Goldman Sachs Says Curing Diseases May Not Be Economically Viable

steddyeddy · 24-04-2018 04:06PM #1

In other words a free market wouldn't and couldn't work for medicine. I'm the opposite of a "big pharma" is bad person but I think this reiterates the fact that some societal needs can't be left to the free market. From IFLS. I don't see why this is surprising though. A lot of diseases aren't economically viable enterprises.

Unsurprisingly, the report sparked outrage after CNBC revealed it. Richter was writing for the investment bank's clients, and it is easy to mock any companies whose profits are threatened by technological changes that will benefit millions. However, unless we adjust the economic structures around healthcare the issue she has pointed to could deprive many of the cures they need.

It costs phenomenal amounts of money to invent new medical cures and test them until health authorities deem them safe – usually at least $1 billion. Someone has to pay. For a widespread problem like hepatitis C, the issue Richter points to simply reduces mega-profits to very, very large ones. For rarer diseases, however, there may not be enough potential income to economically justify doing the research and clinical trials. MIT Technology Review has noted awareness of this issue may be why GlaxoSmithKline recently sold off its rights over some spectacular cures for very rare diseases.

Public health systems, like the ones the most wealthy countries have, will often be willing to pay enough to cure their patients that the cost of the research can be justified. After all, in the long run, the savings will usually outweigh the costs. Only the best American private insurance plans, usually unaffordable to the people who need them most, are likely to see things the same way.

_Dara_ · 24-04-2018 04:21PM

It's for economical reasons that new antibiotics are not being developed. Better in the company's eyes to put that R&D dolla towards things that will see a faster return on investment such as drugs you have to take every day for the rest of your life.

Capt'n Midnight · 26-04-2018 12:48AM

Maybe if Big Pharma spent less money on shareholders and marketing and used the R&D budget for actual R&D then maybe it wouldn't have to charge so much.

http://www.bbc.com/news/business-28212223

"Unlike other sectors, brand loyalty goes out the window when patents expire."

So it's more like a hostage situation than 'brand loyalty' then is it ?

seamus · 26-04-2018 10:36AM

^^
This because mixing healthcare and capitalism doesn't work.

Healthcare is neither a luxury item or a consumable. People avail of healthcare & medications when they need them and stop when they don't.

That means it cannot work like iPhones, or bread, or virtually any other commodity on earth. When people get sick, they're not going to buy Pfizer because they like Pfizer. They're just going to buy fncking paracetemol. If they need a doctor, they're not going to go on the internet and research where the best ones are and how much they cost. They're just going to go to the nearest one they know.

The idea that drug companies spend any money on branding, is insane in itself. Why does branding matter when it comes to medication, unless you're trying to encourage people to take things they don't need.

donegaLroad · 26-04-2018 11:14AM

Longevity for the small percentage who will be able to afford it.

ancapailldorcha · 26-04-2018 11:48AM

At the risk of playing Devil's Advocate.....

On antibiotics, it's getting increasingly difficult to find new ones that work. This isn't even the problem though, resistance is. Then you have the likes of Doctors prescribing them for every little thing, farmers putting them in feed....

Then there are chronic illnesses like Cancer and Dementia. We're nowhere near figuring out how the latter even works while the former still needs more research. Investing now means a tenuous chance of a return in decades. We still need a lot of basic research which of course isn't sexy to private finance for the reason given above.

Ultimately, as Seamus says, the market isn't going to fix this. Or at least it won't without significant input both financial and legislative from the state. Current, the market favours long term treatments because that's all the current knowledge supports. That said, cures do sometimes appear such as CAR T cells that I used to work on though those are expensive, by which I mean in the half a million dollars range because of their bespoke nature.

Ficheall · 26-04-2018 12:35PM

How is this "news"?

(Not that it's not noteworthy, but it's hardly a novel concept...)

razorblunt · 26-04-2018 12:50PM

This isn't news, it's investment insight.

It's why speculative investment happens in Pfizer et al stick happens when they announce a break through and sells happen when they've lost patents or failed trials.

If you're a Fund Manager in the pharmaceutical / healthcare sector then you're going to need to be nimble with your picks and options.

It's also interesting to note firms that have "remission drugs", some forms of leukemia are now treated by daily tablets at huge markups.

Balf · 26-04-2018 12:53PM

ancapailldorcha wrote: »

At the risk of playing Devil's Advocate.....

[...]

Ultimately, as Seamus says, the market isn't going to fix this. [...]

Good points, and I think we need to be open to some Devil's Advocacy.

I think a point that's relevant to reflect on is that the market is always present. Even if the healthcare system is made completely public, that public system will be competing to attract staff from other parts of the economy and from health systems abroad. Same goes for all the other resources that healthcare requires.

One of the reasons that healthcare is expensive is precisely because Governments are willing to fund it. If medicine was a profession that generated its income by user charges paid by a clientele consisting of folk on the State pension, it would be a very poorly paid profession.

We collectively make the market expensive by our willingness to put more money into it. That's not to deny a social element for this - we'd hate to think that someone would be denied access to useful, cost-efficient, treatment that they couldn't afford. But we have to disentangle that good intention from funding a model that guarantees high earnings for health professionals and corporate interests.

GreeBo · 26-04-2018 12:54PM

seamus wrote: »

If they need a doctor, they're not going to go on the internet and research where the best ones are and how much they cost. They're just going to go to the nearest one they know.

Sorry but thats not true at all. There are plenty of example of where people look for the best doctor, the best physio, the best maternity hospital, the best surgeon, the best cancer consultant.

Sure not everyone does, but equally not everyone buys the best/latest iPhone either.

ancapailldorcha · 26-04-2018 01:09PM

Balf wrote: »

Good points, and I think we need to be open to some Devil's Advocacy.

I think a point that's relevant to reflect on is that the market is always present. Even if the healthcare system is made completely public, that public system will be competing to attract staff from other parts of the economy and from health systems abroad. Same goes for all the other resources that healthcare requires.

One of the reasons that healthcare is expensive is precisely because Governments are willing to fund it. If medicine was a profession that generated its income by user charges paid by a clientele consisting of folk on the State pension, it would be a very poorly paid profession.

We collectively make the market expensive by our willingness to put more money into it. That's not to deny a social element for this - we'd hate to think that someone would be denied access to useful, cost-efficient, treatment that they couldn't afford. But we have to disentangle that good intention from funding a model that guarantees high earnings for health professionals and corporate interests.

The US has the most expensive system in the world and they're not exactly famous for wanting more government. I think it's down to the fact that without the state, you need insurance companies to be able to afford pricey care. I think treatments and care are only going to get more expensive as medicine gets ever more personalised. The days of people dying cheap are over. Nowadays, people are living longer, collecting more expensive pensions as a result and dying of more costly illnesses.

If you eliminated government and insurance companies or just heavily regulated the latter you're still going to be left with hugely expensive therapies. The CAR T cells I mentioned can only be manufactured in a few spots in London here. Site development is underway but this is a limiting factor. That they need to be manufactured specifically for each patient and then there are the viral vectors, purity, Quality Control, automated machinery and such.

The idea of a single payer system might keep costs in check for a lot of things but for long periods of care, end of life care and costly chemotherapies in cancer you're going to see a lot of people losing out due to a lack of affordability.

Pat Mustard · 26-04-2018 01:25PM

ancapailldorcha wrote: »

On antibiotics, it's getting increasingly difficult to find new ones that work. This isn't even the problem though, resistance is. Then you have the likes of Doctors prescribing them for every little thing, farmers putting them in feed....

Resistance is the problem. But new antibiotics are needed now.

I don't see the pharmaceutical companies coming up with new antibiotics so unless they are incentivised to do so, some other way should be found in order to get the job done.

I would like to point out CPE (Carbapenemase-producing Enterobacteriaceae) which is already being dealt with as an emergency in Ireland:
http://health.gov.ie/national-patient-safety-office/patient-safety-surveillance/antimicrobial-resistance-amr-2/public-health-emergency-plan-to-tackle-cpe/

The Minister for Health has activated the Public Health Emergency Plan to address CPE in our health system.
CPE is a superbug resistant to most or all antibiotics. It is carried in the bowel and can cause blood stream infection in people who are vulnerable, such as the elderly and those with low immunity.
CPE has been identified throughout the world in recent years. Ireland has seen an increase in the number of cases year on year.
The number of cases almost doubled in 2016 and is estimated to increase by a further third in 2017. An opportunity remains to halt or reverse the spread of this superbug through our hospital system.
The spread of this superbug in hospitals can lead to the closure of beds, wards and units removing thereby, essential capacity to provide services, to admit patients from Emergency Departments and to address waiting lists effectively.

'almost untreatable superbug'

CPE is carried harmlessly in the gut, but may kill if it enters the bloodstream through a wound of a patient who is already sick or frail, which makes it a real danger in hospitals. About 40-50% of patients with a CPE bloodstream infection die.

The article below is from 2013 and things have got worse in the interim. But even back then, this was called "nightmare bacteria".

From the CDC in the USA

A family of bacteria has become increasingly resistant to last-resort antibiotics during the past decade, and more hospitalized patients are getting lethal infections that, in some cases, are impossible to cure. The findings, published today in the Centers for Disease Control and Prevention’s Vital Signs report, are a call to action for the entire health care community to work urgently – individually, regionally and nationally – to protect patients. During just the first half of 2012, almost 200 hospitals and long-term acute care facilities treated at least one patient infected with these bacteria.

The bacteria, Carbapenem-Resistant Enterobacteriaceae (CRE), kill up to half of patients who get bloodstream infections from them. In addition to spreading among patients, often on the hands of health care personnel, CRE bacteria can transfer their resistance to other bacteria within their family. This type of spread can create additional life-threatening infections for patients in hospitals and potentially for otherwise healthy people. Currently, almost all CRE infections occur in people receiving significant medical care in hospitals, long-term acute care facilities, or nursing homes.
“CRE are nightmare bacteria. Our strongest antibiotics don’t work and patients are left with potentially untreatable infections,” said CDC Director Tom Frieden, M.D., M.P.H. “Doctors, hospital leaders, and public health, must work together now to implement CDC’s “detect and protect” strategy and stop these infections from spreading.”

The growth rate of infections is increasing and it is almost untreatable now. Right now, it is killing the old, the weak and the sick. According to the above 40%-50% of those who become infected die. That's now. What about when a new strain arises which begins to infect healthy younger adults?

Maybe then we will find the means to develop new antibiotics.

ancapailldorcha · 26-04-2018 01:32PM

Pat Mustard wrote: »

Resistance is the problem. But new antibiotics are needed now.

Absolutely!

And yes, I'm aware of the irony of just briefly mentioning it earlier. The problem is that a company can invest a fortune in a new drug only for a resistant strain to emerge nearly instantly. The rewards for new antibiotics are too small and too tenuous when compared to treatments for cancer and dementia.

Ideally, an international fund aimed at incentivising or directly financing R&D could be set up with companies sharing both the risk and the profits.

the_syco · 26-04-2018 02:06PM

_Dara_ wrote: »

It's for economical reasons that new antibiotics are not being developed.

And here's me thinking it's because they're getting to be useless because diseases have mutated to overcome their effectiveness.

seamus wrote: »

When people get sick, they're not going to buy Pfizer because they like Pfizer. They're just going to buy fncking paracetemol.

I doubt they'll be buying it wholesale. Thus, they'll be buying it from a chemist. And then chemist will buy it from a company that they know of. Branding is not only for the consumer, but also to let the shopkeeper know that they're producing the same drug as a competitor, but cheaper.

seamus wrote: »

If they need a doctor, they're not going to go on the internet and research where the best ones are and how much they cost. They're just going to go to the nearest one they know.

Depends on the sickness. Sudden sickness, sure. Long term illness, and they'll be checking what brands their their medical insurance covers, etc.

seamus wrote: »

The idea that drug companies spend any money on branding, is insane in itself. Why does branding matter when it comes to medication, unless you're trying to encourage people to take things they don't need.

If they don't, they'll lose out to those that do do branding.

Take Viagra for example; it's a brand name that everyone knows about. I doubt many (any?) go into a chemist and asks for Sildenafil alternatives.

Balf wrote: »

cost-efficient

An interesting term when applied to healthcare.

Pat Mustard wrote: »

Maybe then we will find the means to develop new antibiotics.

I think they're looking at other ways, as antibiotics have hit a wall to how effective they are. One such way is by changing a persons DNA. This may solve one problem, and create another; if your DNA is changed to cure an illness, will it absolve people from a crime that only their DNA links them to?

Balf · 26-04-2018 02:37PM

ancapailldorcha wrote: »

The US has the most expensive system in the world and they're not exactly famous for wanting more government. I think it's down to the fact that without the state, you need insurance companies to be able to afford pricey care.

Indeed, it has much the same effect. Its the same principle - health insurance brings in the spending power of people who don't actually have an immediate need to consume healthcare.

ancapailldorcha wrote: »

If you eliminated government and insurance companies or just heavily regulated the latter you're still going to be left with hugely expensive therapies.

Well, no. The therapies just wouldn't command the same price.

What makes them valuable is the fact that someone is willing to pay a high price for them, not any intrinsic value.

Which, indeed, might mean that no-one bothers to make them. Assuming the existence of "hugely expensive therapies" as a given is a large part of the problem. Drugs companies in particular seem to be very good at creating a public mood that facilitates government (or health insurer) funding for their products.

Wanderer78 · 26-04-2018 02:42PM

Neoclassical rubbish!

ancapailldorcha · 26-04-2018 02:42PM

Balf wrote: »

What makes them valuable is the fact that someone is willing to pay a high price for them, not any intrinsic value.

Which, indeed, might mean that no-one bothers to make them. Assuming the existence of "hugely expensive therapies" as a given is a large part of the problem. Drugs companies in particular seem to be very good at creating a public mood that facilitates government (or health insurer) funding for their products.

You've omitted the cost of creating and/or administering the therapy. Once a drug has been tested and approved, manufacturing it is usually cheap. Gene and cell therapies by contrast are very expensive to manufacture as well as design and test. You could knock a hundred or two hundred grand off the price but you're not getting down to a level that a person of average income will be able to afford.

_Dara_ · 26-04-2018 02:44PM

Pat Mustard wrote: »

Resistance is the problem. But new antibiotics are needed now.

Well, both are the problem. Improper use of anitbiotics has hastened resistance but every antibiotic produced will eventually be ineffective and that would be the case even if antibiotics were prescribed more responsibly. It would just take longer. So new antibiotics were always going to need to be developed. The problem is that for companies, the financial incentive isn't there.

the_syco wrote: »

And here's me thinking it's because they're getting to be useless because diseases have mutated to overcome their effectiveness.

See above. Resistant to any antibiotic produced was always going to happen, albeit at a slower pace if they were not abused. But there is absolutely scope there to produce new antibiotics. There will be a need to keep finding new ones that exploit the new mutations bacteria come up with. But companies don't want to put R&D money in coming up with more because they are not a long-term drug. You take them for two weeks and that's it. Better pump that research money into drugs that people have to take every day for the rest of their lives.

steddyeddy · 26-04-2018 03:20PM

We know that 30% of all antibiotics prescribed by doctors are erroneously prescribed. Before a company can invest in this we need to crack down on this. I think too little criticism is directed at the doctors here.

EPAndlee · 26-04-2018 03:23PM

Family guy knew

hmmm · 26-04-2018 03:25PM

The only problem here is people who are trying to mash together the evil words "Goldman Sachs" and a misleading title.

GS are making the perfectly valid point that if companies have to invest vast sums to develop new medicines, they aren't going to do this if they can't charge enough to recoup their investment. If governments decide it's in the interests of their people to sponsor the development of drugs using taxpayers money, Pharma companies will be happy to take the money.

_Dara_ · 26-04-2018 03:32PM

steddyeddy wrote: »

We know that 30% of all antibiotics prescribed by doctors are erroneously prescribed. Before a company can invest in this we need to crack down on this. I think too little criticism is directed at the doctors here.

I AM critical of overprescription of antibiotics. But it bugs me when people talk like that's only reason there is resistance to some antibiotics now. It's not the case, it's just a hastening factor. It was always going to happen.

And I still think that even if there wasn't antibiotic overuse, companies would still be reluctant to develop more because there isn't that much money in them even when they are effective. It's not just about resistance. Some companies gave up developing new antibiotics 20 years ago or longer.

Balf · 26-04-2018 03:32PM

ancapailldorcha wrote: »

You could knock a hundred or two hundred grand off the price but you're not getting down to a level that a person of average income will be able to afford.

Again, turn the question around the other way.

If the only buyers in the market were people on average incomes with a need for the drug, instead of public healthcare systems and health insurers with significant funds at their disposal, what would that do to the value of enterprises concerned with the development and manufacture of drugs?

You're taking the cost of development as a given, instead of something that's valuable because entities with money are choosing to pay for it.

Wheeliebin30 · 26-04-2018 04:02PM

Hasn’t mother nature always had a way of population control?

Wanderer78 · 26-04-2018 04:06PM

Wheeliebin30 wrote:

Hasnâ€™t mother nature always had a way of population control?

So if mother nature decided you and yours must die even when there's a possibility you and yours maybe saved by modern medical intervention, this is ok by you?

ancapailldorcha · 26-04-2018 04:32PM

Balf wrote: »

Again, turn the question around the other way.

If the only buyers in the market were people on average incomes with a need for the drug, instead of public healthcare systems and health insurers with significant funds at their disposal, what would that do to the value of enterprises concerned with the development and manufacture of drugs?

You're taking the cost of development as a given, instead of something that's valuable because entities with money are choosing to pay for it.

This is just a repetition of what you said before.

Balf · 26-04-2018 05:58PM

ancapailldorcha wrote: »

This is just a repetition of what you said before.

I agree it effectively is. I was simply trying a different angle, as the point hasn't been addressed.

ancapailldorcha · 26-04-2018 06:13PM

Balf wrote: »

I agree it effectively is. I was simply trying a different angle, as the point hasn't been addressed.

Yes it has. Development and staff costs don't fall just because people want them to.

Balf · 27-04-2018 12:01AM

ancapailldorcha wrote: »

Yes it has. Development and staff costs don't fall just because people want them to.

You're right, prices don't fall just because people want them to.

Prices fall when people aren't willing to pay them.

the_syco · 27-04-2018 12:12AM

Balf wrote: »

You're right, prices don't fall just because people want them to.

Prices fall when people aren't willing to pay them.

If the products are already developed, maybe.

If the product is not yet developed, and the company thinks that they won't get the price they need to make a profit, they just won't make the product.

Capt'n Midnight · 27-04-2018 12:24AM

Two points

First - the US already has a fund to pay for development of treatments of rare diseases for stuff that isn't ever going to be economically viable otherwise.

Second - if you ignore painkillers and "me too" drugs, the main customer of Big Pharma is governments , directly or indirectly. So why not cut out the middle man and marketing ? I have no problem with private enterprise developing drugs at cost plus. I have a major problem with patents on healthcare that only benefit shareholders. Pretty much all the people working there were educated by the publicly supported higher education and products are bought by public funded entities like the HSE.

The film Elysium is not about a possible future.
It's about what is happening right now where access to healthcare is about how deep your wallet is and not what it actually costs to provide it.

Goldman Sachs Says Curing Diseases May Not Be Economically Viable

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