It’s Official! Curing Patients Is Bad for Business


I think many of us, if not most of us know this. Better to sheer the sheep over and over than to eat it once.

Of course modern medicine, as deeply crony as it is – and it is deeply crony, is also full of miracles. Many people who are here today, enjoying life, and working, and spending time with their families are here because of modern medicine.

Yet because our markets are so manipulated by government and weird pro-crony business arrangements (See the example of the Hep C treatment below. Why so cheap in India and not here?) all sorts of strange warping occurs.

Clearly a balance needs to be found between profit and cost to the patient. In a free market that balance would be fairly easy to find. Supply/demand = price, and then we could go from there. But because it costs so much to bring a drug to market in the US thanks to regulatory burdens and other crony arrangements that exist throughout our healthcare system, there is every incentive to keep prices higher than they would be in a free market. And it should be said to develop treatments and not cures.

However the fact is also that businesses want a steady cash flow. Just like governments do. Just like we all do. So there is a natural incentive toward ongoing treatments versus outright cures. That is a market created pressure to some extent.

Of course one of the chief challenges in the treatment vs. cure equation is that if we keep businesses from “sheering” the patient sheep, if we take the profit carrot away, (sheep, carrots, sorry) many miracles, even if they aren’t cures and are treatments might not be developed at all.

It’s a tough one but reducing the massive amount of cronyism and making the market in medicine freer is part of the answer. Unfortunately too many do not understand that it isn’t JUST supply and demand and the market that creates some of the challenges mentioned in the article below.

(From MedPageToday)

According to an article by Tae Kim on CNBC, Goldman Sachs issued a report (by Salveen Richter) that suggested that drug developers might want to think twice about making drugs that were too effective. Richter’s report, entitled “The Genome Revolution,” was issued on April 10 and says:

“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…. While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow.”

The translation: if you develop a new drug that cures people rapidly, then patients will not need to take the drug on an ongoing basis, and that limits the amount of money a company can make.

The analyst asks: “Is curing patients a sustainable business model?”

The “problem” appears to be particularly great if the disorder in question is a transmittable disease. The Goldman Sachs report cites the example of Gilead Sciences (ticker symbol GILD), which gained approval for its novel hepatitis C treatment Sovaldi in 2013, followed by Harvoni less than a year later.

Their introduction was a landmark event — for two reasons. First, they provided a near-certain cure for hepatitis C in 12 weeks. Fantastic! Second, they were among the first of a series of drugs to be priced at exorbitant levels. When Harvoni was introduced, a 12-week course in the U.S. cost $94,500. Interestingly, in India, the same 12-week course of treatment cost only $900. (I assume that the company was still making a profit on its sales in India.)

Was this outrageous pricing good enough for Goldman Sachs? Apparently not.

Click here for the article.