Exposing Hidden Realities in Drug Pricing and Investing | Eric Pachman, BSChE, MBA Chief Analytics Officer, Bancreek Capital

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Eric Pachman: My name is Eric Pachman. I work for Bancreek Capital Advisors. I'm the Chief Analytics Officer most people may be more familiar with me from, years ago, founding 46brooklyn and then eventually 3 axis, which I left in the very capable and clearly amazing hands of Antonio and Ben Link, who have just taken that to heights that I could have never envisioned 

Mike Koelzer: Eric, you had a pharmacy background. In fact I guess I knew this. You're a chemical engineer at heart. One of my sons is in chemical engineering at Michigan tech.

Eric Pachman: Must be a super smart kid. But I asked him, Lance, how much do you know about chemistry? And I think they're kind of in the pharmacy field where pharmacists know chemistry. But if you asked me right now, how to do anything with actual chemistry, go into a chemistry high school book and know any of that, I wouldn't know a damn thing.

Mike Koelzer: And I think he was kind of alluding to that too, where. They know chemistry, but it's not like they sit around all day in two equations. It's a lot of flow rates and all this stuff. When you think of who uses a chemical engineer, it might be oil refineries and that kind of stuff. So I think pharmacists and chemical engineers, I don't think we probably know as much chemistry as people might think.

Is that true?

Eric Pachman: It's totally true. I couldn't tell you a thing about chemical engineering at this stage of my career.

 I've been out of it for so long. My son is applying for college right now. Nowadays you actually have to kind of declare for

majors, I guess, He's 17 years old and he has to figure out what he wants to be when he grows up.

It's 

Mike Koelzer: Yeah.

Eric Pachman: Yeah. That's ridiculous. But I can tell you the one thing about chemical engineering is that you just learn how to problem solve.

It's drilled into your head. Now with all of this stuff with, kinetics and thermodynamics and everything, I

couldn't tell you a thing about.

But then when you come out, like whether you apply it to trying to figure out how to size up a pilot plant

to, Commercialize operations for

making soap or whatever it may be, or medications or it's to, launching a consulting business

or investing or any of the other many things that I've done.

I learned. The art of problem solving being a chemical engineer. So I think you can't go wrong at all. And hopefully my son will listen to this. It is not an easy major at all.

It's known for being one of the most difficult ones and so get the partying out of the way the

first couple years Lance and then after that be ready to bear down because those last

Two years of college for me were pretty rough.

Mike Koelzer: Good luck having your kids listen to this. My kids, I mean, there's no way in hell they're going to listen to these maybe after I die, maybe, and that's going to be like, maybe just a few minutes it reminds them of the voice they were sick of while they were living 

Eric, we met each other because of 46 Brooklyn years ago. And I think, boy, we've been doing the show for over five years. I think that was early on in there. 

I know that you and Antonio both speak highly of each other when I see different posts and stuff like that.

So I gotta believe that this was not an um, acrimonious split. So with that clearance.

What was the changeover that you had left your founding business and what was the impetus for that? Change? 

Eric Pachman: I always loved researching, learning, and educating. That's kind of my natural mode.

Much of that in the early days of 46 Brooklyn. Like I was literally, I loved the experience because I was learning the stuff. And then immediately writing it and turning around and sharing what I was

learning.

So people, If you go and you read it in chronological order,you would learn in real time with me as I was learning about

this stuff. So it got to a certain point in time though, and this just kind of was coincidental with the timing though, where I stopped learning. And the same rote story was like on replay.

 And I won't say it was like this seminal moment of Oh my God, I figured out that the prescription drug crisis within this country is completely unsolvable and is more related to the systemic issues within this country than it is to anything else.

And there's actually really nothing wrong with net prices. But it kind of was like that. And then I'm like, wait a second, I'm just repeating myself over and over again. And it just got a little bit less fun. But having said that, this was the exact same time that the business was actually starting to do well.

We were actually starting to get traction and there was more impact and everything. And so that was really engaging and really exciting about what we were doing. But at the same time two things happen. One, Ben Link Who, I'm sure you know who

Ben Link 

Mike Koelzer: We've been on the show. 

Eric Pachman: Ben Link came into my life. And honestly, had Ben Link not come into my life through Antonio there is no way I would have been. Antonio is an absolute master at what he does. But he would be the first person to tell you that he does not do what I do.

He doesn't do the database coding and like the visualization stuff 

 He's the pretty face of the business.

I had a very pretty face at that, right? scary pretty

Mike Koelzer: Yeah, well, yeah, yeah. 

Eric Pachman: so like we were great partners we worked together so well because we complemented each other Like I was creating a lot of content and he knew how to actually make an impact with that content

 But when Ben Link came along, I realized that he was a smarter, younger, more passionate version of me that could do what I did. But he was also a pharmacist. So he actually knew what he was talking about,

Unlike me where I just need the data piece of

it.

Right.And then there was like some small part of me that I'm not a really good manager of people, I excel at a lot of things. That's not one. I like getting my hands into a lot of things and I think that in hindsight, I'd like to think that this is true there was a piece of me that realized that Ben could do so much more if he were running the show. And I'm talking about on the content creation

Because as long as I was there, he was going to maybe defer to me

or want my feedback. there's a certain point in time where you just have to kind of be like. Look, man, you are so much more awesome than you can ever know, which I'm hoping he listens to because he is.

He's just so unbelievable.

And you can do more than you think you're capable of. And I think if you look back to what he has done in the content that he has created, in the amount of time that he has created he's blown me away. And then, of course, Antonio has just continued to do what he does, which is his unique talent with being able to create action and impact out of just fantastic, unique, and differentiated content.

 But when Ben came on, I was not thinking about leaving at all. 

Then at the beginning of 2021, and it all happened pretty quickly my best friend from third grade called who I've been best friends with Andrew Skadoff. He's the founder of Bancreek Capital Advisors. I've been best friends with him since third grade. And it's not one of those things where he magically reappeared.

 We've been

continuously best friends throughout that entire period of time. And my background before people know me from pharmacy or my background is in investing.

I spent more time doing that than I did, on the pharmacy side of

things.

And so when he called and told me I'm thinking about launching my own investment firm.

It's going to be small, but here's my strategy. He was trying to do something that I thought was so innovative and so unique that I was like, I had chills on my arms thinking about what he was trying to do. And so I started just getting out my spreadsheet and figuring out the math behind what he was doing and realized that there was like some legitimacy there. And I couldn't stop thinking about it. but on the other hand, I have this business named after my mom. It was going back looking for something to fix when I couldn't fix my mom's cancer. It's doing really well. Just really kind of on the precipice of having this great impact. And so I'm like, I can't walk. I can't walk away from what I'm doing because it's too important.

When you toil over something that much, that means so much to you. And then it actually works. The last thing you want to do is leave it. But I couldn't Control when that opportunity was going to be,

to start a business with my best friend. Basically my brother,

 so if I look back at it now, I mean, the decision wasn't that big. Black and white back then, but it just seems like it was almost fate now,

Mike Koelzer: did you ever second guess yourself not where you were going to, but second guess yourself leaving. You didn't look back and say, maybe I did this too quickly or something. You didn't do that.

Eric Pachman: No. The second guessing that I did all came from a place of weakness. When you're at a place where there there was like a thriving business meeting needs that were unmet in the marketplace, don't have to worry about paying for college for kids

and stuff like that.

And you've built that. With your two hands And then you leave it 

and then try to do it all over again,

With arguably less control, going into an investment business, like you're at the whims of the market I would be lying to you if I didn't say there wasn't some like second guessing, or it

was not second guessing, but maybe lamenting over like how, You know, much more financially stable life would have been had I just kind of stuck where I was, but Whenever I did that, it would only take like another moment to

come back to, how passionate I was about what we were building, at Band Creek and the unique opportunity that we had to bring something that I think the marketplace had the scene and knowing that it's not a straight line, 

I mean, you're going to have bumps in the road and everything. Point of all of this isn't to just kind of get to success and just I don't know, just kind of sit there that's boring.

 So that's not what I was looking for. And I'm not saying that's what Antonio and Ben have done because they've just continued to push the

envelope, 

But I think for me I don't have any ties to pharmacy,

Ben does. Antonio has very strong ties to pharmacy. This is more personal for them. For me, it starting it was going back to looking for something to fix when I couldn't fix my mom's cancer and as soon as that has run its course, like I started to lose

some of the energy for it that I think, for someone like Ben and Antonio, like really can persist for a lot longer.

Mike Koelzer: All right, Eric, now

here, I think is where the connection is between you and pharmacy and investment stuff. Cause I know you did , a little bit of all that in your past. I'm thinking back to our first conversation years ago. And the reason why I remember this is because I quote you quite often on this.

, we were talking about the calamity, which is vertical integration, how they own the pharmacies that they're saying that the employees have to go to. And what a terrible thing for competition and stuff like that. And I said, Eric, Is there anything close to this in your history?

 Is there anything close to this that you know of that is as bad as the pharmacy industry? First thing out of your mouth, you said, no, but you said, if there's anything close to that, it's going to be the investment banking back in the, . I don't remember all the details, but that's where the banks may be.

Own their own investment guides. And people thought they were non biased. They would guide people right back into their stocks, which wasn't maybe the best move that a non biased report would give and all that.

 And you said, Mike, pharmacy is a hell of a lot worse than that, but that's the worst I can think of that was close to pharmacy. So I think the common theme is discovering some BS that's going on and how maybe you can help people and loved ones and all that on a bigger scale to make sense of all this.

Is that a connection? And are you doing anything in that investment part? Are we conquering any giants in that? Are we fighting against anybody or is it just new stuff that you're coming forward with? What are you doing in investment now?

Eric Pachman: First of all, that, that example, I want to touch on that a little bit because I probably with some of the additional knowledge, I

can kind of help flesh that out and

bring it back to talk about the PBMs, which I know your listeners probably love hearing about. So basically, say like a Morgan Stanley, a Goldman Sachs or whatever, large investment banks,

they will have the investment banking function, which will help a company go public. I have a private company. I want to raise a bunch of capital, go public, get liquidity, whatever. So that's all happening. Very secret stuff. You can't talk about any of that stuff. , this is very strict rules within the SEC, 

So before there was a bunch of regulations the walls between

And then the research department, there were or at least reports of discussions that would happen before a company went public, where the research group that does the buy sell hold rating on a stock, you see these brokers on CNBC or whatever, they would basically.

Or at least was discussed or reported that there would be kind of collusion where they would be like, Hey, we're going to basically, try to raise a bunch of money for this one company, we're going to IPO at whatever stock price it's going to be a hundred, 200, whatever it is. But then at the same time, we're going to release a research report saying, buy this stock. That is very, that's a big no. There was eventually a wall put up in between the two, that would basically say those departments are not allowed to talk to one another.

Now that I know the PBM world a lot better than I knew it

when we first talked,

This is like me as the PBM saying, Oh, okay, Mike, you are an employer. And I am responsible for designing a formulary for you, and so that's one side of my ability. That's the investment banking side. The formulary design

side of it,

So these are the drugs that are allowed to be on your formulary. These are the ones that are not. I'm going to be the bouncer in front of the club. Who is going to come in?

Am I going To turn away at the door? The problem with the PBMs though, is the formulary side of the business is allowed to talk to the rebate side of the business. And they are all working together to make as much money as they can. So the formulary sides can say, Hey, I know this drug sucks. It's just like some combo drug of two old generics.

That's marked up by 10, 000%,

So I don't want that in if I have the employer's best interest in

life, but then the rebate side is like, yeah, but they're willing to offer us our 90 percent rebate. We can flush that through Switzerland. Launder it and then give it back to them. Tell them we're giving all the rebates to them and we'll really make a lot of money and they'll

be like, Oh, Cool.

Okay. We're just going to throw out in the formulary then so it's happening right now, but I mean, there was wisdom within the regulators on wall street to say, Hey, this is really bad for investors. This is manipulating the whole situation.

This is bad. They shouldn't be able to talk to each other. But that wisdom has not yet made it through to pharmacy benefit managers. I mean, you're starting to see it now, thanks in large part to the efforts of Antonio

and Ben, but you still have not separated those. Where's the wall between those functions? So you have someone that is building the formulary for

the employer in their best interest. And then someone else that is negotiating rebates. They don't talk to each other at all. So I didn't give that example, but I hadn't connected the dots

yet 

Mike Koelzer: You don't always need to know what species of fish are in the stinky bucket when something stinks, it stinks. And now we know the details, but if it stinks, it stinks.

Eric Pachman: So my best friend, he worked for a large single family office. in New York City. And so what that means, that's like industry lingo for he worked for a very successful 

family, that if you think about it, and if you're a successful pharmacy owner, and you have three, four, five, 10, 20, 50 pharmacies, you get to a certain amount of point in time where you've been successful, you have enough money, you need to go figure out what, how am I going to invest this money and everything. Think about those times like. 100, 200, 500. And once you have enough money,

There are families that will have their own investment teams.

So they basically hire it all internally and they will figure out how much should I put in this asset class versus that asset class versus that asset class. Back in the day a little factoid. I worked for one of those families right out of business school or almost right out of business school. My best friend started in 2009 working for one of those families as well and he worked for an absolutely wonderful family.

Mike Koelzer: In your friend's case, was that their only client? 

Eric Pachman: They're large enough where they have their own investment teams.

Mike Koelzer: Because there's enough going on. it's like there's enough to have their own chef and their full time fitness person. It's not like this person spending two hours a month giving them

details. It's at least a full time 

Eric Pachman: In cases, some families will have a dozen, two dozen people on staff

that are worried about investments. Other staff that are worried about like charitable giving

And giving their money away, He was lucky enough to start working for this just unbelievable family, just wonderful human beings. Where he was really able to spend over a decade developing his investment strategy.

So the investment strategy started off like he graduated from Columbia value investing program, which teaches you how to analyze companies from the bottom. So let's talk about this in terms of pharmacy.

Walk into a pharmacy, you're analyzing it, you're looking at all the financial statements, you're looking at cashflow, how much money is getting tied up in inventory? How much money do you have to dump into your maintenance capital in order to maintain the pharmacy? What's the volatility on your margins?

Because the PBMs are squeezing you here and the

wholesalers are squeezing you there.

Like an in depth colonoscopy on a business.

 In the industry, that's called like deep fundamental analysis or deep fundamental investing, which is kind of like the gold standard

Learn everything that you possibly can and then use that to build models and try to have a better edge on what future cash flows will look like. And then you can make investments based on that. You can imagine that this is a very time consuming process

Do that, and so he started to get really intrigued by data science and by specifically information theory, the way that video calls work and the technology as far as the signal processing and everything That all dates back to a gentleman by the name of Claude Shannon who worked at Bell Labs and kind of was, I mean, these are some of the most brilliant scientists kind of of their time

back in the 50s, 60s, 70s or whatever at

Bell Labs. And they were coming up with the math that ultimately led to communication theory and led to us being able to have this call over Zoom or whatever platform that we're on. That all originated from information theory. These people like Claude Shannon, another guy by the name of John Kelly, not only were coming up with ways that eventually transformed the way that we communicate, but they also were trying to figure out how to make money with this. And so there were little interesting offshoots of information theory. One specifically called the Kelly Criterion, which was invented by this guy, John Kelly, and was popularized in a book called Fortune's Formula, a book by William Poundstone, which I would highly encourage people to read.

It reads like a novel. It's an unbelievable book with mafias and gambling and horse betting and all sorts of crazy stuff in it and tons of math too. So I love it. Anyway Kelly Criterion was kind of, it was, spun out of this and was used to figure out how I should seize a bet in a game of chance if I have an edge or if I think I have an edge on that game. And so the best way to kind of communicate this is we always use the example of a coin flip game. So let's say that you and I were playing a coin flip game, and we just had a regular run of the mill coin and you flip it, how much should you bet on the game? The answer is, it's gonna come up heads 50 percent of the time, tails 50 percent of the time. You have no edge on that game, and so you would bet zero, according to Kelly. Now, what if you brought Mike a weighted coin to this game? And you're like, let's use my coin instead. And you knew that you had an infinite number of flips, you're gonna flip this thing a thousand times. And it was a 70 percent chance to land on heads. You flip, flip, flip. How much should you invest in your bankroll? If you start with 1, 000 What percentage of the bankroll should you invest? The answer is you can solve for that using the Kelly formula. And the answer is if you wanted to maximize the rate at which you could compound your money based on that game and the edge of the odds that you had, you would bet 40 percent of your bankroll. So if you came to the table, first flip, you bet 400. Next flip, say you lost, you just lost 400 right off the bat. You pretty

bad, but you're never going to have a chance of ruin because that always scales down. You're always betting 40 percent of the new bankroll. But over time, and I've done many simulations on this,

but you can trust me. Over time, you will compound at an astounding rate with a game that has odds of 70 -30.

 It's just ridiculous money,

That's the reason why Vegas doesn't offer you games where you get their weighted coins or anything like that.

Eric Pachman: I knew about Kelly and the Kelly criterion and it is actually the most elegant and pure way to figure out how I should compound if I have an edge on anything in life. If I want to maximize my compound, you use Kelly. But when I read this book, which I read about three, four years before Andrew. I never figured out how to apply this to stocks? How do you apply this to the equity market? And so he did, he connected the dots and he's like, I bet you can actually use this not to figure out like , how to size your bets and everything, but

I bet you Could figure out how to rank them. Can you actually use this in order to figure out how to find those companies? That has structural advantages within their businesses that will allow them to make cash and then spin that cash into more and more cash.

So it compounds up and up over time. Can I use this arcane, obscure information theory thing that I've dredged out of a textbook to actually find better businesses? And that to me, blew my mind. It was so tantalizing to think there was a way that we could use what's called a quantitative strategy, a data driven database strategy to find awesome businesses, to find structurally advantaged businesses. And let me dwell on that point for just a second.

So when I say structurally advantaged businesses. This is the way I define it, this is the way I explain it to like my kids,

Every business is going to make cash, has to, 

Mike Koelzer: Remember, there's a lot of independent pharmacies here, Eric. Come on now. You, be respectful.

Eric Pachman: I know some don't. When I worked in pharmacy and while I was managing pharmacies, I had never ever seen a business that was as unpredictable, especially the fewer pharmacies you own.

Like I would

Tell people like, outside of the pharmacy

business, I'm like, dude, you would never believe I'm not making this up.

Right. So the wholesalers make up our prices and change them whenever they want. And so I have no control over my cost.

And then the PBMs make up our prices and then change it whenever they want. And then, oh, by the way, we get paid random amounts on certain drugs and that patient may move or die or whatever, or the PBM may just change the price the next day or the

Mike Koelzer: That's right.

Eric Pachman: will change. And so I literally am getting squeezed

with no control on both sides of it,

Mike Koelzer: And here's one more for you a lot of these PSAOs that are supposed to be fighting on behalf of the pharmacy to sign up contracts with the PBMs are run by the wholesalers

 They don't care how much money you make.

They just want to make sure your doors stay open.

Eric Pachman: Yeah. So pharmacy is not an example of the structural advantage.

Pharmacy is an example for people. I mean, I'm not saying this just because I'm on your podcast, these are people, especially independent pharmacists that I've met and spent a lot of time with. They're passionate about their craft.

They want to serve people despite the fact that the business sucks

and they will keep doing it to serve their community until the last dollar is spent. 

Mike Koelzer: I was just talking to someone this morning. This guy on my team said it'd be nice to be on a level. Where everybody's getting paid the same and then different businesses can decide to go one step further for somebody. And I said, the problem now in pharmacy is pharmacies are getting paid a lot less and they're still going a step further. So to your point it's love of the, I don't even think it's love of the game.

It's love of the people and stuff, but you're absolutely right.

Eric Pachman: I believe in entrepreneurs, because if you actually knew the odds of success going into a business venture, you would never do it.

Like, I mean, but there's so many people that are just putting themselves out there for something that they're passionate about

and 80, 90, 70, whatever percent are failing. the ones that don't. They take off and that's where our growth comes from. That is what really makes this economy great,

right? and it's all these reckless people that are pursuing their passion. And I kind of look at pharmacy in the same way. If you were getting into this just for a paycheck, you wouldn't go in and open up your own pharmacy now.

 I've had enough experience with running pharmacies and being around enough independent pharmacists but there is something about that interaction that is just sacrosanct, these pharmacists. I'm going to add pharmacists to my list of great American heroes, entrepreneurs and

pharmacists.

Mike Koelzer: Eric, so back on that conversation, then pharmacy is a bad example of the volatility 

Eric Pachman: It's a good example for me because what I was going to say is think of all of those things that frustrate you about, if you own a pharmacy, think about all those things that frustrate you. We're looking for the opposite.

Mike Koelzer: So basically pharmacy is like the anti, example of a structurally advantaged business that we are trying to find.I was watching David Letterman the other day, clips of his stuff. you said these are things we don't want to do, but David Letterman they always picked on this one person.

 He said, so now we're going to bring out a writer and we're not going to tell fat jokes about this person. , but it was something like what did this person not do?

he did not get married just so he could be the first in line at the buffet all right. So we have a good example of what not to be in this. So Continue with the opposite.

Eric Pachman: Andrew had figured this out that, there was potential in using information theory and applying it to long term investing in what we call these structurally advantaged potential there. But Andrew doesn't have a background in data science and modeling. So that's when he called me. 

 He called me and he said, "Look, I know what we need to do, but we need to build the team in order to be able to do it. And I need a lot of data horsepower. Asked me to come on to kind of, head up analytics. And then importantly, was our third member of the investment team, Anton Yen. Anton's one of the smartest people I've ever met in my life. He worked for Lawrence Livermore National Laboratory. Most of the stuff he was doing had such a high level of security clearance that he couldn't even talk about it. But let's just put it this way, the things that he has told me about are like launching satellites and making sure that they don't blow up. And You may have heard recently how we were actually able to create more energy from fusion than it consumed, which was like a really big deal.

He worked on that project too. really crazy stuff 

Mike Koelzer: sure.

Eric Pachman: And the cool thing is that he had never spent time investing, but he had basically written a book on information theory.

So Anton has

this amazing back, which was really this perfect fit to take like the fundamental concepts of information theory. And then how do we actually take this and apply it to this whole new arena of long term investing, long term compounding. We started off in 2021. With the three members of the investment team, Andrew, me, Anton, and then also another friend from childhood, Kevin Pauly he's, he basically is, runs all of the operations. He's the chief financial officer and the chief compliance officer.

Mike Koelzer: In the meantime, is your company servicing anyone or are you guys just building this? 

Eric Pachman: No. So we, 

The reason why Andrew left, was because he wanted to move and basically be able to service a broader publiC. by the middle point

In 2023, we realized that the strategy The tools and the models had been built and were developed to a level where we can fully automate the process. so this was a big deal we realized no longer did we

have to only work with very wealthy families.

 We could actually create an exchange

traded fund, an ETF, which is, 

you, there's, Hundreds and hundreds of them out there on either the NASDAQ or the 

New York Stock Exchange, which you can buy 

just like a stock 

and we can offer our fund up to anyone that wants to participate in this kind of a strategy. 

So Eric is this like a mutual fund?

Eric Pachman: It's a mutual fund. 

Mike Koelzer: Mutual fund but of private

ones.

Eric Pachman: It's a mutual fund that's 

just traded on the stock exchange.

So you can buy it, you can sell it just like a stock. 

We've spent the better part of over 10 years now, like doing this. Brick by brick building this very intentional and data driven strategy that we're bringing to the ETF marketplace 

We have this product and we're super excited about it. It's 

performing well, 

on both sides of the fence, the international and U. S. But how you actually get the word out on that product, how you get people to be aware of it, like that's a whole new challenge. it is just, 

it was, it's taken a lot of

learning and to be honest, we are still like 

learning, we were just at a conference last week called future proof, which was just a fantastic conference. Met a lot of advisors and 

just got to talk 

to a lot of people and there are

just 

so many ways if you have really good content, if you have a good product offering that you're excited

about there are just a lot

of ways that you can connect with people. So they just become aware of what you're doing and then they can make judgments about whether it's a good fit for them. And so we're just scratching the surface on that,

Mike Koelzer: My dad and I were business partners before he passed years ago. And sales people would come in and they'd say our product, we've decided with our product, whatever it was, a cream or something over the counter, typically, we've decided with our product that we're only going to focus on the small independence.

And my dad would always lean over and say, well, that's because none of the big boys want them. None of the chains want them and stuff like this. Why do they want to close their market? All right. so, I'm going to play devil's advocate. So how is this going? And if it works for an ETF,how come this isn't on the front page of the New York times tomorrow and every day trader, every stock trader is using it because you've found the system out. So if this works and this is devil's advocate,I'm, happy for you, I'm excited for you guys, but I have to ask this, if it works, how come it's not like exploding because we talked about earlier in the show, once you have a leg up and you know exactly what percent to put in, you know, the world should be beating your door down 

Eric Pachman: Yeah. 

Yeah. Yeah, let me go up on a little bit of tangent before 

I answer that question, or tangentially answer it my dad,

When I pieced together for the first time, the public data showing what Medicaid Programs pay, 

and NADAC, which is like, literally, okay, let's be honest.

These are two public 

databases, which

I'm a novice data analyst at this point in time. 

It's not rocket science

to connect the two. Thank you. I was 

explaining this to my dad. This was so groundbreaking. And he said What are you telling me? nobody's figured this out already? I, how is this possible?

I mean, they've been doing this forever. Man, there are lots of people. They're very smart. They're highly paid. They're blah, blah, you? How are you the first person that has come up with 

this? And I'm like, Dad, I do not know. 

Mike Koelzer: Great answer Eric.

Eric Pachman: But all I'm saying is that I've had the right circumstances and privilege and like whatever.

And here I am and nobody's done it before. And that's what it reminded me of. But I'd say the more direct answer to it is that the financial media is, how do I say this? Like it, they're only going to tell you about something that's not true. After the larger of the two ETFs has, 64 right? That's really good you know, progress for being months in or something like that. 

Eric Pachman: but it's still small. It's still very small as ETFs go.

Like a decent size

ETF is like two, three, five, 10 billion. So, 

The ones that you're going to hear about are the big ones that are, everyone's already made investments in because it's all 

FOMO and herd mindset and that kind of stuff that's going on 

And a lot of them are 

all owned by the same companies too. And So they're going to market their own stuff. So,

We can 

talk about what we're doing until we're blue in the face, but we're only going

to get coverage. After we're like 500 million, and then people are 

going to be like, oh my God, what is this fastest growing thing?

 There Must be something here that we're missing, throughout most of the year. Like we've been one of the top, I don't know where we are right now, but there are points in in time in this,

year where we were like top five

active manager in the entire world 

Eric Pachman: amongst the actively managed

us large cap, like a pool of maybe 200 or so ETFs and we were top five, I mean, we may be in the top. decile right now. So we've done very well, but there are other small funds in there that have done very well too. And you're just not going to hear anything about them. 

I also was going to answer the question well, I hadn't been on the business pharmacy podcast until now.

And now that I'm on it

Mike Koelzer: Now they know. 

Eric Pachman: Last week we really

learned, likewe 

have to 

lead with our

story. Like, I am very proud of our story. I think it's not only differentiated, but 

there's a systematic approach, 

 This is a process and I am 

very proud of

this process and it's continued

evolution. And there's not a lot That's going on. That's like that out there. And

so I think a lot of it could be, I'll take the responsibility for it, but like, I haven't been out there leading with my 

chin with this story.

And so I appreciate the 

opportunity to

do it here 

because I want people to dig in and to be like, Oh my God, this is something that's pretty cool.

Or,

this isn't for me. I'm not interested in this. 

Or, 

I'd rather do a double leveraged short on oil. , whatever it is. Or I'd rather like, do 

fantasy football.

Mike Koelzer: my dad used to, 

he would turn to me a lot and say things kind of under his breath, and maybe that's where I got my cynicism from. But he'd also say like when people would come in and they'd be like financial advisors, and he'd be like, well, Dick's a financial advisor, but the reason he's working until he's 74 coming in, you're still trying to pound the pavement is that he blew it on these, you know, investments back then. The cool thing we're talking about here is you're not setting up a system and saying everybody. Follow me with this program. You're using this program to try to successfully build your own thing. You're not the advisor or the coach that has gone off and said, buy this so you can make money. Cause I would say, Eric, instead of wasting time selling this program, why don't you use it for yourself and try to make a difference. Ton of value. And that's exactly what you're doing. 

 You're not off just saying, I'm going to sell this program or how to do it. And it's like, No. we're taking this information. We're using it. I'm using it. And we're going to make a go of it. 

Eric Pachman: no, it's It's been a learning experience and it's been like, I'm just looking for the opportunities to kind of tell our story because , I've, I've had to reconcile with, I'm not really good at

 being out there selling myself. I don't 

I love doing it. It feels kind of uncomfortable. Never had to 

do that with 3 axes. It was always people like calling me and being like, Hey, Can you do 

this? Can you do this? I'm like, sure. 

Antonio would be the one that was out there kind of with the megaphone. 

and so I never had to do that myself.

Cool. But 

This is like a personal growth opportunity for me now because I don't have Antonio over here. and so I really have to get out there and kind of, speak with the passion that I feel about this product that we've built. I really do think that we've cracked something here.

Mike Koelzer: Well, I think that marketing these days is, I don't quite understand it, but story, basically people want to become a part of your story back on the comment of my playing devil's advocate to you. One of my sons had a view that was quite different from a pretty large establishment in the world.

Let's put it that way. And the person that represented this establishment said, so you think that more than everybody that's come before you than all the ages of wise people that have, you know, done this and so on. And he's like Yeah, I do. You know, there's different logical fallacies. There are so many of them. I don't know, let's say there's a dozen of them, and one reference to a degree 

or reference to the past. That doesn't guarantee something for the future. 

Eric Pachman: Let me give you another example of that. So 

we talked 

about my dad's question. I'm like, how am I the person that had basically uncovered spread pricing within the public

domain? 

So 

fast forward, 

to really 2023. I know I went away and I disappeared.

That doesn't mean I stopped building data visualizations. This is my hobby, I mean, I 

I love running. spend time with my 

kids. I have three kids. And so I'm busy there. But like I play with data for fun, I love it. 

And I'm always

building data visualizations, but now I'm in this new world,of markets, 

I'm in this new world of inflation, I'm in this new world of jobs data, so there's all these data sets out there that I can play with. The same way that I 

played with all the prescription drug data from CMS, and so in 2023, I really started looking at this data and I'm like, okay, if we're going to launch these ETFs, we actually need to have a public advisory website, which eventually became bankreek. com. And we had an internal discussion. What do we want to do with this site? you go to a lot of advisor sites, there are just a lot of like descriptions about like, 

Why should You trust me to manage your money? And I'm like, 

look,

People are smart.

They can make their own decisions on whether they want to trust me or not. What I want to do with this website is I want to publish data visualizations. Sounds familiar, So I actually, all of the Bureau of Labor Statistics data on CPI, which is basically like the most popular in the entire world, turns around this number every time it's released every month. you know, you, I'm sure you heard about

the Federal Reserve cutting rates by 50 basis points and like, well, what does 

Does this mean? And, 

jobs are the two parts of the Fed's mandate. So

Those are the two big data points they're looking at. So I'm like, okay. Well, where are the free interactive data visualizations on inflation and

jobs?

Because I want them, I want to see what they're like, and if they're not that good, I'm going to, I'm going to build some and give them away.

 happens is like inflation will come out and people, and it'll be like, okay, the number is. 5 percent or it's 3 percent or whatever.

But as we all know, as I'm not a pharmacist, but as pharmacists know, the devil's in the details, right? Like, 

there could be one or three of your prescriptions that are driving a large portion of your profit for the 

month. And then the rest of them, you're losing on. Right? 

And so the 

inflation works the same way. 180 line items from eggs to rents build up to inflation, and each one of them has a different

weight within inflation. And So I was out there looking for where is the data visualization that can quickly tell me

exactly what happens when inflation gets released. I don't want to just know that rents were up by 5. 5%. 

I want to know the weighted impact of that. So I can say,

What was that? as a contributor to the overall headline 

inflation number.

And guess what? My dad doubted me again, 

but it didn't exist. I'd looked everywhere for it. You just Google it. 

You can't find anything. Now you'll find viz, but

like you 

I couldn't find anything on it. And so 

This is even more egregious. 

It tells you something about, I don't know, our society or whatever it is, but there are literally trillions of dollars of value that are being created or destroyed based on data. and there was no, 

 Data visualization where 

you could quickly see what happened. Rather you had to read the media who was interpreting it for you and then feeding you what you should think. And that, I hated that. I hated that when I was working at 46 Brooklyn.

I didn't want to be told what to think. I don't think people deserve to be told what to think. I think people are smart enough to take the information 

and come up with their own views. As long as we're working with real facts. Then

I think we're not going to get ourselves in trouble. You should be entrusted to come up with your own views based on real facts.

But if I hand you like a super messy text file that I 

downloaded off of the 

Bureau of Labor 

Statistics. You also don't have the training to do anything with that. So I have to help you out a little bit, but then after that, 

you come up with your own views on where we are with inflation 

or whatever topic it is. And so that's simply just did not 

exist. 

And so I created it and in February, or I think it was

February, March, I published it for the first time. I am literally not an expert on inflation at all. I connected the data together, but to tell you how starved the media was of any insight from this. Within like a month, I was in the Financial Times, I was in the Boston 

Globe.

 It was basically 46 Brooklyn on repeat, except with data 

that instead of it being like, I know for pharmacists, it seems like it's a big deal, like the spread pricing data, but it 

is literally like a drop in the ocean compared to inflation data. 

And so

my 

kind of going assumption now is that you can 

literally take

any data source off the web and create something that nobody's ever created. There's just so much opportunity out there . 

Mike Koelzer: talking to Antonio, we were talking about how in pharmacy, we know six years ago, no one knew what a PBM was. And now they're having these, you know, things in Congress. And I was saying, Antonio, where is this from? What's happening? And we had to. Somewhat dragging out of them. Oh, who am I kidding? He came out and said it, but he didn't say it as number one. He got his name in there anyways, but he was like, Mike, the data wasn't connected before. And he was telling me, it's like, knew this part of it. And the manufacturers knew this part and someone else knew this part. And I said, Well, Antonio, was it as down and dirty as going into the trash bin and pulling out information? I forget what his response was, probably not quite, but it was still stuff that was like, you had to dig a little bit.

But even when you found it, it wasn't connected. And so we're in a beautiful age right now. The data's sort of there and it's sort of here, and it's the first time we've seen the data, But it takes someone brand new to come along. Yourself and 46 Brooklyn and so on to put that information together finally and connect those pieces. 

Eric Pachman: It also just takes random luck and accidental chance. 

Mike Koelzer: Yeah but they've done it a 

thousand times and 

Eric Pachman: There was no luck in me knowing what I knew how to do. The luck was that I ended up in Dayton, Ohio, and the only reason I ended up in Dayton, Ohio was because my 

wife really wanted to get back to Dayton, Ohio, because that's where her family

I grew up.

We Had land there and everything. And so

She has family ties to Dayton, Ohio. And so I happened to land in Dayton, Ohio, in a pharmacy chain. Right after Caremark had basically rolled up almost all of Medicaid, like 80 percent of Medicaid. And so I didn't know the data that I was looking at. I didn't know that it was representative of pretty much the entire Medicaid program.

When I was looking at our claims, That it just was the random chance that Ohio was 

the state where Caremark had built too much of a monopoly to where someone like me could actually look at the data and then extrapolate that to the entire state and be actually right. Whereas What if

my wife was from Rochester, New York and I end up in New York where 

at the time there was like 15 different managed care plans and

it was like, I would have been doing calculations. based on like a small sliver of the state's claims, and then any extrapolation that I did to the entire state would have had no bearing on what actually happened. 

And so, the fact

that I landed in Ohio, literally just months after Caremark had kind of completed their damn domination of the Medicaid program, and like after they had just done that major slash to MAC rates, it was so severe where it, It caught my attention as a data, 

analyst to be like, what in

Has the world happened here? And then Antonio just happens to be in the same state. Like I'm convinced that if Antonio wasn't here, I would have never been able to know what to do with all that information. And so, it just was like, 

That's where I came up with this random chance. 

Mike Koelzer: There's so much damn information in the world that I try to simplify my likes so one of those is I like time travel movies. That's like a genre I like. And then I like movies about the white house, about the presidency. The third thing is I'm a huge Beatles fan.

I love the Beatles and the history of the Beatles and so on. I tell my kids, the best band ever. How can you say that? I said, they are. And they're like, they're all from one little town. Why not gather people from all over the world? They know they were all from one area. I'm like, it happened. It happened. I don't know if a weak link might have been Ringo. There's debate on that. But you're the pharmacy people of Liverpool in Ohio.

Like, Ohio's the new Liverpool, as far as I'm concerned. With you and Antonio, and I'm going to miss names, but. The other people from Ohio, you guys were that magic sauce that came together and just did some remarkable things and you're right.

 Sometimes the stars line up like that and you guys did it, so. 

congratulations to you.

guys. 

Eric Pachman: Thank you. Yeah, no, I couldn't be more proud of, my early work and then even more proud of what Antonio and Ben 

and the team has done since I left. I am just in awe of what they've been able to accomplish knowing that they're kind of, not letting off the gas. It's personal for me, right? The pharmacy battle is not a personal one, which is the reason why I wasn't the right person for the job. 

In hindsight, 

The personal part is, it will always remind me of my mom. It's 

her legacy. 

I think she would be really proud to know. that the nonprofit that is responsible for some of the most disruption in drug pricing in many years is bears effectively her name and people may never

know that, nor would they care, But I mean, kind of almost immortalized her. And, what more can a son hope to do? 

Mike Koelzer: People love seeing these fights, against the big guys and we know now that we can go to 46 Brooklyn and so on and read those reports, tell us again because you said you had the similar kind of ideas and reports And that similar drive, where are the listeners gonna go to see that?

Eric Pachman: Our advisory site, which has all of the visualizations that I've created, 

is Bancreek. com. So BANDREK dot com. I have basically recreated the work that I love doing for 46Brooklyn, which is just finding complex topics. and writing about them and doing so with data visualizations. 

And so I have probably five or six data

visualizations that are up there. They're all on inflation and jobs right now, but I have grand

visions of like expanding that to a whole bunch of different macroeconomic data sets. I also have a lot of research that's up there too. and it's similar Maybe not as long as 46 Brooklyn stuff, but 

It's similar in nature in that it's very chart heavy. A lot of it Is like really digging deep for people that really want to understand a lot of the what's what's moving kind of this information. 

Mike Koelzer: Eric. What a pleasure catching up with you. I know we could go on forever. This is fun stuff, keep it up. Thanks for your time. And I look forward to the next time we get together.

Eric Pachman: Thank you. Thank you so much for having me. It was just a blast talking to you and 

counting the days till the next time we can talk again.

Mike Koelzer: Very good. Thanks, Eric. 

You've been listening to the Business of Pharmacy podcast with me, your host, Mike Kelser. Please subscribe for all future episodes.