JNJ CEO Alex Gorsky On Talc Lawsuits, Drug Pricing And Healthcare

    CNBC’s Meg Tirrell interviews Johnson & Johnson (NYSE:JNJ) Chairman and CEO Alex Gorsky From CNBC’s Healthy Returns Conference today

    WHEN: Today, Tuesday, May 21, 2019

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    Following is the unofficial transcript of a CNBC interview with Johnson & Johnson Chairman and CEO Alex Gorsky live from CNBC’s Healthy Returns conference in New York City on Tuesday, May 21st.

    Mandatory credit: CNBC’s Healthy Returns conference.

    Realtime Transcription by 

    TYLER MATHISEN: Well, if there is a more American, quintessentially American, company than Johnson & Johnson, I do not know what it is. If there is a company that at its scale is more innovative today than Johnson & Johnson, I don't know what it is. And if there is one that is more globally vital than Johnson & Johnson, I really don't know what it is. And, in fact, I can't think of another company in the world, with the possible, possible exception of Coca-Cola, that touches a billion people a day with its products and services as Johnson & Johnson does. Its heritage goes back to the 1880s, in New Brunswick, New Jersey, and that is where it is today. Please welcome to the stage the Chairman and CEO of Johnson & Johnson, Alex Gorsky. And welcome back to the stage, Meg Tirrell.

    MEG TIRRELL: Hello, everybody. I'm so happy to be here with Alex Gorsky to wrap up what has been just a fascinating day. A billion people a day -- I mean, is that primarily your consumer products, the brands that everybody knows, Listerine, Tylenol, Band-Aid, or is it the pharmaceuticals? How do you touch so many people?

    ALEX GORSKY: Meg, it's interesting, it's really all the above. You're right, most people automatically would tend to think it would be our consumer brands that we're, you know, most noted by consumers for around the world. But if you look at Johnson & Johnson's business line, that actually makes up the smallest segment, by far. And so I think anymore it's a combination, but certainly the brands that we have in our consumer space, I think people can certainly connect with around the world. There's really nothing better than if you can be in China, you can be in Mumbai, I can be in, you know, Munich, and to go into a store and see those brands on the shelf. It's a really rewarding feeling to know that you're connecting with consumers like that around the world.

    MEG TIRRELL: Let's talk about your path to J&J CEO. It's a real interesting one. You became CEO in 2012, worked at J&J your whole career, started out at West Point, were in the military for six years, and then went straight into sales at Johnson & Johnson. Tell us about that, the dream. As a little kid were you thinking, I'm going to grow up to be CEO of Johnson & Johnson? What was the dream?

    ALEX GORSKY: Well, look, I came from a very middle-class family, grew up in the Midwest. My father had been a Korean War veteran, but then stayed in the Army Reserve but got out and went to work for Gerber Baby Food. And my mother was a teacher. I was one of six children, and I grew up in Kansas first and later Michigan. And so, I would get to participate in these discussions. It wasn't uncommon around our dinner table at night for my father to be talking about, well, should Gerber be going -- should we go to adolescents or stick to our baby -- many an evening talking about segmentation. That's not something that most people would do over dinner. But at the same time, about every third weekend, he would put on his uniform and go off to do his reserve duty on the weekend. And I think it set a great example. Look, being one of six children in the family, as I looked around -- I think the first time I happened to open up a yearbook at a friend's house when I was in about sixth grade, and I immediately knew that West Point was where I was going to go to school; and, you know, went from there. It was a great experience. I got a chance to serve six years in the Army. After that I was in Europe for part of that, then back in the United States, but got a chance to train in Central America and other places around the world. And it was a great experience. I mean, you learn a lot about leadership, obviously. I learned a lot about diversity. You know, the military is one of the few places I think where a 23-, 24-year-old can go and be surrounded by people not of their own choosing 24/7. I had so many experiences where you would walk in, and you suddenly had to take people from all kinds of different backgrounds, educations, experiences, and quickly mold them into a team. You know, I learned the difference between uneducated and unintelligent. I had a lot of noncommissioned officers that worked for me that called me "sir," even though I was only 23 years old, maybe they were 33, 43, who just didn't have access to the education that I did. But don't think for a second that they were not wicked smart; that they had incredible experiences. And, really, also just the idea that, hey, you're there not to just admire a problem, but you're ultimately there to rally a team around it to find a solution and get people to work together towards a common goal, and, you know, those are things that influence me every day in my job today, as well.

    MEG TIRRELL: J&J is such a storied brand, and one of the stories people love to tell about the company is about Tylenol. It's actually a business case study that we hear about when in -- what is it, 1982?

    ALEX GORSKY: Yes, I think that's the year, yeah.

    MEG TIRRELL: -- somebody was putting cyanide into Tylenol capsules, and the company responded -- and people died. I'm sure you all know this -- by pulling all of the products off the shelf, with a cost of millions of dollars. They still don't know who was doing that, right, they don't know who the person was. That cemented Johnson & Johnson as this icon of corporate responsibility. You're facing all these talc lawsuits now. It's the same company, but it's a different time, and you've said it's a very litigious industry. How do you, as that company, face this problem?

    ALEX GORSKY: Well, look, I think I'm incredibly fortunate to follow in the footsteps of somebody like Jim Burke. If you think about it, in those days, Tylenol was the largest brand within Johnson & Johnson. It happened, and, you know, you can read the case studies, as I did in college. You can watch the videos. This was at a time when he stepped out personally, but before that was expected of CEOs, and I think, you know, took a very courageous step. He engaged with the public, he talked a lot about the story. But I think throughout that, he was driven with the company, did their best to be driven by the science, and ultimately trying to do what they felt was best for all the stakeholders; in essence, following the credo that had been set by one of his predecessors.  What I would say is today we try to follow that exact same principle in the decision-making that we bring about every day.

    MEG TIRRELL: How concerned are you about these talc lawsuits? We've seen quite a number of verdicts; some in your favor, some against, and, you know, some quite large, billions of dollars. Is this a huge risk to the company?

    ALEX GORSKY: Well, of course, we're concerned. It starts on a very human side. Whenever somebody has a diagnosis or has an issue that they're trying to understand, I think all of us have to remember the human side of all of these, and at the same time we have to understand that we are in a very litigious industry. We do our very best to always put quality and safety first in everything that we do. And, ultimately, we have to do that in a way where we can continue to innovate, we continue to make a difference for patients. We're continuing to, you know, try and touch the next billion people in the right way.

    MEG TIRRELL: So you're running a drug company, as well as a consumer company and a devices company, but a drug company at a time when anger against the industry is probably at its highest that we've seen. The President has said the drug industry is getting away with murder. Obviously there is a reputation problem going on in pharma. How do you fix that; and is this something that the industry is actively working on?

    ALEX GORSKY: Well, I think that's half of the story, maybe more, maybe less. The way I would describe it, it's a bit Dickens-like in that you're right, we are facing those issues. And some of those, frankly, the industry has been -- it's self-inflicted, in that we need to do a better job in talking about what we do, talking about the impact that we have on lives. We need to be responsible about the pricing of our products, about advertising, all of our activities. The flip side of that is what I can tell you is that having been in the industry for over 30 years, I don't ever remember a more exciting time when it comes to the science and the technology and the breakthroughs that you're seeing every day. I can remember a time 15 years ago where the challenge was what breakthrough could you have or what new direction in science would not just be redundant or duplicative of, perhaps, some existing therapy on the market. And today it's a much different conversation. I mean, the fact that we are sitting around conference rooms frequently now talking about, you know, the opportunity to transform something like multiple myeloma, which could have been a death sentence five or ten years ago, into potentially coming up with a cure.

    MEG TIRRELL: Uh-huh.

    ALEX GORSKY: And to see that done in that kind of a time frame is really encouraging. And, you know, look, I -- one thing I didn't know, Meg, is when we first talked about doing this segment that I would be last or I'd be between you and the cocktail hour, or --

    MEG TIRRELL: I asked if they could bring the cocktails in. I was told no.

    ALEX GORSKY: Or that I would be following Jeff, which I thought told an incredibly compelling story from a patient's point of view. Those are the kind of things that remind us, you know, why this research, why the development, why it's so important, and why we still have much work to do.  Again, we've made a lot of wonderful advancements, but in areas certainly like Alzheimer's, there's certainly more to be done.

    MEG TIRRELL: Speaking about AI, so many of your peers have gotten out of neuroscience. It's still a tremendously difficult area, as we heard. What can you tell us about J&J's investment in that space and --

    ALEX GORSKY: You're right. Probably if you did the case study on it and looked at, you know, just the financial, typical quadrant rating that you might do in terms of, you know, portfolio management, that may not pop up. But we try to look at things much broader than that to say, Look, what is the unmet medical need? And if we look at the field of mental health, while it's one of the most nascent, it's clearly one of the most important and critical that we need to better understand as a society in an area where we can make a difference. You know, I think it was Kennedy that said, "Just because it's hard, doesn't mean it's not worth doing." And you're right, we've been in the mental health field for some time. You're absolutely right, the science is tricky. Because unlike some other areas where -- and I'll simplify this grossly for the nonscientists -- you know, rather than having a single receptor where we simply insert a key into a lock and we turn it on or turn it off and it goes away or turns it off or turns it on, we're likely looking at a Rubik's Cube, in many of these cases, where you've got multiple systems or components or underlying mechanisms that are all intertwined in ways that we don't fully understand. I think Alzheimer's is probably a good example of that. But when you just look at the incidence, when you look -- and beyond the cost of health care and mental health care -- and, unfortunately, as we all know, it's not just the therapeutics, but it's the entire system that we need to improve to care for these patients. When you look beyond that, when you look at the impact it has on families and how it can break them apart, when you look at the impact it has on workers and productivity, when you look at what it has on engagement, it's so important for us to be there. And that's why we couldn't be more excited with the recent approval that we had with esketamine, Spravato. It has tremendous potential, you know, in difficult-to-treat depression. We're studying it in a range of areas, including suicidality. And again, these are patients who have likely failed two or three other anti-depressants.

    MEG TIRRELL: Or the anti-depressants failed them.

    ALEX GORSKY: Exactly, yeah, that's right. And now they're in a space where -- and again, if you look at the incidence in the United States and you think there's like 35- to 40,000 suicides, the overwhelming majority of those patients is because, you know, they don't have that hope. And to introduce a new medication that, you know, we're saying is going to work in a much more timely manner, significant reduction of symptoms, even those already on another medication, that that does give us hope that, you know, we're going to even learn more about the next hopeful breakthrough.

    MEG TIRRELL: Tell us a little bit about the development path of esketamine. If someone came to you and said, "Hey, there's this drug," and then you take it, as was described last week, some people had out-of-body experiences, and then it actually does work incredibly well in some cases. But, as the CEO of Johnson & Johnson, you're told about this kind of drug, and you think that's going to be a new pharmaceutical product?

    ALEX GORSKY: Well, you know, you're absolutely right. I think it's a wonderful story that demonstrates while all of us should be excited and intrigued about the science and the technology, we should never forget about the human component of a dedicated, committed, passionate scientist or group of scientists who will not take no for an answer. And I think in this case --

    MEG TIRRELL: Is there an initial --

    ALEX GORSKY: -- a doctor by the name Husseini Manji -- well, there was a lot of debate and discussion, because we knew this was a difficult area. The bar to get over in showing efficacy, you had to show efficacy on top of another anti-depressant. If you look at the history of Phase III trials with anti-depressants, it's loaded with many failed trials. And they're not trials where drugs didn't work, but we just know failed trials because the endpoints, you know, can be a bit more challenging. And so this was a very high bar to get over. And also, you know, we were dealing with some ketamine that had been out there for a while. There was a lot of debate and discussion around would this, in fact, work? Could it be done in the right setting? What about the side effects? Could it be controlled? So to overcome and make the case against, you know, many other opportunities that you have and then, you know, bring that all the way to fruition and to approval and -- you know, we were very excited, we got breakthrough designation with the FDA, and we had another breakthrough designation on the suicidality study that is ongoing as we speak. But it's the first new medication in over 30 years in this space, and so we're really proud of it. But, look, it's still early days. We have a lot more work to do. But you probably saw some of that passion and thinking by Dr. Manji in the presentation that was done last week.

    MEG TIRRELL: Tell us a little bit about the suicidality indication and how that works, how it's administrated and when it's administrated.

    ALEX GORSKY: Well, it is administrated. It's started by a psychiatrist or health care professional. It needs to be administered by a health care professional. The first couple of doses can take place several in a week, and then it usually tapers to perhaps several times a month, depending on the patient response. They do -- it's being done within a risk management program, to make sure that if there are side effects, you know, based upon some of the symptoms that can be experienced, that it's done in a very controlled setting. And so we think that that increases the probability of success significantly. And, again, our goal is to make sure that we reduce the risk of any inappropriate use, or certainly very closely watching those patients.

    MEG TIRRELL: I would like to talk to you about policy and drug pricing, of course. What is your relationship like with the administration, with the Trump administration?

    ALEX GORSKY: I would say overall we share the goals of the administration, of how do we improve the quality of care, how do we reduce costs, and how do we do it in a way where patients feel better. That's the challenge overall with health care right now. And, look, whether we -- whether it's working with the Obama administration with the Affordable Care Act -- and, by the way, we were a proponent of the Affordable Care Act. We said that one way or another health care reform had to take place in this country, let alone around the world, given all the pressures. I would say anybody who's in this industry will likely be participating in and working with some type of health care reform over the next several decades. For all the reasons you heard in the previous panel, when you think about demographics, the increase in demand, the challenge that's going to put on cost, and, you know, the challenge is how do we get there in the right way that balances all three of those vectors.

    MEG TIRRELL: When you have a president who says things like your industry is getting away with murder, is it an adversarial relationship? You say you share the same goals, but what is that, actually, kind of like day to day?

    ALEX GORSKY: Well, look, I think it's like anybody else. We try to stay focused on the facts and the issues, you know, versus some of the -- look, we're in a very political world these days, and more than anything else, one of the things we try to do is make sure that we're educating people, as well, about health care and about some of these issues. Because we hear a lot of broad-sweeping statements that, frankly, aren't supported by some of the underlying facts. And I think that the more people get educated about where -- what are the major cost drivers, where do we have the greatest opportunity to improve outcomes and to reduce costs at the same time, those are the conversations that we try to have.

    MEG TIRRELL: And we've all seen some real change in terms of drug prices. The industry is sort of more self-policing than anything else, most recently. Do you think that's been enough to kind of quell the political pressure on you in that way, or do you expect that there will be some real legislation that changes things?

    ALEX GORSKY: Well, look, I think there will be ongoing change and reform, and I think that's necessary. Particularly -- you know, we're moving into a new phase, I believe, in health care where the fundamental role of pharmaceuticals is changing. Many of the constructs that have been put into place about reimbursement were done 35 years ago when perhaps the most significant medication you had was a hypertensive agent or an antibiotic. Now we're developing cell-based therapies that you and I were talking about beforehand, you know, CAR T for multiple myeloma, where we are actually going to have to extract cells, send them out to another area where we're going to adapt them and then re-administer them to the patient that you're actually going to be bringing about a cure. And so I think evolving a reimbursement system in ways where, rather than on an activity level, we have reimbursement, we move much more towards an outcome. For example, in this case, did that therapy actually work, and can we develop better companion diagnostics to work with them, such that we can dramatically improve, you know, the overall outcome versus, you know, the patients where it does work and doesn't work. And I think changing our reimbursement system along with the changing science that we're seeing now is critically important. But it's complicated. It involves a lot of areas in the system. You have entrenched interests all the way around. You have systems, processes, careers that have been built around the current system, and also doing it in a way that you don't interrupt care or you don't have unintended consequences, where you actually reward people for not treating patients, that's where it gets really challenging.

    MEG TIRRELL: Well, I'm almost out of time. I'm going to steal a question from our friend, Jim Cramer, who asked Dr. Vas, from the Novartis this morning: If you were the FDA Commissioner, what would you do?

    ALEX GORSKY: If I was FDA Commissioner, what would I do, regarding what?

    MEG TIRRELL: Anything. What would be your priority, your top priority?

    ALEX GORSKY: My top priority would be how do we move much more towards a value-based and outcomes-based and episode of care-based approach for, you know, reimbursement. And, by the way, the FDA had to work close to [indiscernible].  I think making sure that we get the balance right. Again, we're living in a time where there's a remarkable opportunity with new innovation, but we're going to have to adapt our entire system. It won't be enough to just approve the drugs themselves; we're going to have to think about the implications it has on entire health care systems, versus just one particular area. But I think it's a very exciting time.

    MEG TIRRELL: One last question for you. Is government ever in your future? Would you consider running for office?

    ALEX GORSKY: Look, I love my current role.

    MEG TIRRELL: Everybody says that.

    ALEX GORSKY: Some days are harder than others, but -- some days are harder than others. You know, I do think it's important that in this discussion that we have, that the more that we can do public-private partnerships, the more that we can be working together in an appropriate way, you know, recognizing that we have to have the right balance and kind of offsets the better.

    MEG TIRRELL: Right. Thank you so much.

    ALEX GORSKY: Thank you very much. Thank you, everybody.