WHEN: Today, Thursday, September 8th
WHERE: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Allergan CEO Brent Saunders and CNBC's Meg Tirrell today, Thursday, September 8th on CNBC's "Closing Bell" (M-F, 3PM-5PM ET). Following is a link to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000549623.
All references must be sourced to CNBC.
KELLY EVANS: WELCOME BACK. ALLERGAN'S CEO BRENT SAUNDERS TAKING ON THE DRUG PRICE WARS BY PLEDGING TO UPHOLD A SOCIAL CONTRACT WITH PATIENTS IN HIS COMPANY'S BLOG POST. SAUNDERS VOWING TO LIMIT ALLERGAN'S DRUG PRICE HIKES TO ONCE A YEAR AND KEEP THOSE INCREASES BELOW 10%. LET'S HEAD OUT TO BOSTON, WHERE MEG TIRRELL IS AT THE WELLS FARGO HEALTH CARE CONFERENCE WITH ALLERGAN'S CEO, BRENT SAUNDERS. MEG?
MEG TIRRELL: KELLY, THANK YOU SO MUCH. BRENT, THANKS FOR JOINING US.
BRENT SAUNDERS: THANKS FOR HAVING ME, MEG.
TIRRELL: LET'S START OFF WITH THE NEWS OF THE WEEK, YOUR BLOG POST, YOUR PLEDGE, YOUR SOCIAL CONTRACT ABOUT DRUG PRICES. ONE OF THE THINGS THAT I THOUGHT WAS SO INTERESTING IN THERE IS HOW YOU SAID HOW THIS WAS HARD FOR YOU TO WRITE RIGHT NOW. HAVE YOU GOTTEN PUSHBACK FROM COLLEAGUES ON THIS? WHY WAS THIS DIFFICULT TO WRITE?
SAUNDERS: NO ACTUALLY THE REVERSE I THOUGHT I WOULD GET SOME PUSHBACK BUT MY COLLEAGUES AT ALLERGAN UNANIMOUSLY SUPPORTED ME AND MY EXECUTIVE TEAM GOT ADVANCE NOTICE AND WE ALL TALKED ABOUT IT AND THEY WERE FULLY ON BOARD. MY BOARD OF DIRECTORS ENDORSED IT COMPLETELY. INTERESTINGLY, SINCE WE DID IT ON TUESDAY, I'VE HEARD FROM NUMEROUS EMPLOYEES ALL OVER THE WORLD, EVEN THOUGH IT'S A U.S. ISSUE, I'VE HEARD FROM PHYSICIANS, I'VE HEARD FROM SHAREHOLDERS, I'VE HEARD FROM PEERS, I'VE HEARD FROM SMALLER COMPANY CEOs, ALL VERY ENCOURAGING FEEDBACK SO FAR.
TIRRELL: SO ONE OF THE THINGS YOU'VE SAID IS THAT YOU CONDEMN THESE EGREGIOUS OR OUTLIER PRICING INCREASES. WHERE DO YOU DRAW THE LINE ON WHAT'S AN OUTLIER, WHAT'S EGREGIOUS?
SAUNDERS: LOOK, I DON'T THINK IT'S A BRIGHT LINE THAT WE'RE GOING TO DRAW HERE. I THINK IT'S A FACTS AND CIRCUMSTANCES ANALYSIS. I THINK IF YOU'RE TAKING OLD DRUGS AND YOU'RE BUILDING AN ENTIRE BUSINESS MODEL OVER PRICE INCREASES VERSUS INVESTING IN INNOVATION AND LOOKING FOR CURES AND TREATMENTS AROUND THAT MEDICAL NEED, YOU'RE PROBABLY MOVING INTO AN EGREGIOUS PRICING DECISION. YOU WOULD HAVE TO LOOK AT THE EXACT FACTS OF THE SITUATION TO DETERMINE IF, IN FACT, THAT'S TRUE. BUT YOU'RE SETTING YOURSELF UP FOR THAT TYPE OF CRITICISM.
TIRRELL: WHEN YOU MENTION OLDER ON THE MARKET PRODUCTS, THAT SORT OF ALSO SPEAKS TO WHAT WE SAW PROPOSED BY HILLARY CLINTON, TO HAVE THIS SORT OF DRUG PRICING PANEL THAT WOULD OBSERVE BEHAVIORS AND WOULD HAVE THE POTENTIAL TO LEVEE FINES OR DO OTHER MEASURES. WHAT DO YOU MAKE OF HER PROPOSAL?
SAUNDERS: I THINK IT MAKES FOR A GOOD CAMPAIGN PROMISE AND IT'S A POPULIST ISSUE AND YOU UNDERSTAND AND EMPATHIZE WHY, BECAUSE IT'S BAD BEHAVIOR AND IT'S HARD FOR THE PUBLIC TO UNDERSTAND IT, BUT THIS ISN'T SOMETHING THAT GOVERNMENT CAN SOLVE, BECAUSE IT ISN'T A BRIGHT LINE IT'S A FACTS AND CIRCUMSTANCES TEST. SO I WOULD RATHER SEE INDUSTRY SELF POLICE WHICH IS WHAT ALLERGAN IS DOING, WE'RE MAKING A VERY BOLD COMMITMENT TO SAY, WE'RE NOT GOING TO ENGAGE IN THIS PRACTICE. WE'RE GOING TO FOCUS ON DRIVING OUR BUSINESS THE WAY IT SHOULD BE IF YOU'RE AN INVESTOR IN OUR BUSINESS, ON SELLING EXECUTION, ON ENTERING NEW MARKETS AROUND THE WORLD, ON NEW PRODUCT LAUNCHES, AND MOST IMPORTANTLY, ON INNOVATION, INVESTING IN R&D, AND FINDING CURES AND TREATMENTS FOR A MEDICAL NEED.
TIRRELL: SO YOU'VE DRAWN THE LINE AT SORT OF 10% OR LESS THAN 10% ONCE A YEAR. SOME OF YOUR COLLEAGUES, EVEN IN WHAT PEOPLE WOULD SAY ARE THE INNOVATIVE SPACE, LIKE AN ELI LILY OR A PFIZER ACCORDING TO DEUTSCHE BANK I WAS LOOKING AT A NOTE THEY PUT OUT IN MAY. LILY HAS TAKEN 12 TO 15% PRICE INCREASES PER YEAR FOR THE LAST FOUR YEARS, PFIZER, 9 TO 16% OVER THE LAST FOUR YEARS. SHOULD THEY BE ON NOTICE? DO THEY NEED TO TAKE A PLEDGE LIKE THIS?
SAUNDERS: I THINK EVERYBODY SHOULD TAKE A LOOK IN THE MIRROR AND EXAMINE THE PRACTICES THAT THEY'RE TAKING IN THIS ARENA AND SAY, DOES IT HOLD UP TO THE SOCIAL CONTRACT WE HAVE WITH PATIENTS? THOSE COMPANIES ALL INVEST IN R&D. SO WE APPLAUD THAT, RIGHT? THAT'S GOOD. AND THEY'RE ALL LOOKING FOR CURES AND TREATMENTS TO UNMET MEDICAL NEEDS. WE APPLAUD THAT. BUT ARE THEY TAKING PRICE INCREASES SOLELY TO DRIVE THEIR BUSINESS TO MAKE UP FOR SHORTFALLS IN OTHER AREAS, OR ARE THEY DOING IT BECAUSE THEY CAN JUSTIFY IT BY LOOKING IN THE MIRROR, UNDERSTANDING THE VALUE OF THE MEDICINE THAT THEY'RE BRINGING TO THE MARKET, AND CAN -- WITH TRANSPARENCY, EXPLAIN THE NEED FOR THAT PRICE INCREASE.
TIRRELL: KELLY?
EVANS: BRENT, HI, IT'S KELLY. AND WE ALL REMEMBER THE EPISODE BACK WHEN VALEANT WANTED TO TAKE OVER ALLERGAN. NOW THOSE SHARES HAVE FALLEN PRECIPITOUSLY. WOULD ALLERGAN EVER LOOK TO TAKE OVER VALEANT HERE?
SAUNDERS: NO, I DON'T THINK SO. OUR MODEL IS GROWTH PHARMA. WE HAVE BEEN INQUISITIVE, WITHOUT QUESTION. BUT EVERY ONE OF OUR ACQUISITIONS OR DEALS HAS BEEN GROWTH ORIENTED. WE LOOK TO BUY YOUNG PRODUCTS THAT WE THINK WE CAN PUT INTO OUR HANDS AND DO BETTER WITH AND REALLY GROW. OR WE BUY R&D ASSETS. AND BEST I CAN TELL, VALEANT JUST DOESN'T FIT THAT BILL. THE OTHER THING I WOULD SAY IS WE'RE NOT LOOKING AT DOING TRANSFORMATIONAL M&A. WE'VE BUILT OUR COMPANY. SO WE'RE LOOKING AT WHAT WE CALL STEPPING STONE DEALS WHERE WE CAN REALLY ADD TO THE THERAPEUTIC PRESENCE AND LOOK FOR CURES AND TREATMENTS FOR UNMET NEED. WE ANNOUNCED ONE ON TUESDAY, A GENE THERAPY FOR BLINDNESS THAT IS EARLY, BUT VERY INTERESTING AND VERY EXCITING FOR PEOPLE SUFFERING FROM A CERTAIN RARE FORM OF BLINDNESS.
EVANS: YOU KNOW, YOUR COMMENTS ABOUT DRUG PRICES KIND OF ARE AN IMPLICIT CRITIQUE OF HEATHER BRESCH AT MYLAN WHO'S CREATED A FIRESTORM OVER THESE EPIPEN PRICE HIKES. HOW MUCH OF WHAT YOU ARE NOW SAYING IS A RESPONSE TO THAT? AND COULD THEY JUST SIMPLY LOWER THE PRICE OF THE EPIPEN HERE ON THE SPOT IF THEY SO CHOSE?
SAUNDERS: WELL, IT WASN'T MEANT TO BE A CRITICISM OF HEATHER OR ANY ONE PARTICULAR COMPANY, BUT RATHER THE AGGREGATE ACTIONS OF SOME EGREGIOUS PRICE TAKERS. AND REALLY, THE PURPOSE OF WHAT I WANTED TO WRITE WHEN I WROTE THE BLOG WAS TO BE POSITIVE. TO TALK ABOUT WHAT ALLERGAN COULD DO TO CHANGE THE CONVERSATION. WHAT WOULD WE WANT TO BE HELD RESPONSIBLE OR ACCOUNTABLE FOR. HOW COULD WE BE TRANSPARENT. AND WHAT COULD WE DO TO PROVIDE OUR MEDICINES IN A MORE AFFORDABLE AND ACCESSIBLE WAY THROUGH PATIENT ASSISTANCE PROGRAMS AND THE LIKE. SO WE REALLY DIDN'T TRY TO TAKE SHOTS AT ANYBODY ELSE IN THE INDUSTRY OR IN THE DISTRIBUTION CHANNEL AND REALLY STAY ON FOCUSING ON WHAT I CAN CONTROL AS CEO OF ALLERGAN, WHICH IS WHAT WE DO. AND LOOK, IF THEY WANTED TO CUT THE PRICE OF THE DRUG, THEY COULD DO IT. I MEAN ANYBODY – WE COULD DO IT, THEY COULD DO IT, ANYBODY COULD DO IT.
EVANS: UNDERSTOOD. ONE FINAL QUESTION, JUST BECAUSE A LOT OF THIS HAS BEEN ABOUT THE SOCIAL CONTRACT. PRIOR TO APPLE'S TAX ISSUE IN DUBLIN, THE PHARMA INDUSTRY WAS THE ONE IN THE CROSSHAIRS OF ALL OF THIS. ACCUSED OF BEING TAX EVADERS. THE GOVERNMENT WENT AFTER PFIZER'S ATTEMPT TO TAKE YOU GUYS OVER TO GET THOSE TAX BENEFITS. DO YOU FIND THAT INCONSISTENT WITH THE SOCIAL CONTRACT YOU'RE PROMOTING WHEN IT COMES TO DRUG PRICE HIKES HERE?
SAUNDERS: I DON'T. I THINK, LOOK, WE PAY ALL THE TAXES IN ALL THE JURISDICTIONS IN THE WORLD WHERE WE OPERATE, ACCORDING TO THE LAW. AND, YOU KNOW, TAXES ARE ESSENTIALLY A LEGAL RESPONSIBILITY, NOT A MORAL RESPONSIBILITY. AND THERE'S NO PERSON THAT DOESN'T TAKE EVERY DEDUCTION THAT'S AVAILABLE TO THEM. IF YOU'RE WEALTHY AND YOU TAKE YOUR MORTGAGE DEDUCTION, IS THAT UNETHICAL? SO I THINK WE ALL AVAIL OURSELVES OF R&D TAX CREDITS. WE ALL LOOK AT MAXIMIZING OUR TAX STRUCTURE. IT IS SIMPLY A COST OF DOING BUSINESS. AND IF JURISDICTIONS WANT TO BE MORE COMPETITIVE, THEN THEY SHOULD LOWER THEIR TAX RATES OR CREATE INCENTIVES FOR BUSINESSES TO BRING THEIR EMPLOYEES THERE.
TIRRELL: I WANT TO CIRCLE BACK ON SOMETHING YOU SAID EARLIER ABOUT M&A. YOU HAVE BEEN CALLED BEFORE THE CHUCK NORRIS OF PHARMACEUTICAL M&A BECAUSE OF ALL THE DEALS YOU HAVE DONE. YOU'VE SOLD YOUR GENERICS BUSINESS TO TEVA, YOU'VE GOT $40 BILLION IN PROCEEDS SITTING THERE, BUT YOU SAY YOU DON'T WANT TO DO TRANSFORMATIONAL M&A. HOWEVER, YOUR NAME ALWAYS COMES UP WHEN A BIG TARGET IS POTENTIALLY ON THE TABLE, LIKE A BIOGEN. THAT'S NOT SOMETHING YOU ARE GOING TO DO?
SAUNDERS: NO, IT IS HIGHLY UNLIKELY. OUR FOCUS AND WHAT WE ARE LOOKING AT AND WE'RE EVALUATING LOTS OF OPPORTUNITIES IS TO REALLY BUILD OUT THE PLATFORM WE HAVE. WE ARE IN SEVEN THERAPUTIC AREAS, WE'RE LEADERS IN VIRTUALLY ALL OF THEM. THERE'S STILL SO MUCH UNMET MEDICAL NEED OR WHITE SPACE IN EVERY ONE OF THOSE CATEGORIES. WE ARE A LEADER IN MEDICAL AESTHETICS. WE COULD DO SO MUCH MORE IN MEDICAL DERMATOLOGY, SAME CUSTOMER. IN CNS, WE HAVE A STRONG ALZHEIMER'S FRANCHISE AND A STRONG PSYCHIATRY FRANCHISE, BUT WE COULD MOVE INTO PARKINSON'S, MS, EPILEPSY. THERE'S SO MUCH UNMET NEED THERE, NAMELY ALZHEIMER'S, WHERE THERE'S STILL SO MUCH UNMET NEED. SO WE HAVE A TREMENDOUS OPPORTUNITY TO GROW OUR BUSINESS IN THE CATEGORIES WE COMPETE, AND THEN JUST THE GEOGRAPHIC EXPANSION IS JUST A TREMENDOUS OPPORTUNITY FOR US AS WELL.
TIRRELL: WELL, WE'RE JUST ABOUT OUT OF TIME, BUT IN THE AREAS WHERE YOU'RE A LEADER, VISIONCARE IS ONE YOU DIDN'T NAME. BUT BAUSCH & LOMB?
SAUNDERS: WELL, I THINK ON YOUR PROGRAM YESTERDAY, JOE PAPA, THE CEO OF VALEANT, WHICH OWNS BAUSCH & LOMB, SAID IT WASN'T FOR SALE, BUT –
TIRRELL: HE SAID NEVER SAY NEVER.
SAUNDERS: HE DID SAY NEVER SAY NEVER. I DID WATCH THE INTERVIEW. BUT – AND I USED TO BE CEO OF BAUSCH & LOMB, SO I KNOW THE ASSET WELL. I'M NOT SURE THAT THAT WOULD BE A GREAT FIT FOR ALLERGAN, BECAUSE IT'S ALSO A CONTACT LENS COMPANY AND IT'S A PHARMACEUTICAL OTC COMPANY, AND WE'RE REALLY A TRUE INNOVATIVE PHARMACEUTICAL COMPANY. WE'RE LOOKING FOR THINGS MORE LIKE RETROSENSE, WHERE WE'RE DOING GENE THERAPY TO SOLVE BLINDNESS. WE'RE LOOKING AT NEW TREATMENTS THAT PERHAPS CAN CHANGE THE PARADIGM FOR AMD AND DME. AND THAT'S REALLY WHERE WE WANT TO BE.
TIRRELL: WELL, A LOT MORE TO TALK ABOUT. BRENT, THANKS FOR JOINING US.
SAUNDER: YEAH, THANKS FOR HAVING ME, MEG.
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