Zach Reitano - Building Ro and Why Healthcare Should Be 50% of GDP - [Invest Like the Best, EP.500]

Eli Lilly and Company

Across the shows: 12 speakers in other episodes, 12 bullish and 2 bearish calls, past 30 days

• Zach Reitano · RoBullish

  Eli Lilly's earnings show GLP-1 volume growth far outpacing falling prices; drugmakers earn more.

  As GLP-1s move to direct-to-consumer cash pay, prices fall, but Lilly's earnings show volume growth far outstrips the price cuts. He argues the companies making the drugs are earning more money as prices come down, and that the removal of PBMs and insurers keeps the gross profit with the manufacturers.

  “If you look at Lilly's earnings, prices come down, volume far outstrips it.”at 7:43

Merck & Co.

Across the shows: 3 speakers in other episodes, 2 bullish and 1 bearish calls, past 30 days

• Zach Reitano · RoBullish

  Merck's new oral PCSK9 could largely prevent heart disease if taken early enough.

  Zach describes a Dallas Heart Study finding that people with a naturally faulty PCSK9 gene had LDL in the 30s to 40s and an 85-90% lower risk of heart disease. Injectable PCSK9 drugs such as Repatha followed. He presents Merck's oral PCSK9 peptide, approved this year, as mimicking that faulty gene. He argues it could largely prevent heart disease, the leading US cause of death, if taken early, though he hedges with 'might'.

  “to invent an oral version that mimics that quote unquote faulty gene, but that if taken early enough might largely prevent and eliminate the leading cause of death in The US.”at 53:04

Healthcare system & insurers

• Zach Reitano · Ro

  US health spending share of GDP is not the problem; rising cost per unit and poor value are.

  Healthcare is the precondition for everything else, and under Jevons paradox market size grows as unit cost falls, so spending should rise as far as possible. He argues the 18% of GDP figure is a problem only if the money buys less. The real issue is that US cost per unit has risen. US health spending went from about 9% to 18% of GDP, UK from 6% to 12%, and Germany from 9% to 12%, so he sees the US as a preview of what other countries will face. The test should be what society gets for each dollar.

  “And so to me, at the limit, you should be spending every single dollar towards the health of your society. And so when we look at The US and say, oh, we spend 18% of our GDP, that's a problem. My question is, well, why?”at 2:19

• Zach Reitano · Ro

  US acute care is better than its reputation, though pricier; administrative burden is the real drag.

  He argues US acute care is better than people credit. The US has higher cancer survival rates than the NHS and higher average survival from heart attacks and strokes than other OECD countries. It also has fewer and shorter hospital stays and slightly more procedures and scans. Prices are higher and administrative burden is much higher. He says the stall in US life expectancy mostly reflects fast-clock deaths like guns, car crashes and overdoses, and slow-clock chronic disease, not the healthcare system.

  “The US health care system, I would say, is really fantastic, Better than people give it credit for at acute care. Yes, it's more expensive, but we have higher cancer survival rates than the NHS.”at 4:24

• Zach Reitano · Ro

  The patient isn't the customer; cash-pay markets deliver lower prices, better quality and convenience.

  He calls the central flaw that the patient is not the customer. Whoever controls payment at the point of purchase is the customer, and patients pay only a minority of their healthcare costs directly, with the rest coming through taxes and suppressed wages. Where patients pay cash, such as LASIK, cosmetic surgery and GLP-1s, costs fall while quality and convenience improve. He dismisses price transparency laws as a symptom, since businesses that hide prices lose customers. He argues a healthcare-only credit card giving patients control would force transparency through competition.

  “...It is that the patient is not the customer. That's the problem that we're trying to solve at Roe”at 6:07

• Zach Reitano · Ro

  PBMs are vestigial middlemen; software can do their work once cash-pay bypasses them.

  He compares PBMs to the human appendix: they once served a purpose, but that was so long ago nobody remembers it. When pharma sells direct to consumers, PBMs and insurers are removed for cash-pay purchases, and software can do what they historically did. He hopes more of these middlemen are removed, so drugmakers keep the same or higher gross profit while prices fall.

  “PBMs, to me, they are like the appendix of the healthcare system. At one point in time, they might have served some purpose but it was so long ago that people can't remember what the heck it was.”at 7:43

• Zach Reitano · Ro

  AI and biology data could make concierge-quality care as cheap as Netflix; a patient revolution is starting.

  Zach says the US healthcare system has systemic failures, so the patient revolution is only beginning. He lists three tailwinds: human biology coming online through symptoms, lab tests, genetics and wearables; services that used to require a specialist now requiring a prompt, citing people paying $100k a year for concierge doctors while paying about $20 a month for Claude; and treatments that radically change quality of life but are unevenly distributed. Together these can turn concierge care into a commodity anyone can access, and possibly a whole new form of healthcare for the price of Netflix.

  “And I think we can go even further than that. Not just concierge care online, but I think we can get a whole new form of health care for the price of Netflix.”at 46:19

• Zach Reitano · Ro

  Going direct cut Repatha from $600 to $200 a month; expects prices to fall further.

  Zach cites Repatha as an example of how direct-to-patient purchasing lowers drug prices. When it went direct, the monthly price fell from about $600 to $200, a 60-70% reduction. He hopes prices fall further, and points to a new oral PCSK9 drug as another example of what the model could bring.

  “I actually think you're going to see, like Repatha is a great example of where I hope you're going to see, one, prices come down. What happened when it went direct? It went from $600 a month to 200. It went down 60, 70%, and hopefully it gets lower.”at 51:23

GLP-1s & obesity drugs

• Zach Reitano · Ro

  Cash-pay GLP-1s bypass PBMs and insurers, cutting the price from about $1,300 to $149.

  Drugs sold direct to consumers close the list-to-net gap. He cites drugs listed at about $1,300 that people pay about $3,400 for behind the scenes. For cash-pay GLP-1 purchases, PBMs and insurance companies drop out, and the price goes from about $1,300 to $149. He notes that regulators and politicians have spent 20 to 25 years trying to get transparent drug prices, and that direct-to-consumer sales achieved it.

  “PBM goes away, insurance company largely goes away. People can debate that and whether or not it should and what they should cover, but for cash pay purposes, PBMs and insurance companies go away. Prices go from $1,300 to $149”at 8:19

• Zach Reitano · Ro

  GLP-1 cash-pay adoption will rewire healthcare, shifting coverage choices from employers to individuals.

  Industries get rewired when many buyers care about one thing for an extended period. COVID made telemedicine stick, and states relaxed cross-state licensing, but that reversed after COVID ended. He expects GLP-1 demand to push questions like why employers decide what health insurance covers. Employers care about many employees over shorter spans, while individuals care about their own lifetime, which creates suboptimal outcomes. Cash-pay GLP-1 buyers are voting with their feet, which brings transparent prices and more competition.

  “Then there's the healthcare system impact, which we talked about, which is I think they are fundamentally rewiring the healthcare system.”at 17:26

• Zach Reitano · Ro

  Majority of Americans will be on GLP-1-class drugs within ten years, like statins today.

  Bottom-up, about 75% of the US population is overweight or obese and therefore clinically eligible. Top-down, only about 10 to 12% is metabolically healthy. Tolerability is improving and mechanisms are better understood, and some people may take it prophylactically for inflammation. Statins are a useful comparison, with 40 to 50 million people on them, and GLP-1s have a broader label and are more effective. He calls affordability the massive open question.

  “I think the majority of people will be on it. I think statins are a good comp. You see 40, fifty million people on it.”at 23:05

Robotics & autonomous vehicles

• Zach Reitano · Ro

  Driverless cars are 10-20x safer than humans; delaying them over job fears costs lives.

  About 40,000 people a year die in US car accidents, nearly the same as annual breast cancer deaths. Driverless cars in some areas have proven 10 to 20 times safer than human drivers. He says the debate has shifted to job displacement rather than lives saved. Regulators who impede proven-safe driverless cars should be held accountable for the lives lost. New technology must prove it is substantially better than the status quo, but the status quo does not get a pass.

  “Driverless cars in pockets have proven to be 10, 20 times safer than a human driver.”at 24:29

AI & jobs

• Zach Reitano · Ro

  Job-displacement concerns should not outweigh life-saving tech; new tools must prove substantially better.

  He argues healthcare debates focus on inputs like keeping care human, when they should focus on patient outcomes. Using driverless cars as the example, he says the conversation is about job displacement while roughly 40,000 annual road deaths go unaddressed. He argues we cannot prioritize jobs over lives, and that new tools and humans must earn their place. The status quo gets no pass just because it exists, though new technology must show it is substantially better rather than marginally better.

  “And it's not that I wanna diminish job displacement, it's that we should not, is what we're talking about, we should not and we cannot prioritize jobs over lives.”at 24:48

Consumer AI products

• Zach Reitano · Ro

  AI lacks day-to-day consumer impact; GLP-1s reach far more paying individuals than AI does.

  He cites a chart showing GLP-1 revenue larger than AI revenue, and that twice as many individuals pay for GLP-1s as pay for AI. He sees the lack of everyday consumer impact as a problem for the AI narrative. He hopes the gap between AI's current consumer reach and the tens or hundreds of millions of people it could serve can be bridged.

  “I think that is a problem with the AI narrative right now that there's not enough of a consumer impact day to day.”at 26:56

Pharma & biotech

• Zach Reitano · Ro

  AI can speed drug discovery where data is structured, but medicine's unstructured data and slow feedback limit it.

  Zach argues AI is strongest where there is a lot of structured data, a verifiable reward and a tight feedback loop, which is why math and coding work well. Medicine is trial and error, much of its data is unstructured, and the feedback loop of death or heart disease is very long. He uses the PCSK9 story to argue that AI could help make drug discovery more like this, but faster, if data and feedback loops can be improved.

  “when there's a verifiable reward, and there's really tight feedback loop. That's where math and coding really thrive. Problem with medicine is it's trial and error. A lot of the data's unstructured.”at 51:54