percentage to reimburse a physician for his or her services. So there wasn't for part B a mechanism to negotiate Medicare discounts, but basically the price that Medicare paid was similar to the commercial price. Medicare had some abilities, exactly, Medicare had some abilities to reduce that price. For example, Medicare would group products together into similar therapeutic categories and

Harsh Thakkar (18:58.426)
Mm -hmm.

Harsh Thakkar (19:11.546)
I see.

Hmm.

Jesse Mendelsohn (19:23.671)
only reimburse the physician at the rate of the weighted average of all those products in that category. So for example, if I'm just making this up, if you have three drugs that treat arthritis and they're all in the same therapeutic category and the physician dispenses a very expensive one from that category, they may only get reimbursed at the cost of the cheaper one in that category. So there were mechanisms to encourage physicians to use cheaper products.

Harsh Thakkar (19:24.354)
you

Harsh Thakkar (19:31.13)
Hmm.

Harsh Thakkar (19:45.466)
it only get reimbursed as a copy of the E -book.

Jesse Mendelsohn (19:52.919)
But that's different than negotiating actual prices, if you know what I mean. And then the part D side, there was more traditional negotiation the way that it works right now with commercial PBMs, pharmacy benefit managers, where there were formal areas and statuses, but still it wasn't, you know, the government sitting down negotiating. With the IRA to your point, Harsh, there are now lists coming out where, where, where these are lists of products that are now coming out where.

Harsh Thakkar (20:12.154)
Hmm.

Jesse Mendelsohn (20:19.383)
Medicare is saying no pharmaceutical company if your product is on this list you need to quote unquote sit down with us and negotiate directly What is now called the maximum fair price the MFP for this product?

Harsh Thakkar (20:24.922)
I'm going to go to sit down with everyone.

Harsh Thakkar (20:31.674)
Wow, okay, that explains a lot. It's interesting. So then this, you mentioned that 200 pages of information around drug pricing in this Inflation Reduction Act.

I know it's possibly, or I should say it's impossible to ask you what that means for the pharmaceutical industry or people in the executive positions at pharma companies, but what are like one or three takeaways from that 200 pages that you want or you think the executives at pharma companies should care about?

Jesse Mendelsohn (21:13.047)
Well, the first one I will say is you need to get a good lawyer and good legal advice and also a good revenue management system that will keep up to date with these changes. That's a very, very important because there's new rebates and new pricing and we are rapidly up in New York software. So I think it's very key to do that. That's the first of the three I'll give you and a good lawyer and good auditors and good advisors are just as important as a good system to administrate. I'll say two other things that I think are having aftershocks. I didn't come up with the term aftershock. I heard it at a conference, but I like the term.

Harsh Thakkar (21:17.498)
Hmm.

Harsh Thakkar (21:21.466)
Yep.

Harsh Thakkar (21:30.554)
Yep.

Harsh Thakkar (21:36.762)
Hmm.

Jesse Mendelsohn (21:42.679)
There's aftershocks of the IRA. One is this negotiation is turning out to not really be negotiation. And there's some litigation about this. Basically, you know, when you hear negotiation, you think of the way you negotiate to buy a car, to buy a house. You know, you look at fair price, you look at surveys.

Harsh Thakkar (21:43.258)
Yeah.

Harsh Thakkar (22:00.506)
Yep.

Jesse Mendelsohn (22:04.151)
You meet with the seller, you say, look, I think basically on the volume you're gonna buy or what I'm getting in return, I think this is a fair price. They say, no, I think it should be higher. You say, I think it should be lower. And you come across and you hammer out a contract and that becomes the price. That's actually not what's happening right now. After the Inflation Reduction Act was passed, the regulatory guidance that was published by places like CMS, the Center for Medicare and Medicaid Services was far more resembling

Harsh Thakkar (22:19.354)
Mm -hmm.

Jesse Mendelsohn (22:33.559)
I'll use my own word coercion than negotiation. Basically, what happened is the guidance was, you know, the government telling the pharma, you need to turn over an enormous amount of data points about your product, enormous amount of pricing information, research information, material costs, all these things about your product. And then I, the government will tell you the fair price. It doesn't sound like negotiation to me. And that's...

Harsh Thakkar (22:36.218)
Hmm.

Harsh Thakkar (22:55.002)
Wow.

Jesse Mendelsohn (22:59.927)
caused a lot of stirs and a lot of concern in the pharmaceutical industry because I didn't see a lot of fear or apprehension in the pharmaceutical industry about negotiation when they thought or assumed that it would be genuinely what we all think of as negotiation. Rather, what we see now is they feel like they're being coerced. And there's a lot of downstream impacts of that and even some legality questions about that you're seeing right now being fought in the courts.

Harsh Thakkar (23:14.778)
Yes, yes.

Harsh Thakkar (23:28.118)
Hmm Yep

Jesse Mendelsohn (23:28.887)
The third thing I would say, you asked me for three, the first was get a good system and a good lawyer. The second is really understand what negotiation means in this case. The third is inflation penalties have now been introduced to Medicare. Now, what inflation penalties are is basically if you as a drug company have increased your drug price faster than the rate of inflation.

you now owe the Delta, the difference between the allowable price increase due to the rate of inflation and what you increase your price back to the government in the form of a rebate. Now, this has existed for quite some time in Medicaid. So in Medicaid, which is, you know, a different government health insurance program, there has been inflation penalties where basically if you same thing, you owe the government rebate, though that is there for quite some time. And also for the Veterans Administration and the federal supply schedule that administers,

Harsh Thakkar (24:02.074)
Hmm.

Harsh Thakkar (24:07.034)
Okay.

Jesse Mendelsohn (24:21.783)
There's also an annual cap on how fast you can increase your drugs price based on the rate of inflation. So this is frankly not new to the industry. It's already existed in other government healthcare programs. And the fact that it's now being applied to Medicare is not that surprising, but it's still important for people and manufacturers and executives to realize that by increasing your drug price to even maintain margin,

Harsh Thakkar (24:37.85)
Yep.

Jesse Mendelsohn (24:45.911)
you may now be bumping up against this maximum fair price if you're on one of these lists. And even if you're not bumping up against this maximum fair price, you might be incurring rebate liability to Medicare, which is a very large market. So basically get a good lawyer, good revenue management system, understand what NFP means in negotiation versus coercion, and understand these inflation rebates that you're about to incur depending on how and how quickly you increase your drugs price.

Harsh Thakkar (24:57.754)
Hmm.

Harsh Thakkar (25:12.282)
Yeah, thanks for that summary. So this inflation reduction act, from what it sounds like, it's applicable to pharmaceuticals, biotech, medical devices. What types of companies in the life science ecosystem will, in your words, have the aftershock, so to speak?

Jesse Mendelsohn (25:33.335)
pharmaceutical and biotech companies. Now, I don't want to say medtech is not impacted. There likely are ways that I'm not thinking about it. And some of my medtech colleagues, when they watch this podcast, might say, Jesse, why didn't you bring that up? But I don't know medtech that well. But I will say largely pharmaceutical biotech. Also, all pharmaceuticals, generic pharmaceuticals are impacted. Biosimilar manufacturers, biologics, they're all impacted. Yes.

Harsh Thakkar (25:34.81)
But promise me.

Harsh Thakkar (25:41.754)
Okay. Yeah.

Harsh Thakkar (25:49.274)
Okay.

Harsh Thakkar (25:53.05)
Hmm.

Harsh Thakkar (25:58.426)
Yeah, yeah. So then I want to double click on the second point that you made, you know, that it's more of it appeared to be as a negotiation, but as more and more information is coming out, it's more of a, like you said, you know, show us the data point, show us how you came to this. So as a leadership of a pharma or biotech company that's doing

you know, strategic planning of your drug development, you know, clinical trials, commercial, whatever. How can, like, what does this do to the drug development strategy? Now, is pharma going to start collecting more data points to support? Like, hey, you asked us for data, here you go. This is, you know, how do you think it's gonna change sort of the data collection across the drug development?

Jesse Mendelsohn (26:50.327)
That's a good question, Harsh. I would say, let me give you two answers to that. The first is the more immediate, the more tactical. And it's exactly as you say. I mean, we're updating our software to collect and maintain more data for the purposes of these negotiations. So from a more immediate perspective, you're right. There is going to be more data collection, more analysis within pharmaceutical companies to make sure that they can comply and respond to these government requests as part of the MFB, the maximum fair price negotiation. Absolutely.

Harsh Thakkar (26:57.562)
Hmm.

Harsh Thakkar (27:04.058)
Yep.

Jesse Mendelsohn (27:18.583)
I'd say more broadly speaking is where the bigger issue is here. You know, there's a couple of things. Even if you are, your drug is not on one of these lists yet. Let's say you are a pharmaceutical or a biotech company and your drug is currently not on the list that Medicare is saying you must negotiate with me on a maximum fair price. What happens if you have a drug that competes with the drug that's on that list? You're still impacted because if your drug competes with the drug that's on the list and that drug is subject to a price cap,

Harsh Thakkar (27:27.93)
Hmm.

Harsh Thakkar (27:36.474)
Okay.

Harsh Thakkar (27:40.634)
Hmm.

Jesse Mendelsohn (27:46.103)
that will likely increase or decrease or change at least your ability to access the Medicare market. Or what if you have a drug in clinical trials right now that is very promising that would also treat the same condition as a drug that's on one of those lists. Your financial outlook for that drug that was the calculus for why you started developing that drug and put it in clinical trials changes. Another thing I'll say is the traditional way that most Americans are understanding drug prices come down is,

Harsh Thakkar (27:58.074)
Right.

Harsh Thakkar (28:09.274)
Hmm.

Jesse Mendelsohn (28:15.351)
The drug is on the market. It's expensive for X number of years because it's branded. And then suddenly with great fanfare, it goes generic. And you're, you know, eventually the price of the pharmacy goes down from your copay or very expensive out of pocket. If you haven't hit your deductible down to, you know, $10 for 90 days. And that's the typical way in the American system of how drug prices go down. But let's say that I'm a generic manufacturer or a biosimilar manufacturer.

Harsh Thakkar (28:27.066)
or going to a company that has a deductible down to $10 for 90 days.

Jesse Mendelsohn (28:43.063)
And I typically like to target expensive drugs that are coming off patent to create a generic or biosymmorph equivalent of that drug so that I could compete with that drug, get some of the revenue while the price is high, and continue to get revenue as the price decreases. Now, would I still have the same motivation to compete with a drug that is on one of those lists because it's already capped at this MFP? So this existence of this price,

could actually limit generic and biosimilar competition for these drugs on these lists. And that is odd in this strange way, a way that could keep the prices high, even though the purpose of this act in the IRA in general was to lower drug prices.

Harsh Thakkar (29:12.506)
Yeah, there's I have to say I love how you explain these very complex topics with

simple to understand examples. I really appreciate that because as I told you, this is a topic where I don't know much about, but yeah, I think you've had tons of experience working in this domain, which is obvious in the way you explain things, but yeah, I love that. So we've talked a lot about...

what's the impact of the Inflation Reduction Act for pharmaceutical companies or also, you know, the negotiation and stuff, but what's maybe a positive outcome in the long run that you feel is gonna come out of this?

Jesse Mendelsohn (30:21.463)
I mean, so, you know, many of us have parents and grandparents who are in Medicare, and this will make their lives better. You know, my father is struggling with cancer and God bless him, he's in remission right now. But the drugs that he was put on to deal with his cancer were very expensive. And starting soon, there will be a cap of how much he has to spend out of pocket. And that's part of the Inflation Reduction Act. And that is a very big help to our...

Harsh Thakkar (30:29.474)
Hmm. Yep.

Harsh Thakkar (30:38.01)
Yeah.

Harsh Thakkar (30:46.594)
Right.

Jesse Mendelsohn (30:51.127)
parents and friends and grandparents who are on Medicare. You cannot deny that for those who are on Medicare today, their lives will be easier. They'll have better access to medication. And by and large, they will spend less money on that medication. So you can't deny that. Now, again, there's aftershocks because of that. Prices may increase on the commercial market because of these taps and changes and limits on Medicare. But many of us love our parents and grandparents, and this will make their lives easier for people.

Harsh Thakkar (31:05.498)
Hmm.

Jesse Mendelsohn (31:19.927)
care and you can't deny that this will be a benefit for them and that's important to pretty much anybody in America.

Harsh Thakkar (31:26.714)
Great, great. And what's next for Model N? I know maybe you can share some, are there any interesting features or modules or something that you're building? Obviously, you're staying in touch with all the regulatory and all the changes happening in the environment and trying to make sure the platform can handle anything from the documentation or the data side. But what else? Are there any interesting...

features or something that you're working on.

Jesse Mendelsohn (31:59.479)
Yeah, it's interesting. So I again, I don't want to get in trouble with my marketing folks. I'm not going to say the name of the data will be GA or what it is, but I'll talk about kind of an area, an area that we're moving in, you know, is upstream data. Let me just put it that way. A lot of manufacturers rely on things like clean customer data to make decisions and to accurately pay rebates and administer pricing. Because remember,

Harsh Thakkar (32:03.226)
Yeah, yeah.

Harsh Thakkar (32:07.546)
Yes.

Harsh Thakkar (32:15.354)
Mm.

Jesse Mendelsohn (32:26.519)
Custard Aids work very complicated. Think of the number of entities in this country. Think of where you're sitting right now, and with a five mile radius, how many entities can legally purchase prescription drugs? Are there doctor's offices? Are there pharmacies? Is there a hospital or a clinic? Think about that. Now all those doctor's offices and hospitals and pharmacies and clinics have different contractual relationships with wholesalers and with drug manufacturers. They might be members of group purchasing organizations.

They might be specific classes of trade or 340B entities that are long -term care facilities, which allow them to have specific pricing. And it's very, very complicated. And making sure that the right entity when they order a drug gets the right price for that drug based on who they are, what pricing is available to them, what contracts they're eligible for, what group they belong to, is critical and a key component of revenue management.

And so I'd say one area we're moving into without being too specific is a very clean cross industry view of the customers in this country who can legally buy prescription drugs, as well as what GPOs they are members of and what contract they might be eligible for. A much, much cleaner way of understanding and making sure pricing's accurate versus each individual pharmaceutical company.

Harsh Thakkar (33:18.938)
Hmm.

Jesse Mendelsohn (33:44.887)
trying to do that on their own, largely duplicating work across the industries. That's one area I'd say we're investing quite heavily in. The other way I'd say is we're investing a lot more in the payer side of the industry. Payor is dealing with pharmaceutical benefit managers and specialty pharmacies, basically paying discounts after the fact to PBMs based on utilization, prescription data that they send you. Now,

Harsh Thakkar (33:53.146)
Great.

Harsh Thakkar (34:09.514)
Right.

Jesse Mendelsohn (34:12.663)
PBMs will send you millions and billions of rows of prescription data. And the more you are able to analyze that data and determine if it really is eligible for a rebate, the more money you save and the more compliant that you are. So we're also investing heavily in tools that allow manufacturers to scrub out, called data scrubbing, to scrub out prescription lines that might have been dispensed from 340B inventory. Basically, they were dispensed from a discounted inventory.

eligible to certain contract pharmacies and therefore they should not be also eligible for a rebate from the manufacturer. Or if a manufacturer agreed to pay rebates on certain products, assuming those products had a certain opportune formulary status in that plan, basically the plan made it easy for their patients to get that drug because it had a low copay or didn't require pre -authorization, then

Harsh Thakkar (35:10.458)
Hmm.

Jesse Mendelsohn (35:10.615)
then the manufacturer agreed to pay a rebate for that drug. Now, on the day that drug was dispensed, was the formulary for that PBM actually published in a way that that drug was in that opportune position for which it earned a rebate? Paying that accurately is incredibly important, and that's the area I'd say we're investing in very heavily in as well, both on the formulary management side, on the scrubbing out of 340B data on the side, and making sure that...

Harsh Thakkar (35:37.562)
Yep.

Jesse Mendelsohn (35:40.535)
rebates are paid accurately. I'll say that we measure success a lot at Model N, not only in do our customers like our software and like me and like coming to our conferences and will they recommend us to others, but also how much money are they saving? How much rebate liability has decreased prior to implementation? They used to pay X dollars in PBM rebates after implementing one of these products like Validate or 340B Vigilance.

Harsh Thakkar (35:55.642)
right

Jesse Mendelsohn (36:08.759)
They have now decreased that in some cases tens of millions of dollars of savings just in the first year And it's because of these types of things that we're investing in

Harsh Thakkar (36:14.522)
Wow.

Yeah, it's again, it's a very interesting area, like I said, at the start of this discussion and I don't get to work much in this area. Like most of the projects that I work with clients are in manufacturing, lab systems, clinical trial systems. So anything that sort of GMP, GLP, GCP regulated stuff, I don't get to work on these types of software. So that's why I don't know much about all the different software companies, but...

From everything I've talked to you, it sounds like Model N is one of the top comprehensive solutions in this area and you're constantly evolving with new changes in the market landscape. So that's awesome.

Jesse Mendelsohn (37:01.591)
I preach it in harsh. It's interesting to say the only thing that's constant here is change. I remember when the Inflation Reduction Act was signed, the CEO of my company asked me, so Jesse, like all these new government rules, what did these replace? And I said, his name's Jason. I said, it's nothing, Jason. I was like, companies still need to comply to all the previous rules and now this on top of it. So it's just more complexity, more change, and you're absolutely right.

Harsh Thakkar (37:06.17)
Yes.

Harsh Thakkar (37:18.042)
Ha ha ha ha!

Harsh Thakkar (37:22.682)
Yep. Yep.

Harsh Thakkar (37:27.738)
Yeah, thanks again for your time. It was a pleasure talking with you. Any final words, where can listeners connect with you or learn more about Model N after this episode?

Jesse Mendelsohn (37:38.743)
Absolutely. So I encourage you to connect with me on LinkedIn. I share some thought pieces. I also share some thought pieces from other people who I respect greatly who are in the drug pricing industry. And you know, this should be easy to find me. I work for SVP at Model N, search Sd Mendelsohn, feel free to connect me or follow me. I would also say just check out the Model N website. We are constantly refreshing it with white papers and webinars and blog posts and these types of things.

very broadly industry -alphagal, even if you don't use our software or any of our services, we try to put a lot of good thought pieces on there to help keep people up to date.

Harsh Thakkar (38:13.466)
Yeah, yeah, that I'll definitely check it out. Like I said, I don't know much about this area, but I like consuming content online, especially, you know, like you said, if it's written agnostic of the software or the system, then yeah, I like to learn. So thank you, Jesse. It was a pleasure having you on and wish you and Model N tons of success. Thanks.

Jesse Mendelsohn (38:33.655)
Thank you, Archer, appreciate it. Have a very good day.