Former Apple CEO and RxAdvance Chairman and CMO John Sculley joins the On the Move panel to discuss Apple's road to a possible $2 trillion market cap.
ADAM SHAPIRO: But we have to take another look at what's going on with Apple. They are approaching market cap of $2 trillion. It was only about two years ago when they hit $1 trillion. John Sculley is the former CEO at Apple. He's also the chairman and CMO from RxAdvance. He's joining us from Palm Beach Florida. We want to talk a lot about pharmaceuticals and Moderna, but first let me ask you about Apple.
There was an article today, I believe, in the "Wall Street Journal" pointed out that Apple, its market share in the S&P 500, has surpassed what IBM held 35 years ago. So Apple the new tech titan on the block. Is this a good thing? Mr. Sculley, I think you're muted, if you just unmute there-- I do it all the time. There you go.
JOHN SCULLEY: Hi, Adam. I think it's a very good thing. I think Apple is in a very different position than many of the other big tech companies. You know, it's not taking people's data and selling it. It's not using the data in ways that the customers aren't aware of. So Apple has said that they're going to have their greatest legacy as a health company. And yet, we still haven't seen the evidence yet as to what that might be beyond the great success they're having with the Apple watch.
But the Apple watch just measures relatively simple things in health. The thing I really focus on on Apple is their App Store. It's a $50 billion gross revenue business, incredibly profitable. I think it's real evidence that Apple is not going to move away from the iPhone anytime soon because the App Store has to sit on the iPhone.
So even if they came up with a different device beyond the iPhone, the iPhone is still a central part of Apple's future. But it's not just the technology of the iPhone. It's all of the things that sit on top of the iPhone that I think give me some confidence that Apple will hit the $2 trillion number. It will expand into probably health services that'll run on the iPhone. It will expand into entertainment, various things that can run on iPhones.
So I think that Apple has got a long run without-- having to make any big shifts in its strategy. And I think it's somewhat insulated from the problems that Google and Amazon and Facebook have.
JULIE HYMAN: John, it's Julie here. Thanks for joining us. It's interesting that you bring up the Apple Health connection, because there's obviously a lot of movement among technology companies generally on the health front. You've got Google and Fitbit, of course, although that's seeing some regulatory challenges overseas. You've got the Teladoc Livongo acquisition today. And of course, you're now in the healthcare space, as well.
So it feels very early days for all of that. Do you think Apple is going to end up being the dominant player there? Do you see others emerging that are also going to be interesting ones to watch? What's your read on it?
JOHN SCULLEY: Well, I think Apple has shown a lot of competence since Steve Jobs died. The company is extremely well run by Tim Cook. But it's a cautious leadership, meaning that Apple doesn't tend to stick its neck out and do things that lets other people kind of see what the opportunities are. And then it's a very fast follower with incredible competence. I don't think that's going to change under Tim Cook's leadership.
So for example, I think Apple has every reason to be optimistic that they can be a big player in digital health. But I don't think you're going to see Apple stick its neck out and be the outfront innovator the way, let's say, Elon Musk has been with what you might call an iPhone on wheels with Tesla.
- John, you talk about the huge growth that we've seen for Apple on the services side of things. They've certainly been able to connect through the iPhone to the big growth they see moving forward on the services side. And yet, last week we heard from Tim Cook testifying before Congress. They are under a big-- they are under a lot of scrutiny right now, along with the other tech companies, largely because of how it operates its app store.
How big of a headwind do you think the regulatory scrutiny presents for Apple and the huge potential for the services side of things?
JOHN SCULLEY: Well, I don't think Apple has the same headwinds that the other big tech companies have. It may have headwinds just because it's big and incredibly successful. But it won a huge case in the EU in terms of taxes in Ireland. So Apple, I think, is actually in a safe place when you compare it to other big tech companies.
But Apple is such a massive company now that when it decides to move into an area-- let's take health, because eventually it will show its hand, I think, in what it's going to do, [INAUDIBLE] health. My sense is if we are looking at Apple by 2030, it'll be obvious to us what Apple did. It's just not particularly obvious to us today. And I suspect it'll be much bigger than just the Apple watch evolution.
ADAM SHAPIRO: John, let's shift to what we learned today from Moderna, as well as Johnson and Johnson. I mean, the race for a COVID-19 vaccine, the government entering into deals to purchase vaccines which are still being tested. In your role there as chairman and CMO at RxAdvance, PBMs, Pharmacy Benefit Managers, understand pharmacy pricing. What's going to happen with this vaccine? Are we, the consumer, are we, the US taxpayer, going to get it at cost? Is this really going to happen?
JOHN SCULLEY: Well, we've had a couple of companies say they're going to sell it at cost. Johnson and Johnson is one of those companies. Moderna has said that they're going to price their vaccine somewhere between $50 and $60, which is higher than what flu vaccines are priced at, which are typically about $40. But then there's AstraZeneca, which is a massive company that is working with Oxford on a vaccine they're very optimistic about. And they said they're going to sell it for under $5.
So I think it's yet to be seen what the pricing is going to be, because obviously there may well be more than one vaccine company out there. Good chance with all the vaccines that are going through trials now that we will see success. Moderna may very well be one of those successes, but they're not the only game in town.
JULIE HYMAN: Well, and John, sort of to your point about on pricing, yes, this is an important public health issue. Doesn't seem like these companies are going to make money off this thing, right, because most of them are going to be selling it at cost in the interest of public health. Meanwhile, the bigger debate about drug pricing has receded into the background because we are in crisis mode here. Do you think we'll see a resurgence of that debate, though, at some point, and what will be the outcome there?
JOHN SCULLEY: Well, I think we should, because if we look at the pharmaceutical industry, it typically raises its prices about 10% every year. It always uses the rationale that they have to make investments in the drug discovery process. The reality is that the pharmaceutical industry is made up of incredibly competent, massive sales marketing channels. And they often acquire their companies.
So if you look at the cell therapy industry with immunotherapies, whether it's companies like Juno or Bluebird or Kite, these companies are acquired for anywhere between $10 and $15 billion. So the money isn't going into drug discovery as much as it's going into acquisition of these new, innovative companies.
And I suspect that there will be scrutiny on the pharmaceutical industry about their practices, because our drugs are much more expensive for the same drug in the US as what they sell for in other parts of the world. The reality is that the pharmaceutical industry spends $240 million a year on lobbying-- by far the largest special interest lobbying group in the United States.
And everybody gets something, whether you're a Democrat or you're a Republican. So it's a industry that will be scrutinized, but it's a very hard one to change because of the huge influence it has on Congress.
ADAM SHAPIRO: All right, John Sculley is the chairman and CMO from RxAdvance. Former Apple CEO, it's always good to have you here "On The Move."