This week I chat with Zack Gray, Co-Founder and CEO of Ophelia. Ophelia is helping to combat the opioid crisis by revamping the drug rehab model. As they put it, their mission is to “replace folklore with science, drug dealers with doctors, and stigma with privacy, convenience, and choice.”
Covered by either health insurance or a monthly subscription of $195, Ophelia helps people struggling with addiction by plugging them into their platform that connects them with clinicians that use modern, science based treatments.
We chat all about the company and the general opioid epidemic, including its history and the failed government response. Zack breaks it all down for us. He also shares why he started the company in the first place, which has a touching personal story about the loss of a loved one to opioids. Ophelia and Zack are on a mission and Interplay is proud to be an investor.
As usual, the conversation goes beyond just the formal topics. Zach studied astrophysics and philosophy at Columbia and it’s safe to say he’s a deep thinker. We talk about whether for-profit companies are good or evil, a new concept for taxation based on social utility and much more. Enjoy.
Transcript (this is an automated transcript):
MPD: Zack. Thanks for being here, dude,
Zack Gray: mark. Thanks for having me.
MPD: I'm super interested in this topic. I think it's going to be a great story for everybody, but let's start at the beginning. Can you give us an overview of a
Zack Gray: failure? Sure. So Ophelia is a digital health company with the mission of making evidence-based addiction treatment, universally accessible.
Today we offer medication assisted treatment for opioid use disorder, which is the number one cause of death for Americans under. With a focus on increasing access for the 80% or so Americans struggling with opioid addiction who are unable to get access to care through, for a variety of reasons.
So we we launched the company in early 20, 20 have grown quite a bit since, and are now in process of expanding across the country.
MPD: Okay. So you've used some jargon that I bet you, most people are not familiar with. Evidence-based addiction treatment. Yeah. What does that mean?
Zack Gray: Well, it means treating opioid addiction.
The formal term is opioid use disorder as a medical condition and applying medical decision-making based on evidence in order to treat it. So that might sound trivial, but in reality, most treatment programs don't follow medical or scientific evidence. So it turns out. We have a treatment that works very well for opioid use disorder.
It looks a lot like the treatment you'd get for depression or anxiety. So it's chronic medication for withdrawal and cravings plus support and therapy does not require you to take two months out of your life and go stay in Arizona by the beach. Most people can't do that anyway because they have jobs and families and privacy concerns.
There are about 15,000 treatment programs in this country too, at a three do not use medication at all. And without medication, 90% of people will have relapse within the first three months, which means they're at a heightened risk of overdose and death because they've now destroyed their tolerance after a period of abstinence.
So by evidence-based, treatment that is rooted in medicine and centered around medication, which is far and away, the most important part for me.
MPD: When I hear the word treatment, my brain defaults to assuming it's based on evidence and science the scientific process. So the fact that you're having to point it out as one, a little bit disturbing what's going on what are most people are most of the treatment facilities for opioid use doing and why are they not adopting medicine?
If that's so much more effective? Yeah.
Zack Gray: I can give a, an anthropological explanation and historical explanation, perhaps not much of the rehab industry, as we know it today, grew up in an era when we did not understand addiction and specifically opiod addiction. Many, you there are probably 10 X, the number of people in this country struggling with alcohol addiction and there are opioid addiction.
Many of the people. Open treatment centers are in recovery for alcohol addiction and they apply abstinence-based treatments which work much better for alcohol than they do for opioids. In, you know, the early two thousands. We got much smarter about how to treat this condition. New medication buprenorphine became more broadly accessible and could be more easily prescribed.
And. The industry itself just hasn't caught up for a number of reasons. So you've got about two out of three programs, not prescribing any form of medication, the ones that do tend not to prescribe it chronically they'll offer you a short-term detox for 30 days, and then discharge you into the world without a treatment plan or their outpatient programs that bundled treatment with all sorts of excess stuff that really isn't necessary, but is essential to keeping their businesses.
MPD: But why would, if someone's in industry for treatment, if the, tell me what, tell us what the evidence is, why is this? It sounds like this is overwhelmingly conclusive, that this is the best way to go. And if it is which I'm sure you'll make the case clearly. Why is everyone not just reading the evidence and thinking, boy
Zack Gray: let's do that?
Sure. Many reasons I would say. Public enemy number one is the government. So there are a bunch of regulations in place that make prescribing buprenorphine very difficult in order to prescribe buprenorphine. It's not enough to have a prescriptive authority from the DEA. Any clinician in this country can prescribe Oxycontin or Vicodin or Xanax or Adderall in order to prescribe buprenorphine, you need a separate license called an X waiver.
Only 5% of clinicians in this country have their. And once you have your x-ray or your capita, the number of patients you can treat, which in the first year for the most part is 30 and about 75% of the 5% are capped at 30 patients. So if there aren't many clinicians to begin with who can prescribe this medication, and most of them aren't hireable for a full-time job in an addiction treatment program because of a very low patient cap.
Then you don't have very many prescribers out there and. The programs that do offer it are bound up in other forms of regulation historically required. In-person visits low reimbursement, and the business side of this problem has not really taken off due to those constraints. Meanwhile, you have tons of misinformation in the market as a result.
There aren't many businesses out there, marketing medication assisted treatment, cause it's hard vide and a lot of stigma in the recovery community itself against taking medication to treat addiction. If you look at it, Our online ads, our Facebook ads, you've got pages and pages of debate going on between our patients who are doing very well and people who are accusing them of substituting one addiction for another, because they're continuing to take medication.
So I would say no, a lack of public understanding about how to treat the disorder. A lot of stigma around people who use drugs and people who use medication. And it's all driven by the fact that there isn't, there just isn't a lot of. There aren't a lot of people out there doing it because it's so hard to do.
And that, public information campaigns also known as marketing to some people just haven't been invested in. Okay.
MPD: So let's unpack this a little bit. How much more effective is medically assisted treatment versus the alternative options?
Zack Gray: It's been studied many times. There's a broadly cited study done by United health.
And Optum labs, which demonstrated across their own population. And they were looking at actually the results showed a 75% reduction in overdose deaths and a $10,000 cost savings within the first three months. Now, the evidence is fairly clear that the longer you stay on medication, the less likely you are to relapse, overdose, and die.
How long you should be on the medication is one of the hottest topics. In this area and the answer is it varies for different people, just like depression. Medication depends on, varies among patients. Some people will stay on depression, medication, their whole life. Some people will take it during a rough period and then taper off of it and be fine.
Some people will taper off and relapse and start taking the medication again. But without the medication, you have a very small chance of making. Very long. And as I said earlier, roughly 90% of people aren't going to make it through the first three months.
MPD: So 90% going through a normal treatment program, failure rate, 90% failure rate.
Whereas if they go on this, it's a 75% success rate.
Zack Gray: As measured in overdose reductions. Yes, absolutely. Okay. It's important to note what the medication actually is and is used for Buprenorphine binds your opioid receptors and gives you enough relief to SU withdrawal and cravings, but not enough effect to get you high.
If you're an opioid tolerant individual anyone out, most people out there who are addicted to any form of opioid, whether it's painkiller, heroin and fentanyl, it's all roughly the same and wants to see. Wants this medication because of the withdrawal period is nearly intolerable without it. And as a result of that, there's a big black market for this medication because it's so hard to get through proper channels.
And the default solution for many people is call up the same person that sells you pills or heroin by this medication. Also branded Suboxone, take it for a couple of weeks to get through the acute withdrawal period. And then as soon your. It turns out that without continued medication, 90% of those people will be using again within three months.
And that means if you're going to a program that doesn't offer medication you're in that camp for going to a program that offers medication, but only for a short period of time, you're in that camp. And if you're you want to be in long-term care you're probably going to an outpatient program that requires you to do all sorts of stuff that is very difficult for you, like driving.
Multiple times a week, 40% of counties don't have a single prescriber. So you might be driving far. Do you have a job? These programs are only open during work hours, so it's very tough. And therefore, while you might opt into chronic treatment, initially once the demand becomes less acute, it's much more likely and you start to feel better.
It's much more likely that you're going to drop out. And if you drop out prematurely, your odds of relapse are much higher. So the goal is providing. The treatment that matters, which is medication support and therapy in a way that fits into people's lives is easy to opt into, easy to stick with and more affordable and safer than your drug dealer, because that is the relevant alternative for most people.
Y okay. So
MPD: hold on. Yes, people get addicted to drugs and then they go back to their drug dealer for the medicine to get unaddicted. Yes, the drug dealers have the market corner. It's a full life cycle. That's a crazy paradigm. And this is because the government is limiting the amount of this medicine that can be delivered.
What's their argument. If you were to get a legislator on this con, what's the counterpoint on why they're limiting access to this drug?
Zack Gray: So I would say that the people who are in office now have no good reason to back it up. It's just the fact of political. And in fact, I asked somebody who worked in the office of national drug control policy, why you need a special license to prescribe Suboxone, but not Oxycontin.
And his answer was something like, wow, that's a great point. I never thought of that. So it's clearly just not a top priority for most people in Washington. Again, I can give you what I perceive to be my best historical explanation, which is that for a long time, the only medication used to treat opioid use disorder was methadone.
Methadone is addictive. I, we shouldn't use that word, but it is a more potent, it's a full agonist to scientific term. I can go into if you're interested and you can overdose on it. And as a result of that, it's highly controlled. It needs to be dispensed in person. And if you're taking methadone, you're going into a clinic every single day to get your dose.
Suboxone came on the market billed as a less dangerous version of methadone. It's a partial agonist, not a full lag. And something that you could prescribe with one in person visit and allow patients to take daily, just like they would any other medication, but because it was derivative of methadone, it carried some of the same regulations with it.
And I believe the thinking was at the time when. It's not in medication. Isn't enough. If you're going to treat people for a complex addiction, you need to couple it with behavioral therapy and support services, et cetera. And therefore, if we're going to allow people to prescribe this medication for addiction, we want them to go through a special training, which could be 24 hours in order to get a license and prove to us that they know how to do it.
Many years have gone by the research is clear that the medication alone is responsible for most of the effect for most people. But the regulations haven't caught up with the. And when you consider the gridlock in Washington, there are other hot topics that tend to take center stage like the economy and healthcare broadly, but not this particular topic, even though the news likes to talk about it.
MPD: Yeah. It's in the news. I think even for people who haven't been directly affected by the opioid addiction or epidemic, as the branding, everyone uses, I don't know anyone who's gone through this, to my knowledge. I know of it, but I don't think I have a full understanding of the relative significance of this issue relative, against all of the other things that the politicians are supposedly working on.
So when you hear inertia, how does this issue stack up against what else is being dealt with? How significant is the opioid epidemic?
Zack Gray: It's the number one cause of death for Americans under. So in the last year on record, a hundred thousand Americans died of drug overdoses. 75% of cases were from opioids and that's the highest total ever on record.
Now, when that's more that answer and everything else. I'm for Americans under 50. Yes. If you compare the numbers to COVID, they don't look so high, but if you look at. Demographics of the people dying from COVID. You're talking about people who are towards the end of their life and highly vulnerable, and don't have that many years to live.
Certainly that's a generalization, but on average versus people in their twenties, thirties, forties who have lives, have families have children to take care of dying before the age of 50. So yeah, it is, the public health crisis to deal with right now, in addition to.
MPD: When did this start?
Zack Gray: Opioids have been around for a very long time. Of course. You know, it, there are many forms of opioids. Some are synthetic, some are natural. Opium, it derives from the poppy plant opium has been consumed for many years by a lot of different people, but there have been successive waves of epidemics that have accelerated use.
Yes. In the wave we're in right now you know, is broadly explained as follows. There was a number of factors that contributed to painkillers being over prescribed because they were built by their manufacturers as being non-addictive and Purdue pharma of courses is the big one that everyone talks about in the Sackler family, blah, blah.
Few years went by, it became clear. Oxycontin was highly addictive. The DEA started to crack down on rogue prescribers and all of a sudden people who had become addicted by accident because they had a surgery and were prescribed painkillers for many years. Now couldn't get a prescription from their doctor.
So what are they going to do? They're going to go to the black market. And so people started buying pills on the black market. Drug dealers learned that heroin is a cheaper version of. Prescription painkiller. So then heroin became the dominant drug and more recently it's fentanyl. Fentanyl is considerably more potent than heroin and is responsible for most of the deaths that are occurring today.
So what happens is you get addicted to medications or drugs, it doesn't always happen by accident through a prescription. Ultimately, you don't know what's in the drugs that you're consuming and if there is too much fentanyl in it, you die. So it's effectively like being addicted to a game of Russian roulette that you play several times a day.
MPD: Okay. So you started Ophelia. Yes. How does affilia solve this help? Help with this issue?
Zack Gray: By removing barriers for both patients and clinicians. So we have a treatment that works. It reduces it. Meaningfully reduces overdose deaths. It saves the healthcare system money and it looks a lot like what prospective patients are seeking, but very little, like what they find in most addiction treatment programs yet.
And it's already covered by every insurance, including Medicaid. So if this were a normal frictionless market, you would expect transactions to be happening all over the place. They're not for many reasons. You know, regulation is the foundation of it all. But then you have to consider the economic incentives for people who do manage to get their X waiver and are working in treatment programs, often driven by reimbursement policy that incentivizes the wrong things and all of the psychosocial, behavioral stigma related barriers that people face who use drugs.
And so if you are an American today who wants to stop you. And you want to use your insurance? You can go to an outpatient program. And if you know about medication assisted treatment, you can go to an outpatient program, but you're going to be forced to appear in a group regularly pee in a cup drive an hour each way, perhaps lots of things that you don't want to do.
Or you could spend a lot of money like a thousand dollars a month, if not more, to buy the same exact medication from your drug dealer. And we think about treatment as we think about the market as going beyond the addiction treatment market, because for many people, the relevant alternative is the drug dealer.
So Ophelia's mission is to take evidence-based treatment and redesign it in a way that works for people and is superior in every way to the drug dealer. And of course the other addiction treatment programs that they don't want to go to. Anyway, how do you do that? Telemedicine is a great way because you can extend access into rural counties that have no prescribers.
People can do it privately in their home. They can video chat with us during work hours and they can stay on the medication easily because it fits into their life. But the challenges are also on the prescriber side. So if you do the math, they're probably only a few thousand. L nurse practitioners or physician assistants in this country with an X waiver as it's called and a sufficient patient cap to be eligible for a full-time hire, which means that most of the prescribers out there, who, by the way, as a universal, he makes up 5% of the total clinician population are not using their waiver.
And it's not because they don't want to per se, because they don't work in treatment programs and they have no platform. If you have a 30 patient cap, you can only treat 30 patients at a time. You're not going to go work in an addiction treatment program. You may go work in primary care or the hospital, maybe you're in school, but you might be interested in treating this patient population.
Part-time. Now in order to allow clinicians to treat patients, part-time you need to have a sophisticated team-based model and supporting software that allows clinicians to practice when they're on the. And not worry about their patients when they're off the clock, because those patients are getting chronic care from their care team.
In other words, a very much more complicated model than some of the other telehealth companies out there that are treating low acuity conditions without, synchronous telemedicine or the need for continuity of care. Probably a bit of a ramble there, but the short answer is break down barriers for.
Patients and clinicians that they can come together and engage in the treatment that they want and they want to provide.
MPD: So playing it back for the patient, it's easier and there's less public awareness of what you're doing. There's get rid of the stigma so you can get access to the stuff you want with the proper treatment with insurance coverage, for the provider market.
There's all these people who have such a small limit that they can't make a full-time job out of. And what that terms of how many people that can treat. Am I reading this the right way? Yeah. They're leveraging the platform to do a part time and now they can provide the treatment of folks who need it.
Whereas otherwise they wouldn't be helping very many people at all.
Zack Gray: That's right. You just sold the business better than I could.
MPD: Okay. This is incredible. And I'm a big fan of what you're doing. Why did you start.
Zack Gray: So my background is not in healthcare. I started off way back when I was an undergrad at Columbia, highly uninterested in business.
My father passed away when I was a freshman in college, and I saw my smart friends going to work on wall street, felt like they were wasting their talent. Wasn't sure what I was going to do with my life, but knew I was much more interested in first answering the big questions. I started studying philosophy and astrophysics spent some time working in physics labs and then became excited about startups as a way to make the world better.
And the core insight was simply that if you can figure out how to do good with people's money and also offer them a return, will you have access to a lot more money and you can do a lot more good because clearly the universe of private capital is much greater than that. A philanthropic capital in this country.
And so I joined a solar energy startup, got some experience on the growth side. Then decided I needed to learn business. If I was going to pursue a career in business, went to business school, but still without any experience in healthcare. And as I was getting ready to graduate in early 2019, a girl that I had been very close to for a very long time dated on and off, like a soulmate died of an overdose.
And I had been very involved in her efforts to get care and. Saw somebody who had every reason to get better, not get better because she was failed by a healthcare system that didn't understand how to treat this condition properly. And in a way that was preferable to the drug dealers who will, who are frankly winning.
And at first I was skeptical, I'd be able to do anything to solve this problem. And then I started talking to lots of people, physicians, researchers, policy, people. And what I learned is that we've got treatments that work really well. The problem is simply access and access is a problem that a startup consultant.
So one of those early physicians that I reached out to is now our founding position in medical director. He is an addiction psychiatrist at Columbia university. Been there for 20 years, manages lots of money from the federal government to study this very protocol and is among the foremost experts in the field.
And it just became clear with each conversation that this thing had to agree. Fortunately the investor community agreed. And it's been a pretty wild ride since
MPD: tell me about your girlfriend, the one who passed away. And the reason I'm asking is there so much in the way of stigma of
Zack Gray: a drug addict,
MPD: and I think what's so powerful about this particular epidemic is how many people it's reached, who didn't have.
Zack Gray: Yeah, I can talk about it a little bit. First thing I'll say is that she was not my girlfriend at the time. This is somebody I fell in love with when I was very young, 15 years old and we had an on and off relationship throughout the years at this moment in time, I was in Philadelphia in business school.
She was living in New York, seeing somebody. And her story is, is not like the story I told earlier she got into drugs because she liked doing drugs. She just didn't appreciate the severity of it. And once you find yourself in a position where you're addicted to what you thought was a hobby, it's very hard to get out of it.
But she was highly functional, had a really great job a lot of motivation and the financial resources to afford care, but was. A very private person didn't want anyone knowing about her problem and thought she could do it on her own. So it was really the stigma that kept her out of care and the misinformation, frankly, more than anything else,
MPD: how many people has affiliate helps so far
Are there stories that come back to what's the feeling you're getting. Through this kind of experience. You're doing more than a company. I believe a lot of people who listen to this now, my, my personal mission, what we've transferred through interplay is a belief that innovation is the driver of social change.
And we do everything we can to facilitate that you're doing your you're happened to be in a business where the impact is very direct. What are the experiences you're having from this vantage point? It must be a very unique moment for you.
Zack Gray: It's extremely gratifying. It can also be very sad at times.
We had a retreat last week where we, it was a virtual retreat because of the world of Omicron. And we brought in five patients to talk to the company and the stories were painful to listen to, but. Extremely, heartwarming and validating of what we're doing. And pretty much always ended with you saved my life.
I thought this was too good to be true. And I found about it. I found it online and I might be dead if it were not for real Ophelia. And there are very few businesses that can say that it's very important. I think for people in the company who understand this problem in theory, but not in reality to get in front of these patients and truly understand the impact that they're having.
And that's what drives every. In the organization, especially our clinicians, this is something that I was very surprised to find, frankly, I didn't know if clinicians would want to practice, part-time feel comfortable, practicing over telemedicine, treating a difficult patient population.
And what I found that it's is that it's the exact opposite. Many of the clinicians we hire really like this patient population, like treating them, but they just did not have a platform to use. Many of them are the resident experts in their other jobs. And they've all come together under the tutelage of our medical directors to learn and do what they love, which has helped people.
I think what's unique about Ofelia's patient population relative to most treatment programs is that every single patient we serve proactively. Signs up online for most of our history. And we're now accepting insurance of all form, including Medicaid. For most of our history, we didn't because insurance contracts are hard to get.
And our cash price is 1 95 per month. Now I was a little afraid about that because I assumed that anyone who could pay 1 95 per month, probably wasn't going to be someone who truly needed our service. Maybe they could pay a little bit more to go find a private doctor, something like that. It turns out that the vast majority of our patients are Medicaid and.
What does that mean? It means they don't have a lot of disposable income. They could go get treated somewhere else for free. If they choose to pay Ofelia $195 a month instead because that's how hard the other options are for them. And often the other option is spending much more than that on the black market for the exact same medication and it's viewed as cost savings.
So the treatment industry as a whole outside of Ophelia, remember it's only 20% of people who are using and often those people. In treatment against their own volition. They wound up in an emergency room after an overdose, they're coming out of prison and they're mandated to be there by their parole officer and they don't necessarily want to get better.
And the recovery rates are much lower than what we're seeing at Ophelia versus people who are proactively opting in spending their hard earned money, because they really want to get better. They just didn't have any other options. And so the number one outcome metric and addiction treatment is returning.
Our six month retention is about 70% compared to an industry, average of 30%. And I believe that's in part due to the excellence of our service and the benefits of telemedicine, but largely due to the inherent motivations of our patient population, who are exactly the kind of people who couldn't seek out other care, because they have jobs.
They have families to take care of and reputations to protect but still not a lot of money. And so to answer your question. It's been extraordinarily gratifying to see obviously from the patient side, but especially from the clinician side and more broadly, the entire team who is working for affiliate because they believe in the mission
MPD: where are there opportunities to help, you're taking on a very big target and it's inspired. A lot of entrepreneurs come through and when they get knee deep into an industry, they'll see opportunities that they'll want to tuck into their business. Sure. The things they know they're never going to do as well. For anyone listening, who's thinking about starting something, what mantle would you like other people to pick up to come help?
Zack Gray: So I think of the, when you ask yourself the question, why are 80% of Americans with opioid addiction not getting. Why our two thirds of treatment programs not following the evidence. There are a number of stakeholders who are directly responsible. The first one is the federal government. So there are a lot of laws in place that make practicing very difficult.
But this comment does not address the politician. So I'll skip that one. The second stakeholder are the people responsible for managing healthcare dollars meaning payers. And that includes private payers, United healthcare six. Humana Anthem and public payers that manage Medicare and Medicaid dollars because increasingly even public funds are being managed by private companies.
Now, what do we know about medication assisted treatment? We know that it saves lives. Sure. That should be enough. We also know that it saves a lot of money. And if you look at the study, I cited from, United healthcare, which has been duplicated many times. The cost savings associated with someone with opioid use disorder who goes on medication assisted treatment versus someone who doesn't have $10,000 in the first three months, which is to say if you want to reduce your costs and earn more profit for your shareholders then you should be paying more for the treatment that works because more people would do it.
Fewer people would wind up in the emergency department and you would see the results in your bottle. So now the question is why isn't that happening? It's smart business and any shareholder in a healthcare company, you should be annoyed that there's irresponsible management of their dollars, let alone you know, deaths being allowed on their watch.
The rationale, in my opinion is simply that healthcare organizations are large uninnovative companies for the most part They would prefer to do things the way that they always have. Now, there, there is innovation happening in little pockets of healthcare, but where the true innovation will happen, I believe is from digitally enabled technology companies that are able to offload some of this risk from the payers.
So for example, if you are managing the whole population of Medicaid enrollees, Some meaningful percentage of them have an opioid addiction, 80% of them you don't even know about because they're not in care. And on average, are they going to cost you X you don't really know what X is, and therefore you probably want to pay as little for treatment as you possibly can, but a company can come, the private company can come in and say, you know what, let us take care of this population.
This is what you pay for them last year, pay us X minus Y. And we'll take on the risk. So. The payer can automatically fix their costs, but the provider that is taking on that risk is innovative enough to run the data, invest in digital preventative tools. They can reduce the total cost of care for the population and take on some of that savings as.
The payer wins because they're paying less than they did last year. But the only way that works is if you have an agile technology oriented organization, that's willing to invest in these things and take on the risk. And so you're seeing digitally enabled technology providers take risk off of health plans.
Babylon health is a great example of one. You're also seeing payer networks that are simply saying, give us your patients. We'll offload the risk from you and we'll invest in, in data city block health is another good example. Where does it, how does this get me to an answer to your question?
I would say that payers are private companies. They have an interest in reducing their costs. I don't think that they have the organizational know-how to do it themselves, and that is what startups are good at. So anyone out there that wants to make a major dent in healthcare, figure out how you can.
Make it easier for payers to pay smartly for things that reduce costs, including preventative care, whether that's helping them understand their data better and make smarter decisions or directly offloading risk and exp and spending those dollars on their behalf.
MPD: Fascinating. It's hard to talk about your industry today without bringing up the dope sick show on Hulu.
Yeah. I think when we first met, I asked you if you had watched and you said you had not, have you watched, you
Zack Gray: know, I'm embarrassed to say that I still have not. However, Beth Macy, the author of the book did speak at our clinician retreat because she is a friend of one of our medical directors. So what I can say is that it is a it's legitimate and it's portrayal.
Although I don't know the details of the story. Yeah. That's
MPD: fascinating. Cause that's one thing I've wondered as I watched it, it almost seemed too easy. To black and white, but maybe that's what the situation was. The the thing I took away from it is it's basically an advertisement for medically assisted treatment medicine assisted treatment.
They specifically call that out in the middle of it. They talk about how no one knows about this. They, you should just be having people watch the documentary or the show in order to get them to sign up for a feely. It's, it tells the whole.
Zack Gray: That is the whole story. The media loves to talk about problems and they love to focus on the Sacklers because that makes for interesting content.
But the story that should be told is the story of solutions that we have treatments, they work and they look very little like what we traditionally think of. In fact, they're far easier. That's the important story.
MPD: Would I let that, what you're talking about is you're talking about the current barriers.
But you're probably making your business more viable, but I'm sure if you had a choice, you'd wave a magic wand and wipe them away to get this epidemic solved. Or have you thought about doing anything around lobbying? Is anyone trying to move the government and the industry to be a little bit more dynamic here and respond to the issue?
Zack Gray: Yeah. So the irony here is that any major medical institution. In this country fully agrees with what I'm saying. It's well understood that medication assisted treatment is the gold standard. If you go to the SAMHSA website, the substance abuse, and mental health services association, which is the division of the federal government responsible for overseeing addiction treatment medication assisted treatment is front and center on their website.
So they, it's not a matter of more research. It's not a matter of convincing doctors. It's a matter of getting politicians to go to the floor and. And the reason they're not is that it's simply that it's not a priority and it's been easy for them to kick the can down the road.
And I would say in large part because the population that needs to be lobbied for is not the kind of population that tends to influence Washington. Can we, as a relatively small startup impact federal legislation, I'm skeptical. We can share our outcomes and we will. There is enough effort happening without us, that it will be difficult for us to have a meaningful, marginal impact at the federal level.
Then the efforts already in place. Now we're you know, we're aligned with the American tele-health association. We signed several lenders to the federal. But if we're going to talk about government advocacy, we can do much more on the local level. So states are now being handed money from opioid lawsuits.
The worst thing they could do is pump that money into legacy programs that don't work. They should be working with people that have innovative solutions in order to deploy that money that they're mandated to, to deploy. And I wouldn't call that lobbying it's government relations. It will be much more effective if done at the state and local level, because that's ultimately the people who are making beyond the regulatory decisions, the most important operational decisions.
MPD: So I dug around a little bit on you before this conversation and I'm fascinated by your journey. You've taken so many, I guess it's a linear the way you tell it. One thing that you used to, as far as I can tell you is to have a little bit of a firebrand commentary around. For-profit companies not being socially positive.
Zack Gray: Did you watch my Wharton speech? Is that what this is?
MPD: Can you are for-profit companies good or evil?
Zack Gray: It's a great question. And the answer is simply that it depends on the company. So I will, I'll take a more abstract approach to answering this question. For-profit business as a whole good for society.
I think the answer is yes. And the way that I think about it is that you, when you're asking yourself, how do we organize society's resources? You have two extremes. One is that nobody owns anything. And the government decide who produces goods and services. And we call that communism.
The other extreme is that everything is privately owned and we let free markets decide what to do. And we call that free market capitalism. Now both of those two extremes have their flaws. And I guess I'll go into a couple of them. Communism is empirically proven to not work. There are no price signals which tell the government what to make.
Historically people claim that workers are an incentivized to actually work because they don't participate in their profits. It leads to corruption with centralized decision-making, et cetera. On the free market side. You have pollution of the environment with no government enforcement of externalities.
You have the tendency for capital to accumulate in the hands of a few and lead to mass inequality. So if those are two logical extremes and neither of them are correct, the solution is somewhere in the middle. How do we leverage the creative power of free market capitalism, but reign it in by making sure that it is.
Restrained from pollution and equity and the profits are equitable equitably distributed across the population so that you don't have people dying in the streets. And I think the answer is some level of taxation. And I think most of the, fiscal political economic debates in our country are just a question of where you sit on that.
If you think that we should be closer to the communist side with higher taxes and more government authority over what we spend our money on, you're called a socialist or a progressive. If you think we should be closer to the free market side, lower taxes, more power to businesses, more power to individual consumers while you're conservative.
But it's a question of values. And when you think about the evolution of free markets over time before we had finance. We all lived on average to age 30 and farmed our own food. And over the last couple of hundred years through investment enabled by finance, the expected life in developed countries is doubled.
We have things like . And communication technologies and transportation and electricity and education, and all of that was enabled by the inherent forces of for-profit business. So my answer to your question is some businesses are fundamentally good without the intervention of government. And I think that is Ofelia some government, some businesses can be harnessed for good with the influence of government and classic examples of that are.
Energy companies, you can produce energy cleanly also make money, create jobs, fuel the economy without polluting the environment. If the government imposes some taxes to disincentivize pollution, without it, we get rapid climate change. So I hope that answers
MPD: that does. Let me let me ask you one of my favorite questions.
So if you were king, not president king, you could change anything you want. Okay. Let's say you got stuck with a job. Okay. What would you say?
Zack Gray: What would I change? How much power do I have? Do I have superhuman power? Oh, you
MPD: can't. You can't fly, but decisions.
Zack Gray: What would I change? It's a great question.
I believe. I'll give you an answer in slight contrast to what I just said. I would allocate far more money to. Pro bono scientific research that isn't immediately monetizeable. So when you think about how projects get funded in this country for good you can think about a pharmaceutical company.
You create a therapeutic or a medication. You sell it. The payers are, the revenue comes from payers, which is funded by premiums and taxes. And your revenue is greater than your costs, which means that the people who fund it can get a return on their investment. But the key is that it is monetizeable.
What about the people who are working in research labs, coming up with the science that goes into our textbooks and fuels that innovation, but have no clear way to monetize their discovery. And so there's this idea that you can, know, once a piece of wisdom gets to a point where it can be commercialized and sold to someone with money.
Then capitalism is great at fueling its progress. But what about the really smart people who should be spending more of their time working in research labs and less of their time trading stocks on wall street? How can we realign incentives to motivate that type of behavior and. That's the short answer I've got I've got another answer that plays on general themes, but the short one is let's fund smart people to make us smarter as a species without worrying about how it's going to be monetized.
And that has to come from taxation and allocation. Yeah.
MPD: I would love to see your manifesto, which for your agenda is king. I want to see your
Zack Gray: platform. I've got another one, the more, probably easier to implement what's that to hear it. Yeah, of
MPD: course. A hundred percent
Zack Gray: let's go. Okay. Okay. So the, the, the motivation behind taxation is manifold.
You have public goods that can't be funded by individuals or individual companies. We all need it. So let's give it to the government. Then there are the redistributive aims of tax. The idea that markets are really good at creating wealth, but they're not great at distributing wealth. So if someone's dying in the streets, let's give them healthcare in the form of Medicaid that has to be funded by taxing people who have money and, prohibiting them from going out and buying another expensive pair of shoes.
Right. But when you think about how taxes are levied on companies, it's as a percentage of income with no consideration for what that company is actually. In economics, we learn about the law of diminishing marginal utility of money. And it's a pretty straightforward law. If you had no money at all, and you were given $10, you would buy some food for yourself and not starve to death or your kids.
If you had a billion dollars and were given $10, it wouldn't mean anything to you and you might spend it on a square inch of a S of a tile for your third mansion. Which is to say that money means more to people who have less of it, because if you're lower on the curve that represents more marginal utility, more like true value for you and your family and things that actually matter to humans.
And so if you are creating, if you're a business that's selling luxury goods to very wealthy people, that means the money being spent on your goods and services per dollar is worth less than if you're a business that is providing a saving treatment to people who don't have very much money at all.
And so if the government cares about maximizing utility, which should be the goal, then businesses should be taxed relative to the utility they're creating for society, which depends broadly on the income level of their consumer. So what would I, how would I change corporate taxation? I would say if you've got a company making luxury shoes and a company selling, saving trees.
Well, let's look at the average income of their population. Figure out where they are in the utility distribution. If the person has very little money, then there's a lot of utility represented by that a hundred dollars are probably buying a sandwich for your child. If you're very high, very little utility, it's that a floor tile.
So let's adjust profits of corporations by the, convert them into units of utility. By looking at the people that they're actually selling to and then let's levy taxes. And so do I think it's fair that we're, when we're dealing with cash pay patients who have very little money, they need to pay us $195 a month to save their lives because we can't get in network with their insurance companies.
Is that $195 really equal to $195 for someone who's building their fifth mansion? No. Taxes are a way to incentivize behavior in the economy. Higher taxes makes businesses less profitable, fewer mansions get built more life-saving treatment. So how do I change the corporate tax code? I would make taxes lower for businesses that are creating fundamental value by adjusting their actual dollar profits for the true utility they're creating for society.
And that way you fund them, you fundamentally incentivize more utilitarian.
MPD: That's fascinating. I think the government would have to implement a lot of technology to make that work better. Now
Zack Gray: she just won't cut it. Do you know how we measure price indices? We have people going around counting, it look picking socks off the wall and writing down their prices.
So I don't think that the stuff government is doing right now is any more difficult. And I don't think they're doing a better job at it that they would have. That's
MPD: terrific. Thank you for being on insightful.
Zack Gray: Yeah. No. You're great. Thanks for being here. Thanks so much.
MPD: I really enjoy doing this podcast. Want to extend a big thank you to Zach. It's topics like these that really make me feel like we have meaning in what we do at interplay and in the startup ecosystem where we're having positive social impact through innovation. This is where I solicit you for help.
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