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CNBC Transcript: Alex Gorsky, CEO, Johnson & Johnson

Following is the transcript of a CNBC interview with Alex Gorsky, CEO, J&J. The interview was broadcast on CNBC on 20 March 2017.

All references must be sourced to a "CNBC Interview".

Interviewed by Eunice Yoon, Beijing Bureau Chief, CNBC at China Development Forum 2017.

Eunice Yoon: How concerned are you about some of the protectionist rhetoric that's been coming out of the White House?

Alex Gorsky: I think that's the real opportunity for a forum like this, where we get business leaders, political leaders, global leaders together to talk about what can we do to make sure that we have a positive, healthy environment for trade around the world. Look I realized that there're a lot of issues and a lot of discussions taking place, but I am encouraged, I am always optimistic about these kinds of conversations in a forum like this, that we can figure out the way forward.

EY: And how important is globalization to a business like yours?

AG: It's critical. Johnson & Johnson, we're a very global company, we have more than 250 companies in countries around the world, we've been here in China for 35 years, and when you look at our innovation hubs, you look at our supply chains and you look at our commercial, it's a global network. And frankly to be successful, to be competitive, you got to be a global company, particularly in healthcare today, so we intend to continue that measure going forward.

EY: What kind of protectionist measure that you think would be the most damaging you think, either to your business or to the pharma more broadly?

AG: We think going forward, there're clearly opportunities to harmonize quite a few aspects of healthcare to serve more patients, so let's start for example with regulatory reforms. There're more we could bring to regulatory reforms to the various food and drug administrations around the world, the faster patients are going to get medications. And of course we need to make sure that they're effective, of course we need to make sure that they're safe. But how do we do that in a more harmonize global way is absolutely critical. How do we make sure that we standardize and make more consistent some of the more quality standards, so that we increase and ensure high quality goods for patients around the world, so those are a couple of areas that we focus on with government officials.

EY: What do you think of the border tax?

AG: Well I think it's still early days. And I had the opportunity to spend in Washington DC, and talk to a lot of officials, and really we're still early in the day, we have to see how it works out. I think at the end of the day, we want to make sure that we can access capital so it can be mobile, transferable, around the globe, and can be as efficient as possible. And we'll see how that ends up playing out in the next coming weeks and months.

EY: President Trump wants to see manufacturing return to the U.S., how realistic is that? Will we see a big boom in manufacturing in the U.S.?

AG: Well, again we have to see exactly what policy changes. I think the concerns have been you have seen a lot of manufacturing and there're a lot of reasons for that. One is certainly how technology has changed manufacturing. And that's probably been related to tax and various trade policies. But I think it's going to take a combination of efforts, it's even going to take how we educate of workforce. But I'm optimistic that we can find a way to - number one remain important global trading partners, and at the same time ensure that we've got an environment in the United States that's conducive to great manufacturing jobs as well.

EY: Have you had a chance to review the new healthcare plan?

AG: I have, I've taken a look at it, and getting there too. The good news over the last several years with the Affordable Care Act is we've got about another 15 to 20 million people access to healthcare in the United States. I think the good news is that people with preexisting conditions can actually get coverage and get care especially if in your early 20s it's great because you'll be covered by your parents' insurance policies until you find some other means. The challenges are that we still have a lot of other issues to take care of how are we going to make sure that we continue to make some of the important improvements to healthcare, from a quality, from an affordability and from a sustainability point of view. And I think that's what we're going to have to work on, to bring forth the next round. I think regardless of, you know, whether you take the new plan, the old plan, we are going to have to make changes. So the question is how we pull meaningful important changes in place that are ultimately going to help us have a great healthcare system over the next several decades.

EY: What elements do you think need to stay, what elements would have to change, just because the estimates around the new healthcare plan is that 24 million people could lose their healthcare?

AG: Well I think that there are a lot of estimates being thrown around right now. And I think the key elements that we want to say stay is - first of all we've got to make sure that the number of uninsured stays low. You know that it's gone from about 17 percent down to 10 percent because we've got 25 million more people covered today. We want to maintain that. The preexisting clause, we definitely want to make sure that people with really difficult conditions aren't put at a disadvantage. I think making sure that young people can get access to healthcare. I think the elements that we need to take on are - how do we change some of the fundamental, how do we move from instead of paying for healthcare products, how do we move to change into an episodic of care and outcomes based approach. How do we build better partnerships between very fragmented systems of hospitals insurers and product providers. So again I'm optimistic that we can work together in different ways we can change some of the payment and structural changes to address you know the long term sustainability of healthcare in the United States.

EY: President Trump has also tweeted about how it's important that the drug industry bring prices down, what do you think needs to happen, from your side, a pharmaceutical side and also what do you want to see coming out of the White House to help support the industry?

AG: Well I think it's much broader than just a pharmaceutical issue. It's a healthcare issue. If you think about it, healthcare or pharmaceuticals only represent about 10 to 15 percent of overall healthcare spend. And if you look at, you know, the dramatic improvements that have been made in healthcare for example, you know if you were born in the early 1900s in the United States the average life expectancy was a little over 50 years old. Today it's close to 80 years old, and a lot of those improvements have been due to you know drugs that can keep infections down, treat cardiovascular disease and other areas. So I think what's important is to make sure obviously that we continue to innovate, that we bring out products that can cure Alzheimer, that can cure cancer, that we price responsibly, that we work on some of the reimbursement mechanisms be it Medicare, be it Medicaid or through private insurance. And I think there's ways to do that that can help contain overall costs, make sure that we continue to have an innovative environment that can take on new diseases and be part frankly of a reform of the entire healthcare system.

EY: Is your takeover of the Swiss company Actelion? Is that part of the overarching plan?

AG: Well, we look at it as a partnership. We're very excited about you know the science, the technology and the new options for patients that Actelion brings. They've got a great track record of innovation in drug conditions like pulmonary arterial hypertension, very difficult to treat condition. We think we can break the great science in execution, that they've been able to do over the last 20 years and merge it with you know the very diverse platform that we have at Johnson & Johnson the global reach that we do for around the world. We think it's going to represent a very significant opportunity and we're quite excited about it

EY: I want to ask you a little bit more about China. What opportunities do you see here?

AG: We see a lot of opportunities. I think you know, for one, it starts with there's still a lot of unmet medical needs in China. And the good news is about 800 billion more people have now got access to healthcare than what they did even 10 or 20 years ago. But if you look at the incidence of things like lung cancer or other conditions cardiovascular disease, there's still a lot more patients that could get access and get treated, so we're looking forward to that. We're working a lot on things like minimally invasive surgery. How do we take things like hip or knee replacement that previously could have resulted in several weeks in a hospital and have patients ambulated within a matter of days. We think that's a huge opportunity. And finally you know the emerging millennial population from a consumer point of view now they want to look better. They want to feel better. They want new products and they really want to move beyond products, they want to move to experiences and things that are very personal and meaningful and targeted to them. So we think all those things represent really significant opportunities here in China.

EY: With all the talk of a trade war between the US and China, do you worry that relations could deteriorate, and if so what would that mean for American companies doing business here?

AG: Well you're always worried that you're going to have some untoward events that result in unintended consequences like you mentioned, but I'm actually much more hopeful. I think if you look back at the very long rich history between the United States and China, I think it's fundamentally very sound. The world will do better when China and the United States do better as partners. And so it's really my hope that in the coming meeting between the leaders of the countries that we're going to be able to again build on that strong foundation. And I think it will send a very important message. I think a vote of confidence around the world when we work together in that way.

EY: I want to ask more about that meeting. What do you want to see when Trump and Xi meet for the first time?

AG: Well, I think first of all it starts with establishing a strong relationship. I think whether it's in business, whether it's in politics making sure they both understand philosophically you know the objectives that each of them have and the agendas that they've been in elected office to have. I think two is how do we find ways through tax, through trade, regulatory reform where it's win-win or it's good both for China as well as the United States, because again I think that creates a lot of momentum for the global economy. So I think those are some of the key areas I'd love to see them focus on.

EY: J&J has a huge business here in China. Just based on what you're seeing, how healthy is the economy here, and how healthy is the consumer?

AG: We're very proud of the business that we have here. We've been here for about 35 years. We have a strong consumer, a strong pharmaceutical, strong consumer business. We have over 10,000 employees. I've been much more optimistic particularly over the last six to 12 months with what I'm seeing here in China. When you look at some of the areas for us that are very important, the steps have been taken around intellectual property; the number of new scientists available to join our innovation centers and to help us in research and development. For example we'll invest about a half a billion dollars in research and development right here in China. And right now many of those products are intended to be used right here in healthcare. One day being able to export those around the globe. I think it represents a pretty significant and exciting opportunity.

EY: What about the Chinese consumer?

AG: Well the Chinese consumers are also getting very healthy but they're also very demanding. You know what you find is that they want access to natural products. They want access to the very highest quality products. They want to make sure that the products are customized personalized for their own needs and they want it on their terms Vis a Vis the Internet. And so when you're able to provide them however, the products that fit those needs, it's a big opportunity.

EY: You mentioned the importance of R&D. How has the proposal about scaling the H-1B visa affected you, or is that something you guys worry about?

AG: It hasn't affected us to a significant degree, again you know we're fortunate in being a global company we attract talent from around the world and you know frankly we think diversity includes making sure that we've got the right environment helps us be our very best. We haven't to this point in time seen a real significant impact from that.