CHAI's Approach to Cost Plus Negotiations with Aaron Patillo

Show notes

Aaron Patillo was a key member of the Clinton Health Access Initiative's (CHAI) original drug access team. Based in Beijing, he brokered deals with pharmaceutical companies that helped slash the price of HIV/AIDS medicines and expand access to treatment for millions. Aaron sits down with host Inder Singh to talk about how CHAI got suppliers to cooperate by opening their books, how the team used cost-plus pricing negotiations to ensure sustainable access to medicines while dramatically reducing prices, and how CHAI pushed costs even lower by going upstream in the supply chain. Aaron and Inder also swap stories from the early days at CHAI, reflecting on how its culture enabled remarkable achievements— major price reductions in short periods of time—when market shaping was still an untested idea. The Market Shapers Podcast is a production of Inder Singh and is produced by University FM. This interview was recorded in April, 2025. Episode Quotes: Why the lowest price isn't always the best solution 12:33: [Inder Singh] Why did you not just take what you could get? Because I think people from the outside world looking in would be like, "Whoa, heck, get the lowest price you can," right? It's going to improve access. Why was that important? 12:44: [Aaron Patillo] It was really important because we were focused on the sort of long-term molding of the, of these markets, right? I mean, President Clinton very eloquently put multiple times, these were markets that looked like a jewelry store, with very low, low volumes and very high margins. And our goal was to try, try to push these into ones that looked much more like grocery stores, high volumes and, and low margins. And so to do that, even if we could get a big win on margin at zero or negative margin, that would be ultimately like a short-term win. And we're interested in having this really be a sustainable improvement to the marketplace that we were making. Long-term solutions over short-term wins 12:02: This is not charity, and we want this to be like a long-term, viable, sustainable business decision, and very specifically, that has a profit margin for them. So, we weren't looking for handouts or these short-term results. Even if we could get what felt like, kind of, an easy win and they're willing to agree at any price, we actually said, "No, that's not how we're operating here. We need this to be, like, sustainable from a business point of view for you, the company." The ground rules for market-shaping partnership 19:36: We didn't just go out and establish partnerships with whoever we could find. This was a very well-vetted process. But it was very clear these are the ground rules and you'll have these improvements in volume in a way that you could not bring to bear just yourselves with throwing added marketing dollars at this, for instance, right? These were unlocking components of this that wasn't just a dollar allocation game in any way. A lot of these suppliers found that hugely useful and information they wouldn't have otherwise. Show Links: Aaron Pattillo | LinkedIn Initiative for Medicines Access and Knowledge Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.