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Medicine Businesses The Almighty Buck

'Is Curing Patients a Sustainable Business Model?' Goldman Sachs Analysts Ask (arstechnica.com) 368

In an April 10 report for biotech clients, Goldman Sachs analysts noted that one-shot cures for diseases are not great for business as they're bad for longterm profits. The investment banks' report, titled "The Genome Revolution," asks clients: "Is curing patients a sustainable business model?" The answer may be "no," according to follow-up information provided. Slashdot reader tomhath shares the report from Ars Technica: Analyst Salveen Richter and colleagues laid it out: "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."

For a real-world example, they pointed to Gilead Sciences, which markets treatments for hepatitis C that have cure rates exceeding 90 percent. In 2015, the company's hepatitis C treatment sales peaked at $12.5 billion. But as more people were cured and there were fewer infected individuals to spread the disease, sales began to languish. Goldman Sachs analysts estimate that the treatments will bring in less than $4 billion this year. [Gilead]'s rapid rise and fall of its hepatitis C franchise highlights one of the dynamics of an effective drug that permanently cures a disease, resulting in a gradual exhaustion of the prevalent pool of patients," the analysts wrote. The report noted that diseases such as common cancers -- where the "incident pool remains stable" -- are less risky for business.

'Is Curing Patients a Sustainable Business Model?' Goldman Sachs Analysts Ask

Comments Filter:
  • by fibonacci8 ( 260615 ) on Saturday April 14, 2018 @01:12AM (#56435373)
    "Is eating the rich a sustainable business model?" asks music group Aerosmith. The answer may be "no," according to follow-up information provided.
  • by Waffle Iron ( 339739 ) on Saturday April 14, 2018 @01:14AM (#56435387)

    Nothing is stopping them from curing another disease and collecting another cool $20B or so.

    • by Ayano ( 4882157 )
      .... GS is basically saying they're not getting a good ROI. GS didn't cure the disease, a company they invested in did, and perhaps that funding was tied to X year commitments so it was an initial burst followed by possibly unprofitable years.

      Now you want to invest in other companies that possibly end up like that as a 'best case' scenario? The best case being a 'decent' amount of profit with a number of failed companies that tried to cure X.

      It's not sustainable, nor good for cash flow unless you hav
      • Why is long term sustainability of cash flows necessary from the side of the biotech companies? Stop and think about it, why?

        Even in the realm of mathematical finance a sustainable cash flow is not any sort of prerequisite for profitability. If they can make enough income to sufficiently offset the risk based discounting of the initial investments, then there is no need for the income to be long lasting. It could even come in a single lump sum, as long as that lump is big enough.

        In slightly reduced jarg
      • Not getting a good ROI for something like this either indicates extreme inefficiency or extreme greed. After all the key effort is made by researchers finding the cure who by no mean actually get a significant part of profits. The rest is nothing more than large scale industrial process which brings revenue only while there is a demand for it. When there isn't it can be just scaled down saving on expenses to maintain it too.
  • by Dutch Gun ( 899105 ) on Saturday April 14, 2018 @01:25AM (#56435421)

    These guys are what give capitalism a really bad name. Yes, a company can't exist without profits, but it's not like there aren't plenty of diseases we can't cure still. And if you think about it, indefinitely siphoning money from seriously ill people as a business model is pretty sick, no pun intended. We only put up with it as a society because it provides a powerful incentive to actually develop treatments in the first place. But if people start seeing that as a second-best option, I think society will quickly lose patience with them.

    Fortunately, there are almost always those willing to offer an improved service that others aren't, if there aren't any significant barriers to doing so. In the end, it doesn't really matter that some slime think it's better NOT to cure people of illnesses outright, letting them suffer for the rest of their lives while bleeding money from them. There will also be those that choose to offer better services, like full cures, for lower overall profits. Because it's the right thing to do.

    Sorry, pharmaceutical companies. You'll have to deal with that. If you start deliberately avoiding effective treatment, you invite societal wrath - probably resulting in even more soul-crushing regulation.

    • by quantaman ( 517394 ) on Saturday April 14, 2018 @02:56AM (#56435635)

      These guys are what give capitalism a really bad name. Yes, a company can't exist without profits, but it's not like there aren't plenty of diseases we can't cure still. And if you think about it, indefinitely siphoning money from seriously ill people as a business model is pretty sick, no pun intended. We only put up with it as a society because it provides a powerful incentive to actually develop treatments in the first place. But if people start seeing that as a second-best option, I think society will quickly lose patience with them.

      Fortunately, there are almost always those willing to offer an improved service that others aren't, if there aren't any significant barriers to doing so. In the end, it doesn't really matter that some slime think it's better NOT to cure people of illnesses outright, letting them suffer for the rest of their lives while bleeding money from them. There will also be those that choose to offer better services, like full cures, for lower overall profits. Because it's the right thing to do.

      Sorry, pharmaceutical companies. You'll have to deal with that. If you start deliberately avoiding effective treatment, you invite societal wrath - probably resulting in even more soul-crushing regulation.

      I read the motive of the report very differently than you do.

      I think you're reading it as "cures are less profitable than treatments, therefore don't try to cure anything! BWAHAHAHA!!!"

      I read it as "curing things is really awesome and we wish you could do more! The problem is it's hard to come up with a business model that makes cures viable, and if you go out of business you won't cure anyone, so we suggest you keep developing treatments for things you can't cure at the same time".

      You don't need to assume "money-grubbing sociopaths" to get a crappy situation.

      • by TheRaven64 ( 641858 ) on Saturday April 14, 2018 @07:09AM (#56436031) Journal
        A back of the envelope calculation for the drug mentioned in TFS indicates that their profit over a 10-year period (including the first 5 years prior to FDA approval) was around ten times the cost of developing the drug. Even if they make no sales ever again, that sounds like a pretty good ROI. Or, to put it another way, with the profits from one cure, they can bring 10 more drugs to market. They're also in an unassailable position because there is now no market for treatments for the disease cured by their drug and there is no point anyone else trying to develop a cheaper cure because anyone who does won't make enough money to cover their costs (they won't get fast-track approval if there's an existing cure, so unless they're already in clinical trials they have a few years before 2030 when the patent on the existing cure expires and they have to compete with generic alternatives).
      • by swb ( 14022 )

        Goldman may have a point that curing a single disease may not be a sustainable business model, but looking at the business as a single treatment for a single disease doesn't make sense -- it's like saying construction isn't sustainable because once you've built a building that person doesn't ever need another building.

        Obviously construction isn't about building one building anymore than curing disease is about curing one disease. We need more than one building and we have more than one disease to cure.

        It s

  • by Khyber ( 864651 ) <techkitsune@gmail.com> on Saturday April 14, 2018 @01:26AM (#56435423) Homepage Journal

    Cure that disease so the other ones have a chance to take root and you can make money curing them as well!

    That's guaranteed long-term profit. you are known as the company that cures things and people go to you before anyone else. What's not to like about this arrangement?

  • They did NOT lose money on the endeavor. They made extremely large profits for a couple years... and now it's drifted down a lot as the most financially capable potential customers have now been cured. Plus a couple competitive drugs have launched.

    But... yeah, they would have done financially much better selling a $20K a year drug to keep Hep-C at bay for these same customers for the rest of their lives.

    Of course, not everything is about profit maximization.... it is kind of a nice thing to save thousands o

    • by Ayano ( 4882157 ) on Saturday April 14, 2018 @02:12AM (#56435543)
      Goldman Sachs is a large financial company who's whole buisness is taking other people's money, and investing it to make more money for them while siphoning a portion of it for themselves as payment.

      Sure many millionares and billionaries have big ticket accounts, but there's also Joe Shmo, who has a modest 140k, or 200k retirement account there. Since all the money from each account is pooled to give Goldman the capital to invest, failed investments will impact all portfolios.

      Investing in companies that develop cures is all good and dandy assuming all are as successful as Gilead. However, for every successful business, there are failed ones. Here, Goldman is basically saying that in the best case scenario the profit was not good enough to justify the investment even if they made an okay profit. After all, that one 'decent' success needs to offset the number of failed companies that Goldman also had their money on.

      Assuming they had a net gain including all the losses, then it comes to wither the amount expended was worth the profit. It's more than monetary here, this includes paying for research consultants, retaining experts to vet companies, visits and check ups on said companies as well as all the menagerie of departmental-ism compared to that same expenditure on something else, as you put it.. a company whose drug suppresses the illness that would produce more money over a long period of time.

      As a Joe Shmo do you want to see your retirement account grow faster or slower? Big or small, we're all capitalists, and unless Goldman wanted to discriminate accounts (and get sued) every customer they have suffers or gains; details be damned apparently.
    • But... yeah, they would have done financially much better selling a $20K a year drug to keep Hep-C at bay for these same customers for the rest of their lives.

      Maybe. It's worth noting that the drug in question was part of an acquisition, so if Gilead didn't buy Pharmasset then that wouldn't have stopped the drug coming to market. It's also worth noting that they get that $20K/year right up until the point someone else develops either a cheaper treatment or a cure. If you don't go through the fast-track process, it takes, on average, 12 years to get FDA approval from a new drug, so even if you don't patent it then you get at most 8 years of exclusivity in the

  • How many non-infectious diseases have ever been cured? My google-fu doesn't seem to find any.

    The closest that I've found claims "The only disease ever 'cured' is Small Pox.". And it's infectious.

    • How many non-infectious diseases have ever been cured?

      I see a lot of people missing OP's point, answering with infectious diseases. Probably because you need both a medical and a historical background to give him an answer -- once a problem is "cured", the memory and attention dedicated to it fades.

      Pellagra, Beri-beri, Scurvy, Rickets, Vitamin A deficiency blindness. All cured with population-scale nutritional supplementation, all so rare now that most doctors in the developed world have never seen a real

  • Your duty is clear (Score:5, Insightful)

    by Required Snark ( 1702878 ) on Saturday April 14, 2018 @01:56AM (#56435505)
    As a worker under the US Medical/Wall-Street Industrial Complex, you should work as long as you are able to pay health bills while being as sick as possible. All income not spent on medical treatment or health insurance should go to the Entertainment/Food/Automotive Complex or the Shelter/Clothing Complex. When you can no longer fulfill your financial responsibilities to any of the Government/Economic Complex members you should immediately die because you are not generating enough profit or taxes to justify your continuing existence. You will get assistance for a quick death by having all possible assets stripped from your personal control.

    It's easy to grasp once you accept that you are effectively an animal that exists to make a profit for someone else.

    Get with the program or you will die very quickly and even more unpleasantly. This is your only instruction/warning.

  • Big pharma has been peddling antidepressants that largely don't work or are actually counter-productive, but have a host of side-effects, including suicide and addictiveness.

    Some hallucinogenic drugs such as psilocybin and LSD, on the other hand, have shown remarkable, disease-changing curative properties, but are schedule 1 drugs. [drugs.com]

    We didn't need Goldman Sachs to reveal that curing patients is not the best model for big pharma. Everybody with half a brain must have known this by now. Enjoy your destructive a

  • by locater16 ( 2326718 ) on Saturday April 14, 2018 @02:07AM (#56435539)
    It's almost as if technology is advancing beyond the useful life of capitalism.
    Nah who are we kidding, praise the almighty dollar!
  • so what they're saying is that single-payer is the most economical healthcare system?

  • by ooloorie ( 4394035 ) on Saturday April 14, 2018 @02:12AM (#56435545)

    "Is curing patients a sustainable business model?" The answer may be "no,"

    The answer is "yes" when people have to make price-conscious decisions for their healthcare because people naturally will prefer a one time expense over open ended expensive treatments.

    If you socialize costs while maintaining private health providers, however, curing diseases ceases to be an objective for doctors or drug companies.

    If you socialize costs and have public healthcare providers, one time cures are preferred to ongoing expensive treatments. That's better than the mixed system the US has right now, but it's still worse than a fully private system.

    • by AuMatar ( 183847 )

      Why would a company trying to maximize profits even offer the 1 time cure at any price, when they don't have to and can charge as much as you can afford for the rest of your life instead?

      If you privatize profits at all, that's what you get. How you pay for it makes no difference. Which is why only one country in the developed world does it that way, and why they have the worst health outcomes in the developed world.

      • Why would a company trying to maximize profits even offer the 1 time cure at any price, when they don't have to and can charge as much as you can afford for the rest of your life instead?

        Because they would go out of business when a competitor enters the market and does offer the cure.

        If you privatize profits at all, that's what you get. How you pay for it makes no difference.

        Absolutely right: if you privatize profits while socializing costs, that's all you get: that's crony capitalism and utterly dysfunctio

    • by quantaman ( 517394 ) on Saturday April 14, 2018 @02:35AM (#56435599)

      I don't think you understand how this market is working.

      The answer is "yes" when people have to make price-conscious decisions for their healthcare because people naturally will prefer a one time expense over open ended expensive treatments.

      Every system will choose a cure over a treatment, for reasons including cost.

      If you socialize costs while maintaining private health providers, however, curing diseases ceases to be an objective for doctors or drug companies.

      If you socialize costs and have public healthcare providers, one time cures are preferred to ongoing expensive treatments. That's better than the mixed system the US has right now, but it's still worse than a fully private system.

      This has nothing to do with the socialized vs private on the cost side or the provider side. In each case they will take the best and cheapest available option, a cure if available or a treatment if not.

      The motive for treatment over cure comes from market pressures on the R&D side. Drug companies need to decide what projects to fund. Given a choice between developing a treatment or trying to make a cure, they might choose the treatment because it has a better return. The rest of the system needs to make do with what treatment options are given them.

      You can call it unethical, but if the ROI on the treatment is 200% but only 80% for the cure then you're not going to stay in business making cures all the time.

      Now you could fix this by socializing R&D (public universities do this to an extent), but it's not clear that they'll do a better job of drug development than drug companies.

      • You can call it unethical, but if the ROI on the treatment is 200% but only 80% for the cure then you're not going to stay in business making cures all the time.

        Why not simply charge more for the cure so that ROI is 210 % ?

        • You can call it unethical, but if the ROI on the treatment is 200% but only 80% for the cure then you're not going to stay in business making cures all the time.

          Why not simply charge more for the cure so that ROI is 210 % ?

          Martin Shkreli is that you?

          Though in all seriousness I covered this a bit in my other response, drug pricing is fairly arbitrary but at a certain point people simply won't buy it.

          I think that might be a bigger problem when dealing with private insurers over public.

          If it's a public insurer they may be willing to pay for a cure that costs as much as 20 years of treatments because they expect to be covering the person for another 50 years.

          But a private insurer might only expect the patient to be a client for a

          • Fair enough.

            How about this: the insurer funds the development of the cure, and happily takes the 80% profit margin, instead of paying for the 200% ?

      • Every system will choose a cure over a treatment, for reasons including cost.

        When costs are socialized, who has an incentive to reduce costs? Patients certainly don't, because they don't bear the burden of their treatments. The government or regulated insurers don't, because the more they spend, the more power they have and the higher their revenue. And health care providers don't either because, again, they earn more if they spend more.

        Now, European nations are a little bit better at cost control in their

    • "Is curing patients a sustainable business model?" The answer may be "no,"

      The answer is "yes" when people have to make price-conscious decisions for their healthcare because people naturally will prefer a one time expense over open ended expensive treatments.

      If you socialize costs while maintaining private health providers, however, curing diseases ceases to be an objective for doctors or drug companies.

      If you socialize costs and have public healthcare providers, one time cures are preferred to ongoing expensive treatments. That's better than the mixed system the US has right now, but it's still worse than a fully private system.

      I thought about this a bit more and realized I was wrong (and you were more wrong than I first realized).

      I still don't think the payer, private or socialized, makes a big difference, but to the extent is does make a difference private insurance is the one that prefers treatments instead of cures.

      Consider a treatment that costs $100K/year and a cure that costs $1M.

      A socialized payment system will obviously choose the $1M since it's going to be caring for that patient for decades.

      But a private system may only

      • Consider a treatment that costs $100K/year and a cure that costs $1M. A socialized payment system will obviously choose the $1M since it's going to be caring for that patient for decades.

        You're presuming a socialized payment system that makes rational decisions based on what's best for society and for patients. That's absurd. Look at the current federal budget: are they spending money in rational ways?

        But a private system may only have a patient for 5 years, meaning that opting for the cure costs them an ex

  • by wertigon ( 1204486 ) on Saturday April 14, 2018 @03:01AM (#56435647)

    You need medicine research to be funded by the goverment. Because the companies just said "Ain't no money in it."

    Capitalism is a great system as long as there are profit motives, but falls far short where quality and safety are most important, profits be damned.

    • by Jahta ( 1141213 )

      You need medicine research to be funded by the goverment. Because the companies just said "Ain't no money in it."

      Capitalism is a great system as long as there are profit motives, but falls far short where quality and safety are most important, profits be damned.

      Sadly a lot of the research leveraged by big pharma is already publicly (i.e. taxpayer) funded [theguardian.com]. The idea that the pharma companies need to make huge profits in order to fund R&D is a convenient myth; it's all about generating short-term shareholder value. These days big pharma companies are more concerned with mergers [theguardian.com] and acquisitions [theguardian.com] than investing in research.

    • Very much so. And quality and safety need not be the primary motive; these can be achieved by setting minimum mandatory standards and enforcing them. it works reasonably well in health care already, as well as in other industries. Not perfectly, sure, but the same is true for the public health care facilities we had: they didn't really care that much about quality because patients had no other place to go, and they were getting paid either way.

  • ... many healthcare professionals make a living off making things worse.

  • If you applied the template of "what's in the health care/phamaceutical industry's best interests", the answer was always having a sick population. Following that, when people said there was no incentive to cure, only treat, they were called kooks.

    Sure, OTOH, this company made a lot of money, and ultimately making money for the executives, even if it bankrupts the company, is the goal of the corporate leaders, i.e. the company (see private equity's "getting your bait back" [google.com], and this Nobel Laureate's paper o [nyu.edu]

  • This reveal, not anything to do with Donald Trump, may be the moment the Republicans lost the midterms.

  • This is yet another misleading headline from Ars.

    From the CNBC report it was quoting, which in itself is only quoting excerpts:
    https://www.cnbc.com/2018/04/1... [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."

    "The potential to deliver 'one

  • Period. This is probably a big reason why public health care on average is so much better then US in large parts of the world, and especially Europa.
  • Profits before the cures for smallpox, cancer, hepatitis-C, etc?

    Well, I guess blame the parents applies to those analysts. As well as those patients.

  • by MoarSauce123 ( 3641185 ) on Saturday April 14, 2018 @10:01AM (#56436401)
    This is why health care must be a non-profit business. As soon as it is about maximizing profits the goal is to keep folks from dying, but sick enough to require permanent medical care. This report also shows that financial megacorps like GS have ZERO ethics. That they even bother with such a report is utterly disgusting.
  • Let's get one thing straight: the company that innovates cures has only a limited time frame for profiting from the risks they took in developing the cure or treatment.

    Small molecule drugs are treatments. For a small molecule drug that time horizon is about 12 years (drug development after invention and regulatory approval time cuts it back from 20 years). Then the generics enter the market, and well, the profitability of treatment goes bye-bye.

    The picture is better for biologic drugs because biosimilars ar

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