Virologist and investor Peter Kolchinsky joins Brian Anderson to discuss a coronavirus vaccine, the critical genetic differences between Covid-19 and the flu, and his proposals to reform the pharmaceutical industry.

As millions of Americans approach a month of living under stay-at-home orders, scientific teams across the globe are racing to find a vaccine for the coronavirus. According to Kolchinsky, several vaccines are already in development, and concerns that the virus will mutate and evade them are overblown. But until a treatment is made widely available, he warns, we will have to maintain a level of social distancing to prevent the health-care system from being overwhelmed. Kolchinsky is the author of The Great American Drug Deal: A New Prescription for Innovative and Affordable Medicines.

Audio Transcript

Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Joining me on the show today is Peter Kolchinsky. Peter is a scientist and an investor in biotechnology companies. He's written three fascinating pieces for City Journal over the last month on the coronavirus crisis and we're very pleased you could join us on the podcast to talk about his recent work. He's the author of an important new book called The Great American Drug Deal, which we'll discuss as well. If you haven't seen our coverage of the Covid-19 outbreak already, I encourage you to head over to the City Journal website to check it out. Also, the team is hard at work on the next print issue of the magazine, so stay tuned for updates in the coming weeks on that. Peter, thanks very much for joining us on 10 Blocks.

Peter Kolchinsky: Thanks very much for having me, Brian.

Brian Anderson: As I mentioned in the introduction, you're a scientist and an investor and you're specifically trained in virology, the study of viruses, which makes you pretty well suited to talk about the present situation. Just for our listeners could you describe a little bit your background? Just briefly?

Peter Kolchinsky: Sure. I did HIV research in graduate school, studying how the virus enters into cells. I did this at Dana-Farber at Harvard university. And after that I became an investor which still required me to understand a lot of what I learned in graduate school about not just viruses, but the immune system and the inner workings of the cell. Eventually I had an opportunity to invest in companies that were developing drugs to treat HIV later, drug companies that tackled hepatitis C, hepatitis B. And so my professional work has still kept me involved in the field of virology. Though I have broadened out to others diseases.

Brian Anderson: When did you first become concerned that the outbreak in China was going to, or at least threatened to become a global problem?

Peter Kolchinsky: I would say that I realized it too late. Like many people, I think back about why somebody with my training didn't appreciate this. And probably sometime in February. It was something that I was thinking about. We'd heard about it before then. But I have to admit because of how quickly SARS and MERS came and went, there was a general complacency out there and I suffered from it too. Where I just assumed that somehow people who focus on this stuff would would solve it before it really came to our doorstep. But it really became acute for us, I would say in early March our firm went into a heightened state of awareness. Initially it started with hand sanitizer. I think we even started with that in February. Avoiding handshakes, being more careful about anybody having these symptoms, not coming into work. And then we just went to work from home, work from home mode about a month ago. And have you been that way ever since?

Brian Anderson: Yeah, that pretty much follows our timeline with the Manhattan Institute and the magazine. In the very illuminating piece you wrote for us, "Ending Covid," you express some confidence that we're going to develop a vaccine for the virus. Why do you think that and, and what do you say to those critics out there or observers who point to a lack of a vaccine for the cold after all of these years as suggesting we might not get a vaccine anytime soon for Covid-19.

Peter Kolchinsky: Yeah, so I would say that Covid-19 is very much on the forefront of all of our minds. And it seems scary as you watch how it's killing people and sending so many people to hospital. But the reality is that Covid-19 is not so different from, or I should say SARS-CoV-2, is not so different from other coronaviruses, that we have studied and we understand reasonably well. We know that our immune systems can beat this virus. We know that it's possible to develop vaccines against them. We've never bothered to develop vaccines against the four human coronaviruses that we've long had that caused the typical, common cold. Just because the common cold kind of wasn't worth developing a vaccine for and it's caused by lots of different viruses.

But we do have coronavirus vaccines for animals, for chickens and pigs and cows. So it's doable if you want to make one. We started off really working on, and we as an industry started off wanting, wanting to develop a vaccine for SARS and MERS, but because those got reined in very quickly by isolating infected patients, it turned out that there really wasn't a need for a vaccine. And those programs were aborted. To the extent that governments funded them, governments cut funding. Now that we have Covid and it's spreading, I think that there's going to be considerable follow through on what we started with SARS and MERS. And from what I can see of all of the efforts going on around the world, ad I've been in touch with the teams at many companies that are working on vaccines, this is a tractable problem. There's going to be a need to do some testing, ensure that the vaccines are safe and that they are effective, but I have no doubt that whatever ends up being released to the broader public, in tens and hundreds of millions of doses, will be safe and effective.

Brian Anderson:  Now you've mentioned, as have other observers, the need for probably an 18-month timeline optimistically for the vaccine to be available. Could you explain a little bit more why, given that we do have a lot of science already on this, it might take so long?

Peter Kolchinsky: I'm going to revise that a bit, and say that I am very confident that we ought to have vaccines coming online, becoming available, as early as the fourth quarter of this year.

So let's say November of this year, not in large amounts, not at large scale, but enough to potentially start vaccinating our frontline workers, particularly healthcare workers. And then I think we're going to see vaccines come online at a much larger scale in the first quarter of 2021. I don't say that with 100% certainty because there are still some risks we need to put behind us. And we're gonna be running those experiments as an industry over the coming few months. And if those results show that the first generation of vaccines that we're working on are as safe and effective as they probably can be, then I think I would stand by the timelines that I'm suggesting here. And I realize that that's ambitious and aggressive according to some people, if it turns out that the first generation of vaccines do have some problems that we detect in these animal experiments in early human studies, then I can see how we'll have to work on them some more and run larger, longer studies in humans to make sure that they're safe and effective.

And I can see how it might take a longer, maybe until 2022, so two years from now, before we get a vaccine. 18 months, to me, is not quite right. It's an average of those two. But I'd say it's more likely to be, let's say, one year before the masses see a vaccine, but there's a chance that it could be more like two. There are a number of vaccine candidates, right? I mean, just anecdotally, I've seen four or five mentioned moving into some form of animal trial or human trial. Yes, I can certainly speak to the, the different kinds of vaccines that, that we're working on. It starts to sound a little bit technical. There's MRNA based vaccines where you're injecting the instructions for how to make pieces of the virus basically in the skin and the cells take it up and they start making bits of the virus. A vaccine is pretty much a picture of what the bad guy looks like. It's a picture of SARS-CoV-2 that our immune cells, which you can think of them as like a police, they look at that picture and they say, all right, we will be on the lookout for anything that looks like this. You can send the instructions for printing out that picture to the cells, so that they print it out and then look at it themselves. You can also just inject the photographs themselves. So in this case, the proteins that are on the virus, you can inject those in and just spare the cells from having to produce it. But that comes with other things that you're giving up. You can make a weakened version of SARS-CoV-2, so what's called an attenuated virus. That's actually what our first smallpox vaccine was that BARDA approved. It was a sort of weakened version of a type of smallpox virus or pox-related virus called vaccinia. And that kind of virus is probably is the most natural way to train your immune system to recognize SARS-CoV-2. I'd say that's probably one of the harder types of vaccine technologies. So I don't think that that, that one would be coming online quite as quickly as the others. There's viral vectors that use the machinery of other viruses like adenovirus, which we get routinely, adenoviral infections. They also cause the common cold and you can reprogram the adenovirus to inject the instructions for printing out a picture of SARS-Cov-2, into your cells. And that's what J&J is working on. One of the things that I would probably focus on most and trying to figure out which vaccine, the masses should be rooting for, is the scale of production. So the MRNA vaccines right now, they're harder to manufacture. We haven't yet built up, built up the manufacturing scale to be able to crank out hundreds of millions of doses quickly that the US and then the broader world will need. The current scale manufacturing for those would be enough for healthcare workers and other frontline workers. It's a good start. But the adenoviral vector vaccines for example, or the nanoparticles that other companies are with those can be scaled much more quickly, to the point where you could generate a billion doses over the course of 2021 and hundreds of millions of doses by the beginning of 2021. So that's the kind of vaccine that would make a difference for the broader population.

Brian Anderson: That's very, very illuminating. Thank you. The recent piece you did for us is a follow-up to the Ending Covid argument where you address the question of the mutations of the virus and how that in this case is probably not so worrisome. Could you elaborate a little bit on that?

Peter Kolchinsky: Yeah. So there's been some concern that because the flu virus, which we all know we live with, it comes around every year. It mutates pretty quickly and we have to constantly keep racing to keep up with what does the flu virus look like this year. And in reality, there's multiple strains of flu that are circulating around the world each year. And, we get a look at what the virus looks like in Asia about six months before it lands on our shores here in the U S and so the companies that make flu vaccines will take some of those strains and create vaccines out of them, right? So you're taking a snapshot of what the bad guys look like on the other side of the world and you're training or police and what you're hoping is that the bad guys don't change their faces by the time they actually arrive. And the trouble is flu sometimes does. And so when our vaccines or photos turn out to be out of date, then our immune systems have been trained to look for the wrong thing. And that's when the flu runs a muck and we have a particularly bad flu season. People get more serious infections. Now, occasionally flu will mutate so radically, so quickly that it's completely unrecognizable to our immune system and that's when it can cause a pandemic. And that happens every once in a rare while. It's certainly what happened in 1918 with a Spanish flu. And it's what we worry about. When you hear people talk about avian flu or pandemic flus. Well, coronaviruses are nothing like that. They don't swap out, their faces quickly the way that flu can, they don't mutate as quickly as flute can. In fact, coronaviruses have proofreading machinery to make sure that every time they make a copy of their genomic code, that if there are mistakes there, the coronavirus tries to fix them. Now it doesn't get it right every time and so you do get an accumulation of genetic mutations, but at a much slower pace than you would with flu. And so, you may look at everything that's on the internet about coronaviruses about SARS-CoV-2, and see talk of all the strains that are out there. Sometimes a patient will have two strains in them. The virus will appear to have mutated right inside that person. And so you think, how can you say that? It doesn't mutate. It seems to be mutating like crazy. And here I would basically say that if flu mutates as quickly as a vine grows, right? You look at a vine and if you look at it in the morning and you look at it in the evening, you can see how it's grown. It's changed over the course of a few days. It can grow wildly. It looks very different by comparison. SARS-CoV-2, and coronaviruses in general, they're like cactuses. They barely change from day to day, from week to week. But when you look with a microscope at a cactus, you will find changes on a daily basis. If you look that hard. And that is what people have been doing with the SARS-CoV-2 viruses that they take out and they sample from various patients around the world. They look in incredible detail of the genetic code. And every time they see a little difference, even if that difference does not actually change the virus in any meaningful way, they call it a new strain and it kind of makes the word strain lose all meaning, right? And so it's really important that the public, to the extent that it worries about strains, focus on the accumulation of genetic changes that matter. And in particular to vaccines, the genetic changes that matter are the ones in that show up as changes to the viruses spike protein. That's the protein that the immune system goes after to try to sort of block it from binding to the proteins on ourselves that allow the virus to get in. So it's basically the viruses hand that reaches out to turn the door knob on ourselves to be able to enter ourselves. And in this case the doorknob is called ACE2. So if our immune system can recognize the viruses hand, the spike protein, it can glom it up and keep it from being able to turn those doorknobs on ourselves and get into the cells and the, SARS-CoV-2 hand that spike protein is not currently changing in any appreciable way. So as long as that remains the case, then whatever vaccines we create to combat SARS-CoV-2 are going to continue to be representative of what the vaccine of what the virus looks like year after year after year. And so our immune systems may forget, immunity can wane, and so you may have to give a booster shot, but it's going to be a booster shot most likely of the same vaccine year after year after year. And if a SARS-CoV-2 does end up eventually accumulating enough changes to change how it looks and invade our immune systems, we're going to have way more than six months notice on that and we'll be able to adapt our vaccines and add additional coverage for those strains into our vaccines. So flu has prepared us so well, I think, to track this kind of thing that we will be able to manage SARS-CoV-2 for the long run.

Brian Anderson: Let's turn Peter to your new book, The Great American Drug Deal. It's subtitle gets at the book scope. The subtitle is a new prescription for innovative and affordable medicines. A lot of policy thinkers in this area would say it's either one or the other that you can't have both innovation and affordability. Could you describe the main thrust of your book's argument and tell us what you mean by a biotech social contract?

Peter Kolchinsky: Yeah. Over the last several years, the drug development industry has received a lot of attention for very high price drugs and the public has perceived that it is because those drugs have a high price tag on a per patient basis that they are unaffordable to patients. And the outcry from patients, that they can't afford the medicines they need, people with diabetes saying, "I have to ration my insulin, I can't afford my insulin" has been interpreted by the public to mean that drug companies are overcharging for their medicines. And the industry response, unfortunately what I heard was while drug development's very expensive. And it struck me that there was a disconnect there that patients are saying, I can't afford my medicines. And drug companies are saying, well it's really expensive to develop new medicines, so I need to charge a lot. But missing from that was a very important statement. It's terrible that you can't afford your medicines. That's what your insurance is supposed to do. It's supposed to make healthcare affordable for you. And we must do everything possible to reform insurance so that it functions as proper insurance with low or ideally no out of pocket costs. If your doctor says you need insulin, then your insurance plan should make that insulin affordable to you. And if you don't have insurance, then it's impossible to imagine how anything in healthcare is affordable. So it's essential that we achieve universal insurance for everybody. It's not the same as a single payer system. It's not the same as Medicare for all. Maybe it's not that far off from Medicare, for those that don't have anything, Medicare itself needs to be reformed. It can have high out of pocket costs for some people. So even that needs to be reformed. But Medicare for those that have nothing is better than nothing. Now at that point, once all patients can afford the medicines that they need, we've solved the affordability of medicines. And the next question is yes, but are drug companies still overcharging society? Could it be that America at that point is being taken for a ride and there the answer that industry was giving before is not that far off. Uh, indeed it is expensive to develop new drugs. You have to charge a lot for them when you are successful in order to make it worthwhile to risk considerable amounts of time and money trying to develop those new drugs. But the industry also wasn't giving the absolute key answer to the question of is America getting value? And that answer was absolutely because drugs are the only aspect of all of healthcare that actually goes generic. So drugs go generic. The prices we pay for branded drugs are temporary. America used to pay a lot of money for statins. Now they're incredibly inexpensive and taken for granted and it's like you've paid the mortgage off on your home and now you get to live in it inexpensively for the rest of all time as opposed to paying rent. By comparison hospitals, senior doctor, all the services which make up the bulk of healthcare, spending like 90% of healthcare spending that's rent. And if we don't invent new drugs to keep people healthy or to keep them out of the hospital to prevent. For example, my book, I talk about how many hip replacement surgeries are done every year. If we don't create drugs that strengthen bones that prevent osteoarthritis we will continue to be paying billions, tens of billions of dollars every year for hip replacement surgeries and healthcare costs. Services costs are rising, that's rising faster than inflation. But if we do create a drug that strengthens bones or prevents osteoarthritis and we're able to cut hip replacement surgeries in half, then that drug is going to be expensive, no doubt about it for the first 10 to 15 years, like most drugs, all their patents lost. And then after that it'll go generic and uh, it will still leave the rate of hip replacement surgeries cut in half. It will start to generate savings for the rest of all time versus not having invented the drug, which is exactly what you'd expect. If you're living in a apartment that you have to rent and you say, "You know what? I'm going to invest in my own apartment, I'm going to buy one" and you pay the mortgage on that. It's higher than your rent, but it's temporary. And when you've paid it off, you now get to live, rent free. So investing in drugs that will go generic without undue delay is how we spare ourselves much greater healthcare services expenses over time. Now some drugs don't go generic. That's the key problem when you think about how great drugs are because they go generic, you realize some don't. And in some cases when they do go generic, they don't stay inexpensive. That was the big problem when turning pharmaceuticals price-jacked than old drug Daraprim by over 5000%. And Hillary Clinton tweeted about it and said Turing's terrible. And the public really had an annaphylactic reaction against that. And that's when a lot of this talk about drug pricing and lack of affordability took off. This was middle of 15. Well there are things we can do to make sure that all drugs go generic on time and stay in expensive forever. At the time that I was writing my articles and eventually the book, these things weren't being discussed and what I proposed was a reform that I call contractual genericization. You basically say, look when you launch a new drug, then tell us how long your patents are going to last. And let's agree that on the date when your patents will expire, if no other generics have already launched and competed down the price of your drug through the normal genericization process, then you will drop the price of your drug down to, let's say just two times the cost of production as if it had gone generic. And that way America's going to get good value no matter what.

And so I'm proposing what is essentially a price control, but after your initial patents have expired and if along the way you've improved your drug in some way maybe you tack on six months to your period of exclusivity and you delay your contractual genericization date by six months and that will allow you to harvest some more reward for your extra work. When you look at a bill like HR 3 that came out of the house it basically proposed price controls right at the outset. Any new drug that gets launched immediately, it's subject to price controls as well as on the other side of the ledger lowering out of pocket costs for patients with Medicare. So it kind of captured the two sides of the biotech social contract, but with the wrong kind of price control. What I'm proposing is simply yes, let's lower the out of pocket costs. That's essential. In fact, I'd like to see that extended to all insurance plans and not just Medicare, but in terms of price control shifted to when the patents initially expire. Those initials patents, once they expire, yes, let's impose a price control to make sure that society gets value from its finite series of mortgage payments. And the closest thing out there now to a bill that's proposing exactly what I'm calling for is the MC Sally bill in the Senate. It's not getting a lot of attention, but, uh, I'd encourage people to take a look at that.

Brian Anderson: What kind of reception are you getting, Peter, for your argument from the drug companie?

Peter Kolchinsky: So I am getting a lot of interest actually from small companies. Not surprisingly, they're the ones that are, are in favor of innovation and they are not in the business of harvesting rents from drugs that are long overdue and they're not playing patent games. But the larger companies that have been accused of playing these kinds of patent games and turning mortgage streams into extended rent streams, they've also reached out because at the end of the day, every one of these large companies even if it's enjoying the benefits of some of this patent gaming, they're also launching new drugs. And so they're kind of conflicted. It's nice to have those extended revenue streams from patent gaming, but they can also see that if they don't do right by society. If they don't convey that ultimately they are willing to let their drugs go generic it's going to be harder and harder for them to launch their new drugs and get a reward for that progress. And so these larger companies, I think they are of two minds. They want to ultimately align themselves with the biotech social contract. And they're trying to figure out how to do it so that society welcomes their continued innovations and they're trying to figure out just how are they going to absorb the loss of revenues from reforms. Like what I'm suggesting and if it's not the reforms I'm suggesting, it will be other reforms. The grass, the wine bill suggests capping price increases on drugs, which on the surface. Sounds great, but actually it can be a real problem for a new drug. When you don't quite know how large the market is that you're trying to address. You don't know how many patients there are. Are there 100,000 patients that will need the drug? Are there 20,000 patients that will need the drug? And when you price the drug, if you're not allowed to adjust the price later, once you find out exactly how many patients are going to be benefiting from the drug and taking it, then you're just gonna have to err on the side of caution and price that drug higher, right? And if you think that that's going to cause a backlash, they might say I'm so uncertain about this market size, maybe I shouldn't even bother developing the drug at all. And that would be a shame. So capping price increases as its own problems. And I've spoken to folks that are involved with that. Bill suggested maybe they delay triggering that cap for a few years so that a new drug can launch equilibrate the price to the real market size that's there. And then let's say four years after launch, you can impose a cap on price increases. That would be fine. I don't see that as discouraging innovation or you're going to get bills like HR three that call for just outright price controls that are so incredibly toxic that I think that they would shut down most of innovation pretty quickly. So the industry can see it's going to face some kind of reforms. And the ones that I'm proposing are the ones that are most pro-innovation because they ultimately focus the industry on harvesting mortgage payments and guaranteeing society that the high prices that pays for drugs are finite and that it will come to own all of these new drugs as kind of public domain resources, generics for the rest of all time, right? That should be our industry's give to guarantee that all our drugs will go generic without undue delay in exchange for winning affordability for patients, which is what this is all about.

Brian Anderson: Thank you. Peter. Don't forget to check out Peter Kolchinsky, his recent writings for city journal on the coronavirus crisis and his new book, which has been discussing the great American drug deal. His latest piece for the magazine is called "Ending Covid." You can find it on our website in the description as you can a link with the book. Peter can be found on Twitter at @PeterKolchinsky. His tweet threads have become a must read during this crisis. You can follow city journal on Twitter as well @CityJournal and on Instagram @cityjournal_mi and remember you can email us at if you have any questions or suggestions and always, if you like what you've heard on the podcast, give us a rating on iTunes. Thanks for listening and thanks Peter very much for joining us.

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