Goldman Sachs Asks: 'Is Curing Patients a Sustainable Business Model?' (cnbc.com)

Goldman Sachs analysts attempted to address a touchy subject for biotech companies, especially those involved in the pioneering "gene therapy" treatment: cures could be bad for business in the long run. "Is curing patients a sustainable business model?" analysts ask in an April 10 report entitled "The Genome Revolution." From a report: "The potential to deliver 'one shot cures' is one of the most attractive aspects of gene therapy, genetically-engineered cell therapy and gene editing. However, such treatments offer a very different outlook with regard to recurring revenue versus chronic therapies," analyst Salveen Richter wrote in the note to clients Tuesday. "While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow."

Richter cited Gilead Sciences' treatments for hepatitis C, which achieved cure rates of more than 90 percent. The company's U.S. sales for these hepatitis C treatments peaked at $12.5 billion in 2015, but have been falling ever since. Goldman estimates the U.S. sales for these treatments will be less than $4 billion this year, according to a table in the report. "GILD is a case in point, where the success of its hepatitis C franchise has gradually exhausted the available pool of treatable patients," the analyst wrote.

Comments

Well..

[Z80a]

Time to blacklist anyone working at goldman sachs from getting any sort of cure.

Re:Well..

[arglebargle_xiv]

The great vampire squid wants to be able to jam its blood funnel into anything that smells like money for as long as possible, not just as a one-off while they're cured. So keeping patients non-cured (sick) for as long as possible is the optimal path for them.

Re:Well..

[Anonymous Coward]

Why cure them entirely though, when you can mostly-cure them and treat the remaining effects with a lifetime supply of patented drugs?

There is a market failure to research complete and cost effective cures for diseases.

Medical research should be entirely funded by the public, and all patents and treatments that result made available to the public for free.

Obviously, this leads to a better system. Stop trying to defend the status quo.

Re:Well..

[crunchygranola]

No, it's actually about high time somebody asked this question.

It is indeed. And the answer is clear. Medicine and medical research must not be driven by market economics.

That medicine emerged as a major profit making industry in the 20th Century was due to a transitional phase in science and health care, wherein most things could not be cured, but treatment was huge business opportunity.

Some of the most dramatic improvements in U.S., and world, health in the 20th Century was in the development of vaccines which were one of the cheapest interventions also. But what gets little attention is that this was always a government and charitable foundation activity, not a business, and not profit making.

Health care must be a service available to everyone, with government taking the lead role in supplying it. There is plenty of room for business in the delivery process, but profit must not be allowed to drive health care decisions. Period.

Re:Well..

[cascadingstylesheet]

Medical research should be entirely funded by the public, and all patents and treatments that result made available to the public for free.

Obviously, this leads to a better system. Stop trying to defend the status quo.

How is that obvious?

Because everyone flocked to Cuba, Venezuela, and the Soviet Union for their excellent, effective medical treatment?

Not saying it's impossible ... just not exactly obvious.

Re:Well..

[blindseer]

Medical research should be entirely funded by the public, and all patents and treatments that result made available to the public for free.

So, you'd ban any privately funded medical research then? That doesn't sound like a society I'd want to live in. In that case the government has a monopoly on medical research and if you had some disease that the government didn't feel like researching then you won't get treated. If you had piles of money that you'd be willing to spend on a cure for your own disease, or donate to someone with a similar goal of finding a cure, then the government would bar you from doing so.

I'm pretty sure that the best path is a combination of both. We can have our publicly funded research without barring private research. And private research does not need to come at the expense of public research. Each has their merits.

We saw a lot of research in prosthetic limbs come from public research as wars lead to soldiers coming back as amputees. The government has a high motivation on taking care of those that defended the nation after they've fought. This research can become available publicly for use to treat birth defects and industrial accidents, both of which are quite rare in modern society and not very profitable for private investment. Once the research is done though the actual manufacturing of these devices may in fact be very profitable.

Private research on profitable cosmetic surgery tends to also help out on less profitable treatments for birth defects, war injuries, and accidents. What has made elective vision correction surgery so inexpensive has been the government largely staying out of it. Competition between different kinds of such surgeries, and inexpensive corrective lenses, means the surgery had to become very inexpensive or no body would bother.

No, medical research should not be exclusively publicly funded. Doing this requires the belief that the government knows best always, and they don't. It also requires a government so large that it is capable of barring any private research. As I recall there seems to be a lot of people that exclaim "my body, my choice" when it comes to government intervention in medicine. Well, what happens when people truly get choice? They can fund any medical research they like.

I know "my body, my choice" is a politically loaded phrase. If the people that shout this from the rooftops actually believed this then they'd keep government funding from medicine as much as they could. When the government pays then they choose. If you want choice then you must pay for it yourself.

Re:Well..

[houghi]

Plenty of people go to Cuba for the effective mediacal treatment, indeed.

I have no experience with the other two countries, but I bet people do not go there, because Mexico is much closer and in Europe Americans feel better at home to go to clinics.

Re:Well..

[squiggleslash]

Why?

If curing patients is not a sustainable business model, what good does it do to suppress this fact?

Reality: It's probably true. Which means those arguing that healthcare needs to be not 100% taken care of using the free market are right.

Can we stop pretending the "free market" is the solution to everything? It isn't. Healthcare is an obvious area where it just plain doesn't work. When you have a woman whose leg has been crushed between a subway train and a station platform screaming at people NOT TO CALL FOR AN AMBULANCE because she's going to have to pay $5,000 just for the ambulance, plus god knows what else on ER care, and that's WITH the Obamacare "Everyone has insurance! Everyone must participate in the glorious capitalist healthcare system!" thing in place, you know it's fucked beyond measure.

It's not going to work. It's never going to work. Let's fund this one with taxes.

It is ...

[Going_Digital]

If your competitors can't. If you develop a treatment and your competitor has a cure then your business is flushed down the toilet while your competitor gets rich. So unless the biotech companies collude with each other there is always the risk that a competitor will produce a cure killing your business, so you had better get there first and kill their business instead.

That's a question

[Artem S. Tashkinov]

Yes, bloody idiots.

The longer the person lives the longer he might be a client of various medical/pharmaceutical companies because we're not getting younger and healthier with each passing day.

Health care != profit

[CptLoRes]

The main problem is looking at health care as a profit driven business in the first place. Take a look at Europe / Scandinavia for examples of much better models.

Re: Health care != profit

[Kiuas]

Are you under the delusion that European pharmaceutical companies don't make a profit?

No, and he didn't even imply that. The point is however, that the way medicines are bought here means that the prices of drugs are lower. The companies still make a profit off of them, but we spend overall less money on drugs, because of things like collective bargaining.

Take something like insulin. The price of insulin in the US doubled from 2012 to 2016, and it's not because the product itself has change or consumption has skyrocketed. Quoting the article:

“It’s not that individuals are using more insulin or that new products are particularly innovative or provide immense benefits,” Jeannie Fuglesten Biniek, a senior researcher at HCCI and the report’s co-author said in a phone interview.

“Use is pretty flat, and the price changes are occurring in both older and newer products. That surprised me. The exact same products are costing double,” she said.

And one of the 3 main manufacturers of insulin is Novo Nordisk, a Danish pharmacompany. So yes, European pharma companies are raking in a lot of money thanks to in no small part the american medical system. Now keep in mind, this is not some new wonder drug, insulin has been around for decades at this point, the manufacturing process has been honed down and is extremely efficient. A study from 2017 estimated the cost of production to be as follows:

After analyzing expenses for ingredients, production, and delivery, among other things, the researchers contend that the price for a year's supply of human insulin could be $48 to $71 a person and between $78 and $133 for analog insulins, which are genetically altered forms that are known as rapid or long-acting treatments. Examples of analog insulins include Humalog, Lantus, and Novolog.

Put another way, the study estimated the cost of production for a vial of human insulin is between $2.28 and $3.42, while the production cost for a vial of most analog insulins is between $3.69 and $6.16, according to the study in BMJ Global Health. Meanwhile, the median prices paid by more than two dozen countries for human insulin were 1.2 to 1.8 times greater than estimated prices. Median prices for other types of insulin were also higher: Lantus, which is sold by Sanofi (SNY), was 5.6 to 7.8 times higher; Humalog, which is sold by Eli Lilly (LLY), were at 2.7 to 3.7 times higher; and Novolog, a Novo Nordisk (NVO) treatment, was 2.6 to 3.5 times greater.

Note: the siggested figures there are not the costs of manufacturing, they're suggested price-points at which the companies would still make a profit on the product. And the actual numbers are global medians. In the US, the average price for a year's supply is now around $5700 dollars a year (from the previous link). Depending on the type of insulin, that's a markup of anywhere from 100 % to around 640 %. On a life-saving chemical that people depend on daily. That's insane. This is only possible because even though there's competition in theory, the highly more privatized nature of the US pharma/medical sector has allowed for all the three major players to raise their costs in tandem, while simultaneously making no significant changes/improvements on the drug itself.

The commercialized nature of the system means it doesn't optimize itself for cost-efficiency or availability, it optimizes for maximal profit. Insulin is cheap to make, so obviously the companies sell it for very cheap in countries with lower incomes or just a better regulated health care system. This

My Doctors' group practice...

[bdwoolman]

Drillem, Billum, Killem and Chillum. Seriously, there is a whole class of human endeavor that is not made better by the profit motive. Healthcare certainly belongs in it. It is something that should be pursued by practitioners and institutions to improve the public good not to get filthy rich. Charging large sums of money to prolong life is essentially extortion. Most developed societies recognize this by having long ago instituted single-payer systems. It is expensive, but demonstrably such a system vastly improves the society's productivity and quality of life from the bottom up -- a measurable plus economically. And, besides, it is just the decent way to run things.

Re:Yes it is. Indirectly.

[Opportunist]

As we've seen with the measles, all you have to do is rely on idiots to give diseases a renaissance.

And there's no cure for stupidity.

Start with their CEO....

[b0s0z0ku]

Lloyd Blankfein, the CEO of Goldman Sucks, has lymphoma, which is currently in remission. I hope that it comes back, and that a potential cure was suppressed due to Goldman not investing in the technology.

Let the piece of filth get a taste of his own medicine!

Does this work under game theory?

[Okian Warrior]

That is basically the ancient Chinese model. Everyone living in the same lock with the doctor payed a monthly fee.
Got he sick, he stopped paying and visited the doctor. As soon as he was cured, he payed again.

I'm not sure this would work under game theory, because people would have an incentive to get out of paying by claiming to be sick when they're not, or get out of paying by going to the doctor for trivial reasons.

For the system to work, there can't be any monetary incentive to "game" the system. The system has to be viewed from all angles, and cheating and other abuses have to be eliminated from the point of view of incentive.