[00:01:00] Dr. Gary Bisbee: Good morning, Dan, and welcome.

[00:01:02] Dan Liljenquist: Gary, good to be with you. My friend

[00:01:04] Dr. Gary Bisbee: We’re pleased to have you at this microphone. Dan, this show is about leadership and leadership excellence of which you’ve displayed plenty. What did the young Dan think about leadership?

[00:01:17] Dan Liljenquist: Gary. I think I mentioned this before. I was born into a very large family. My parents had nine children and then adopted six boys.

[00:01:26] Dr. Gary Bisbee: Wow.

[00:01:27] Dan Liljenquist: I was born right in the middle of seventh of 15 children. So I grew up with a very dynamic environment and I learned in that environment, a lot of very intelligent people. You gotta work with the group to get them to go anywhere and I, I loved my experience growing up. I love my family. We’re all really close, but I think you, I learned early on group dynamics and how to operate in a group and how to move people along. That served me well, I think in politics and other areas of my life.

[00:01:56] Dr. Gary Bisbee: When did you pick up your interest in healthcare?

[00:01:59] Dan Liljenquist: Well, My dad is a, is an endocrinologist. I was actually born in Nashville. He was a professor of medicine at Vanderbilt, but moved back to Idaho where my mother was from. And because there were, he had two nephews and a niece with type one diabetes and nobody would care for them. And so my dad wanted to start his practice. He wanted to be close to home so he could care for his for my, on my mom’s side, two, two nephews and a niece. And then built a practice in Idaho Falls. And my brother now is an endocrinologist, a brother-in-law’s, an internal medicine doctor up there, practice as have another brother’s orthopedic surgeon. So I’ve been around medicine a lot in my life. I, I almost thought about be becoming a doctor until I ended up with a B in anatomy at um, byu, and I realized, Oh, I. My mind doesn’t work quite like my brother’s minds do.

[00:02:48] Dr. Gary Bisbee: When did you become interested in politics from the standpoint that you were a Senator, Utah State Senator, and then ran for the US Senate from Utah? Pretty special stuff.

[00:03:00] Dan Liljenquist: I fell into . Politics serendipitously. I’d moved to Bountiful Utah and I thought, maybe I’ll explore running for, local office. Just kinda give back and it, I ended up meeting Senator Dan Eastman, who was unbeknownst to anybody ready to hang up and retire. And I remember calling him and said, Hey, do you have any advice? He invited me to his house right then and he said, I’m not gonna run. You should run. And I was 33 years old and he, I said, Look, I have no experience. He said, It doesn’t matter. You’re smart, you can do it. And I, so I threw my hat in the ring and got elected and you. It was happened so fast I barely realized I was a politician.

[00:03:38] Dr. Gary Bisbee: Well, After some years in business, as you said, founded your own company, you. Way to Intermountain Healthcare. What led to that decision, Dan?

[00:03:47] Dan Liljenquist: So, As you mentioned I ran for the US Senate in 2012 against Senator or Hatch and in the primary, and I did force him into a primary for the first time in, in 36 years. But he absolutely destroyed me in that Gary, like he beat me two to one. Like it wasn’t even close. And I had sold my interest in my business. I was 38. You don’t retire at 38. And so I didn’t know what I was going to do and I had a former bank colleague of mine uh, who was the CFO of our pediatric hospital, primary children. Reach out to me and say, you should really come and work at Intermountain. And I, and Gary honestly said What would I do? I have no idea what I would do, but I’d worked with Intermountain on the Medicaid reforms and really held the organization in high esteem and they made a job for me. I was director of special projects in our population health department. And then I’ve been here almost 10 years now and just fell in love with the complexity of it all. The stakes are so high. The, public policy melded together with new technology, with a complex payment environment, all of that captured me and I’ve loved it. And trying to figure out how to navigate through all of that and drive change has been, Worth investing the, the productive years of my whole life doing, and I’ve loved it. So it’s been really.

[00:05:04] Dr. Gary Bisbee: You’re d personally doing a heck of a job of it as is Intermountain. Well done Dan. You laid out that you gravitated toward complexity and finance when you were in the state senate at Utah. You’ve done the same here at Intermountain. What led to. Envisioning Civica rx, which is a heavy lift. Anyway, you, any way you look at that. What led to that, Dan?

[00:05:31] Dan Liljenquist: So Civica came out of so when I left the legislature and I lost my race I had a local news paper come to me and say, the largest new newspaper in Utah will you write a weekly column for the paper. And by the way, we’re not gonna pay you to do it. It’s gonna be volunteering. And so I said, you know, it was a really, the editor’s a really good friend. And I said, I’ll do it. I’ll. So I began writing a column in late 2012 and, weekly column wrote over 200 columns. But in January of 2016, when Martin Shkreli, the pharma bro, took prim, captured it, raised the price by 5000%. I’m an econ guy at heart. I’m a free market guy. I want the markets to work. And it bothered me that he was out there saying this is just capitalism. This is how capitalism works. There, there’s no morality to it. And that bothered me. And then six months later I was writing about EpiPen and it was a similar thing. And I realized, these are drugs that have been on the market for years. How does a company corner those and then rip off patients and hurt people? And again, the comment was, this is how our system works. And I said that shouldn’t be how it works. . And so I just started thinking in the summer of 2016 why are they allowed to do this? Meaning what are the market forces that are allowing this to happen? And Gary, Kimberly, down to three things. They can only do this when there’s in elastic demand for a product, meaning you don’t get the products, you die. You couldn’t do this with, with candy bars. They can do this with insulin, They can do this with EpiPen and with D. And then I thought there’s obviously economies of scale and manufacturing, and that’s a big part of this. But the third component was I realized that in some of these markets, only one manufacturer was required to meet the market demand. And so when you have those three factors, elastic demand, economies of scale, and you only need one manufacturer trying to bring competition, it’s really hard if you’ve got double the manufacturing capacity for the competition. The closest analog at Gary was actually a public utility. If you think about power, same thing. You’ve got elastic demand, huge economy scale. You only need one. And so in most of those environments, we regulate those environments. We represent consumers in those environments by regulating price to some extent. And I just run for the US Senate, I didn’t feel like Congress was gonna do anything. So I started thinking outside of a regulatory regime, what could we do? And I just thought the opposite of a monopoly is a monosomy, it’s a purchasing monopoly. So let’s just go organize the demand side of the equation and just build something new and that’s where the idea of seka came to create a nonprofit drug company that would act like a public utility. Nobody would own. And now, four years later we make 64 drugs, and that’ll be closer to 80 by the end of this year. We’ve treated 35 million patients. We’ve made almost a hundred million doses of medication. And, I’m the volunteer board chair and I’ll never make a penny off of it. And that’s exactly what I, what makes me happy. I’m, we’re just trying to bring low cost to.

[00:08:38] Dr. Gary Bisbee: Credit to you, and we appreciate your service because it is making a difference for sure. How did you envision the funding, the startup capital, if you will, Dan to kick off Civica?

[00:08:49] Dan Liljenquist: We looked at it and said obviously you gotta capitalize the business. And a lot of the return on investment. Gary a actually, we were looking to stabilize. Drugs for our own hospital systems. When you went and talked to a chief pharmacy officer and they’ve got 200 drugs on a whiteboard they’re trying to track down for their patients drugs we use every day, it was an enormous drag on them. And so we knew we would get a return on an investment just by stabilizing this for our business. Our core business would run better. We’d treat our patients better. And so wh when we brought the idea forward and said, Look, it’s gonna be a nonprofit, we’re gonna finance this with contributions. And mostly with debt, a debt instrument, a long term debt instrument that the health systems would put up. We brought in also three philanthropy partners as well. So we’ll repay the debt with a 5% interest rate, reasonable interest rate, but nobody owns it. There’s no profit taking nothing. Just once that debt’s paid off, nobody owns it. In fact, nobody owns it day one. And when we started framing that, And built the case that we would be able to stabilize our core business, bring prices down for our core business, we get returns both on the core business, and then we’ll get a fair return on the debt. It became a no brainer. I That’s why so many people joined to say, Yeah, we know this is gonna help our core business. But we also know that this that there’s a reasonable return in addition to the people who put up the upfront capital.

[00:10:16] Dr. Gary Bisbee: How’s it decided which drugs you’re going to develop?

[00:10:21] Dan Liljenquist: So Gary, the way that works, and this is maybe the most important part of Civica, how do you enter a market where you have a dominant incumbent player who has a monopoly? And what we divided was this idea of a minimum viable volume. So what we do is we go to our membership group. They identify the drugs they’re struggling to get, or they feel like either the supply or the cost is wrong or they’re worried about it. And we get together, we discuss, Okay, which drug do you want us to make? But then we get upfront purchase commitments from our members before we bring up our drug to market. And they are five year take or pay arrangements. Maybe they take the product for us or they pay for it anyway. Now the good thing is we can actually come out with a very competitive price. We’re not a profit taking entity. We are only trying to actually make enough margin to have the business be self sustaining. And that has led to our success. So we don’t want our, we don’t want our members. We’re not after market share with Civica. We’re after market impact. We don’t want our members to put all of their volume with us. We want them to put a sizable chunk with us so that we can enter, but that we can also set a fair market price.

[00:11:33] Dr. Gary Bisbee: So the two key factors, it sounds like are shortages and price. Those would be the two decision points on whether you pursued to develop a particular drug. Is that right?

[00:11:45] Dan Liljenquist: Yes, on the hospital side in particular on the outpatient side, and I know we’re gonna get there in just a second, it really is about price manipulation. It’s not the drugs aren’t short on the outpatient side, but there’s a lot shenanigans around pricing that we’re working through. It’s different set of issues, but a similar outcome. Patients don’t have access to drugs they need.

[00:12:04] Dr. Gary Bisbee: So you announced pursuing insulin earlier this year. When will that be? Is that a 23 or 24 release date?

[00:12:13] Dan Liljenquist: Yeah, So we announced in March of this year, the Ccal will be producing three molecules of insulin, generic versions or biosimilar versions of Humalog, Novalog, and Lantis. So human log and novalog are the fast acting insulins, that type one diabetics people with type one diabetes use. And then, Lantis or glargine is a basal insulin that is used for both type one and type two diabetes. And we’re bringing all three molecules to market between those three. They make up about 85% of the insulin prescriptions in the country and probably will end up being more because a lot of people are on older insulin. Because they can’t those three. So we we partnered with a company called Genesis that was four years into a eight year or seven year development cycle. And Genesis will be our partner and we hope to go into clinical trials next year. And hopefully we expect in 2024 to bring those insulins to market, beginning of 2024. And Gary, the more important thing is, look, these insulins, the price has gone up on average by 11% a year. The list price for 20 years.

[00:13:18] Dr. Gary Bisbee: Oh my

[00:13:19] Dan Liljenquist: And this is after their patented life. these drugs are clearly in the public domain. They should be, and we are gonna put them in the public domain. So Civica is committed. Our insulin vials will sell for no more retail, no more than $30 a vial. And a five pack of flex of three milliliter flex pens will be no more than 55, and that reflects an 85 to 90% price reduction on those drugs. And we are intent on democratizing insulin.

[00:13:47] Dr. Gary Bisbee: You know, You mentioned that Civica scripts that they cover roughly 140 million people. That’s roughly what, 40% of the people in the country which is just a terrific terrific group proportion.

[00:14:01] Dan Liljenquist: And we have honestly here we have more. Join us all the time and look, nobody likes the current situation. Nobody likes it. I think people feel trapped in it. Certainly patients are at the tail end of it. We believe that medicines that once they’re in the public domain and we want the innovators to keep innovating. But once drugs are pass or patented life and are, and those formulas are owned by society at that point, we’re intent to making sure they’re within they’re within reach of regular people who need them. If there is anything, a modern day equivalent of owing your soul to the company’s store, Gary, it’s, have a chronic disease and not have any ability to impact how much you pay. And we, those are the people that come to mind though. That was the impetus for Civica.

[00:14:48] Dr. Gary Bisbee: Yep. Once again, well done there, by the way. So Mark Cuban started his his cost plus drug company with great fanfare, by the way, but how does that relate to Civica Rx then?

[00:15:01] Dan Liljenquist: Listen, we’re thrilled with what Mark and Alex Oshmyansky are doing. Alex and I have been friends for some time now. He, in fact, when we announced Civica, he called me and said, came out and met with me. He said, Hey, I’m thinking about something similar. And the thing is, it’s a target rich environment. We’re thrilled. In fact, we will happily sell our civic insulin through their pharmacy. We just wanted to get to patients, I think their pricing structure and how they’re thinking about the world. Transparent and fair is exactly what the market needs, and I hope there are more pharmacies and you take up that banner, it should be the case. And so we’re wishing them well. And, but we will work with any pharmacy who will abide by our pricing philosophy. That is we expect a transparent price. We expect you to let people know what a fair price is and. That’s how Civical works. I’m just so thrilled that other people are working on this problem. It’s gonna take more than just Civica to fix it.

[00:15:54] Dr. Gary Bisbee: Right. Well, You led the way. You made the point when we were speaking last week. It’s not so much about market share, but market impact that counts. Dan, can you describe that for us or share that thought with us?

[00:16:09] Dan Liljenquist: Yeah. Going back to the beginning, Gary, Look for me it was the government probably has an interest in figuring out how to make sure monopolies don’t exist for generic drugs, but their ability, their willingness to regulate is one thing, but I’m not sure they would have the capacity to do it either unless you’re actually in the market, participating in the market. As an honest broker, it’s really hard to move anything. So the whole idea of Civica was how do we stabilize the market, stabilize the. If we can do that. So if you think about it, we’ve got about a third of the US hospitals, we’re asking those hospitals to give us half of their volume. So we’re really only moving 10 to 12% of the market. But if we can move 10 to 12% of the market and have the price come down and be come down by 90% and be fair, that’s where we’re after. We want the patients to have the benefit.

[00:17:08] Dr. Gary Bisbee: You spent a lot of time in the pharmacy industry, or at least pharmaceutical industry over the last five, six years, how would you redesign the pharmaceutical industry and the associated distribution? How would you redesign that if you could, Dan?

[00:17:26] Dan Liljenquist: Well, a full one quarter of people with diabetes type one diabetes are rationing insulin, so they’re delaying their care, they’re creating long term impacts. It’s stressful. I think that rebate scheme for drugs that are clearly pass their patented life is actually hurting patients. And so if I were gonna redesign it, I would just say, Hey, be open, transparent, need manufacturers that are open and transparent. You need retailers to say, We insist on transparency because if there were transparency, this wouldn’t be able to. And that’s what we’re working on, transparency. We’re not asking for any special regulations from Congress to support our business model, although frankly has been very popular with both sides of the aisle. But we believe transparency should be the hallmark of drug supply chains. Absolutely. And that’s where we’re focused.

[00:18:17] Dr. Gary Bisbee: So Dan from an idea on a treadmill six years ago to Civica Rx and Civica Scripts. Made an enormous impact. What’s next for you and what’s next for Civica?

[00:18:28] Dan Liljenquist: Well, We’re just getting started. We’re building 140,000 square foot manufacturing facility in Petersburg, Virginia. That’ll be online later this year. That’s where we’ll begin our. Batch runs for our fda, approval for insulin, but we’ll make a whole variety of drugs in that facility. We’re just plowing ahead. The company is doing well. We’re ahead of budget, we’re ahead of schedule. We’ve got really good leadership helping us guide Civica along and with some of the best leaders around in healthcare around the country, sitting on our board. Excellent. Buy-in. For example, Bill Rutherford, the CFO of HCA is our finance chair, the Dennis Stalin, the CFO of Mayo Clinic is our comp committee chair. We’ve got, excellent operators and clinicians involved with us and that’s fun. And then, it feels like the sky’s the limit from a impact perspective. And every drug that is necessary where there’s no close substitutes. We’re watching those markets to make sure they function, if they function well and their drugs available and fairly priced we’ll have no interest in intervening. But when it’s not you know that’ll be in our crosshairs.

[00:19:33] Dr. Gary Bisbee: Dan, this has been a terrific interview as expected. Once again, congratulations on all that you’ve accomplished in relatively short period of time at that. I have two final questions. More from a leadership standpoint, what advice would you give a young person who’s got a challenging venture idea and they’re looking at pushing that rock up the hill and say, Gosh, I don’t know if I can do this or not. What kind of advice would you give that person?

[00:20:03] Dan Liljenquist: I think maybe the most important thing, I had this idea, I had no idea how to do it. I knew nothing about drug manufacturing, like zero except for some. I learned everything I could learn and I found some experts and I just badged them with questions to teach me and I brought new insights that they hadn’t thought of before. That kind of just created this magic, and I would say we were always iterating on the hypothesis and the business model emerged after a lot of discussion and a lot of iteration. And there were moments where I was like, I don’t wanna give up a certain part of this model cuz I think it’s perfect. But I had other folks come and say, You’re not seeing this clearly and here’s how it actually works. But. Always iterate on the hypothesis, and we are continuing as a board to iterate on the hypothesis. So I’d say if there’s something that inspires you, go after it. Learn everything you can learn and then be comfortable to change your mind and iterate on what it means, how it will work. It was that resiliency that allow us to crap this idea into Civica and I don’t think any idea, big ideas happen any other way, to be honest. You gotta have passion for it. You gotta learn everything you can learn, be a learn at all person, not a know at all person. And then iterate with people that are smart.

[00:21:31] Dr. Gary Bisbee: Great advice. Final question is a more general question for up and coming healthcare leaders. What advice would you have for them?

[00:21:43] Dan Liljenquist: I would ask the people who are involved, just lean in. It’s worth investing your life to do. Yeah, there are opportunity costs. You could leave, you could do other things, Probably make more money. But I’ll tell you, I find deep meaning, and I’ve done well. I’ve made money. I find more meaning what I’m doing today. Than anything I’ve ever done. And and that when you find that sweet spot in your career, in your life, it’s a great place to be. And I would just keep looking for that. But I hope that people will continue their productive, creative energies to help us solve these issues, cuz as goes healthcare, so goes to the country.

[00:22:20] Dr. Gary Bisbee: Thanks, Dan. Thank you for your time today. Terrific interview.

[00:22:24] Dan Liljenquist: Thanks Gary.