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

Posted by msmash on from the wow dept.

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.

28 of 443 comments (clear)

  1. Published 3:15 PM ET Wed, 11 April 2018 by K.+S.+Kyosuke · · Score: 4, Funny

    "Slashdot asks: Is posting fresh stories a sustainable business model?"

    --
    Ezekiel 23:20
  2. Well.. by Z80a · · Score: 5, Insightful

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

    1. Re:Well.. by arglebargle_xiv · · Score: 4, Insightful

      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.

    2. Re:Well.. by Anonymous Coward · · Score: 5, Interesting

      No, they're got a point. Of course it isn't a sustainable business model. But that's OK. As long as the business gets a good ROI over time time period it doesn't matter if the profits dry up eventually. All this means is if you're going to value a company over the longer term, you should probably take effects like this into account.

    3. Re:Well.. by Anonymous Coward · · Score: 5, Insightful

      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.

    4. Re:Well.. by getuid() · · Score: 4, Interesting

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

      The devil is not not talking about it, but what you make
      of that information. If the answer is "no", and the commonly agreed upon consequence
      is that we stop curing, then that's a big problem.

      But if the answer is "no", and the consequence is that we need
      to work towards making medical care a non-profit social enterprise,
      then that's a totally different pair of shoes.

      In any case, whatever the answer and whichever way the debate
      about the consequences goes, it all begins with the answer.

      (If you don't want the debate to make a turn for the most inhumane,
      then I guess you better be part of it early on instead of getting
      busy grinding your pitchfork just yet...)

    5. Re:Well.. by jellomizer · · Score: 4

      The real question is, if finding a cure is not a sustainable business model. What is wrong with your business model?
      My father gave me his old table saw it is from the 1950's it still works, The company that made the saw is still around, and they still make table saws. You would think if you made such a quality device that once everyone who has a table saw, you wouldn't be able to sell them anymore.
      However, there are new things such as new safety features (this 1950's table saw is a death trap even beyond the blade, there are exposed belts, an exposed motor that seems to be a good bump away from sucking in the power cord...) There as well smaller sizes, or larger sizes, the ability to get better angles, to keep the material straighter, or make it easier to replace the blade.

      A company who makes a cure for a disease will one make a lot of upfront money from people demanding the cure. Which they can reinvest into finding the next condition that needs to be cured. It will be a long time for all problems to be cured.

      In the meantime the general population who is now healthier will be working and expanding the economy even further.

      --
      If something is so important that you feel the need to post it on the internet... It probably isn't that important.
    6. Re:Well.. by crunchygranola · · Score: 4, Insightful

      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.

      --
      Second class citizen of the New Gilded Age
    7. Re:Well.. by houghi · · Score: 4, Insightful

      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.

      --
      Don't fight for your country, if your country does not fight for you.
    8. Re:Well.. by squiggleslash · · Score: 4, Insightful

      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.

      --
      You are not alone. This is not normal. None of this is normal.
    9. Re:Well.. by BringsApples · · Score: 3, Informative

      Man, these guys at Goldman Sachs are really stuck between a rock and a hard place.

      On one hand, they have their investors to consider.
      But on the other hand, they have their investors to consider.

      --
      Politics; n. : A religion whereby man is god.
    10. Re: Well.. by cascadingstylesheet · · Score: 3, Informative

      Wow, you actually believe that.

  3. Yes it is. Indirectly. by Opportunist · · Score: 4, Informative

    Curing something does not mean you won't sell the same cure to the same person again. Just because you cured HepC, hell, even curing AIDS in a person does not mean they can't get infected again and need your cure again.

    The number of diseases that grant lifetime immunity to it after you survived it once is fairly low.

    --
    We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
    1. Re:Yes it is. Indirectly. by Opportunist · · Score: 4, Insightful

      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.

      --
      We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
  4. It is ... by Going_Digital · · Score: 5, Insightful

    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.

    1. Re:It is ... by ShanghaiBill · · Score: 4, Interesting

      Your caricature is inaccurate. Many Libertarians oppose intellectual property rights. Others support reforms of the existing system.

      Libertarian perspectives on intellectual property

  5. That's a question by Artem+S.+Tashkinov · · Score: 5, Insightful

    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.

    1. Re:That's a question by Megol · · Score: 3, Informative

      No that's not why we don't have an AIDS vaccine, not even close.

  6. Health care != profit by CptLoRes · · Score: 4, Insightful

    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.

    1. Re: Health care != profit by Kiuas · · Score: 4, Insightful

      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

      --
      "It is the business of the future to be dangerous" -Alfred North Whitehead
    2. Re: Health care != profit by c6gunner · · Score: 3, Informative

      There's a lot of misinfo and half truths in there ... I'll address some of the bigger ones:

      1. Collective bargaining benefits exist in the US also. Insurance companies pay much lower prices than those cited, exactly because of their bargaining power. The costs you're discussing are costs outside of the insurance system, and as such aren't really comparable to anything in nations which control all sale/distribution.

      2. Insulin has changed significantly over the years, and the prices for newer products are therefore higher. The newest generation of insulin is far safer and more effective than the stuff being made back in the 1930s. If you want some of the older stuff you can get it way cheaper in many markets.

      3. Looking at solely the cost of production and then saying that "a 100% markup is insane" is just ridiculous. There are many other costs associated with these products, not the least of which are regulatory costs, and R&D. Pharmaceutical R&D in particular is insanely expensive. While the costs for R&D on insulin specifically may not be as high as some others, companies use profits from one product to offset general research costs, not just development costs of that one line.

      4. I don't think you understand how patents work. You don't get to hang on to a patent for longer just by making small changes. You can probably get a new patent for your changed product, but the old patent will still expire. Once it expires, others are free to copy your old product. The issue in the US is that, if you want to copy an older form of insulin for example, you still have to jump through the regularity hoops to get your product approved for sale by the FDA. You also still have the usual marketing costs to try and make people aware of your cheaper product, AND you'll probably have to work to convince doctors to actually prescribe your cheaper version rather than the better, more expensive product. All of that is going to raise your costs quite a bit higher than just those "production" costs you were talking about earlier. The easiest way to get more generics on the US market would be to get the FDA out of the way by lowering standards or automatically accepting generics which are approved in other markets ... but then you're potentially sacrificing safety for speed (see Thalidomide, for example).

      All that said, if you think that you can compete by making an older, cheaper form of insulin ... what's stopping you? Go fire up a Kickstarter to get some initial funding, get your business set up, and then maybe hit up some of the charitable foundations for funding. If you had a workable plan to bring low cost generic insulin to the US market (and actually succed in selling it) I'm sure you could get plenty of startup funding from, say, the Bill and Melinda Gates Foundation.

      I hear lots of people like you banging on about the immorality of making money selling medicine, yet none of you seem to be interested in actually doing something about it. The only "solution" you have seems to be price controls, which is wonderful because it allows you to act morally superior without having to actually do anything. Just get the government to fix things for you; that's always the best solution!

    3. Re: Health care != profit by Anonymous Coward · · Score: 5, Informative

      50 year Type 1 diabetic here.

      > Insulin has changed significantly over the years

      The purity improved drastically since its discovery in 1921, which is how animal source insulins became safer and less likely to cause sensitivities, basically allergies, that reduced their effectiveness profoundly. The patent for insulin itself was made public domain by its inventor. The release of "human" insulin, and the patents for making it, were an effective attempt to get new patents, not to provide medical benefit from a natural chemical which cannot be patented. There seems to be no measurable medical benefit to the human insulin molecule over animal sources, and there are some reports of medical deficits with it.

      The folks at Novo are always *really excited* by the insulins. But the short acting human insulin only replaces the older regular insulin, and its speed of action is overwhelmed by the modern glucometer use and by the quick action of delivering insulin with an insulin pump. The longer acting human insulin based Lantus simply replaces NPH or UltraLente, older and cheaper ways to make insulin last longer. There is *zero* net benefit from the modern human insulins over the older and vastly cheaper animal based insulins. Using e. coli to make insulin doesn't actually improve it in any measurable way.

      > The newest generation of insulin is far safer and more effective than the stuff being made back in the 1930s.

      That is a false equivalency. Compared to the 1930's sure. Improvements in insulin effectively ceased in the 1970's with the last upgrade to "U-100" concentrations of insulin. The developments for insulin since then have been like the "new" and "improved" labels on detergent, or like marking farmer's market produce as "non-GMO". Very exciting and an excuse to charge more, but involving no useful change in the product and likely untrue.

      Yes, the "human" insulins were exciting. But using the human rather than the animal insulins has no demonstrable medical benefit, and costs roughly 10 times as much. Insulin is *grotesquely* expensive due to the captive market and the basically fraudulent "upgrades" over the last 30 years.. A classic example of drug companies continuing to blow smoke up our asses is seen at the "article" at https://www.adwdiabetes.com/ar.... I've not seen such a nonsensical puff piece since Sarah Palin campaigned for Trump.

  7. New business model by iTrawl · · Score: 4, Interesting

    There are two choices, and they have their detractors:

    1. Socialism: We all pay for this and enjoy the benefits of a healthy society.
    2. Ferengi: Mortgage. Because the treatment works so well, it is also expensive, and the only way to finance it is by taking a lifetime loan. If you need a second treatment, better take a second mortgage then.

    --
    "Everybody's naked underneath" -- The Doctor
  8. Re:Answer right here. by Ambassador+Kosh · · Score: 4, Informative

    As opposed to the rest of the 1st world countries which manage to have affordable and working health care systems. Canada, France, UK etc all have single payer systems with working hospitals and better health outcomes at a fraction of the price.

    --
    Computer modeling for biotech drug manufacturing is HARD! :)
  9. Then let's ask by Okian+Warrior · · Score: 4, Interesting

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

    I've recently been thinking about this a little in terms of game theory: Insurance companies see medical care as an expense and premiums as income. Patients see medical care as a benefit and insurance premiums as an expense. This has led to a system with a whole lot of problems, but the fundamental flaw is that the two sides have fundamentally conflicting goals.

    How can we rework this into a better system?

    The first thing we need to do is define the goal of the system, and "longer average lifespan" seems like the right goal. We can also add a quality of life rider by saying that anyone can check out if their life becomes unbearable, with lots of safeguards against coercion and suicidal depression and such. (I imagine a process similar to sex-change operations - the patient has to really want it over an extended time, and have psychiatrist buy-in.)

    With "longer average lifespan" as the goal, now how do we pay the doctors?

    One answer might be to assign to the *doctor* (primary care physician) a monthly fee per patient, regardless of that patient needing medical service. If patients could switch to a new doctor at any time and for any reason, doctors would then have incentive to a) provide the best medical care, b) compete with each other for quality of service, and c) keep their patients healthy, happy, and long-lived.

    This seems to work at the "primary care physician" level, but it isn't a good fit for specialist and above, hospital care and ER. The PCP should feel free to refer a patient to a specialist without incurring a drop in salary, and an ER doc should have incentive to save a patient's life without regard to payment.

    Also, medical research should be included, so that there's incentive to cure diseases instead of masking symptoms.

    Anyone good at game theory like to add to this model?

  10. My Doctors' group practice... by bdwoolman · · Score: 4, Insightful

    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.

    --
    "No fear. No envy. No meanness." Liam Clancy
  11. Re:Answer right here. by Comrade+Ogilvy · · Score: 3, Interesting

    "Cancer survival rates" are a baloney statistic. What matters are mortality rates. If I diagnose a cancer earlier and the treatment does exactly nothing, my survival rate improves while the mortality rate stays the same. In fact, if I can diagnose false positives, my survival rate looks even better while mortality stays constant. The more harmless lumps I remove from the breasts of healthy women, the better and better my survival statistics look.

    Measured by mortality rate the US is not substantially better or worse than any other rich industrial nation, including the UK. It is a myth that the US system is better at all.

  12. Does this work under game theory? by Okian+Warrior · · Score: 3, Insightful

    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.