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One-shot cures for diseases are not great for business—more specifically, they’re bad for longterm profits—Goldman Sachs analysts noted in an April 10 report for biotech clients, first reported by CNBC.
The investment banks’ report, titled “The Genome Revolution,” asks clients the touchy question: “Is curing patients a sustainable business model?” The answer may be “no,” according to follow-up information provided.
[...] 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.
[...] Ars reached out to Goldman Sachs, which confirmed the content of the report but declined to comment.
(Score: 3, Informative) by ElizabethGreene on Sunday April 15 2018, @02:22PM (8 children)
>> The greed involved in the Pharma business is legendary. In a another recent news item, an American drug with a price of (ISTR) $6,000
was no better than one costing $6 made in the middle east.
It's quite possible you lack perspective to see this greed for what it truly is.
It costs $6 billion USD to bring a drug to market. The failure rate for clinical trials is 50% per phase with three phases, so I'm going to get to the clinical trial phase with an average of 8 drugs to get one useful one. You don't get a refund for the R&D on those failed drugs. That money is gone.
The math isn't hard. It's going to cost me $6 billion and 10 years to develop and market a cure for disease C. If I put that money in an investment paying 8 percent I'd have 12.9 Billion dollars at the end of 10 years. The drug has to pay more than that to be worth the trouble. If 4 million people have disease C. I need to sell the drug for at least $2580 not to lose money. If I'm going to take that risk I want a big payoff, so I'm going to want to sell it for 10x that, $25,800 per cure. I know that insurance companies are going to want a fat discount for something that expensive, so I have to mark it up so I can afford that discount and still make a profit.
So I price the cure (Sovaldi) for disease C (Hepatitis C) for $65,000 so I can give insurance companies their 60% discount.
Which specific action here is greed?
(Score: 0) by Anonymous Coward on Sunday April 15 2018, @05:18PM (2 children)
Other countries manage to provide the same medical care that costs us tens of thousands of dollars for much, much less by negotiating with the manufacturer. In the US, the largest provider of medical care, the government, is barred from negotiating the cost of medications.
In some cases the difference can be thousands of dollars per dose.
(Score: 2) by frojack on Sunday April 15 2018, @09:12PM (1 child)
Its no secret that tig Pharma pays for drug development with high US pricing. Slightly lower EU pricing, and dirt cheap third world pricing.
This is a well known fact. The theory is that the US can afford it, and if average prices were used world wide, some places (Africa) would never be able to afford these drugs, but they would be very cheap in the US.
As for US government negotiating cost of medications...
Some people [thefiscaltimes.com] are just fine with that.
Other people, [cnn.com] not so much.
You'll be surprised at who is in which camp.
No, you are mistaken. I've always had this sig.
(Score: 0) by Anonymous Coward on Monday April 16 2018, @04:46AM
And then Trump talked to someone from the industry for five minutes and his mind was changed. Try again.
(Score: 3, Insightful) by VanessaE on Sunday April 15 2018, @06:18PM (4 children)
It's the combination of actions and inaction, but it all boils down to you demanding to make back in mere months what took you ten years to spend, when you could spread that revenue out over the 28 year (double) term of the cure's patent.
You act as if those 4 million will be the last to ever have it - but you've developed a cure in this scenario, not a vaccine. Meanwhile, there are actually between 71 and 150 million infected worldwide (depending on who you ask), with about 1.7 million new cases every year (keeping with the example of Hep. C)
So, let's assume your 4 million figure is right. Let's cure 'em all right now, in one massive months-long campaign.
Assuming everyone affected has insurance that will cover it, or otherwise can afford your per-cure 65 grand figure.... minus 60% for insurance discount, minus your stated 6 billion in R&D costs, and losing 90% of the final result to advertising costs, internal re-investments, litigation, hookers and blow, and everything else that doesn't add up to unallocated cash in the company bank accounts...
((65'000 × 0.4 × 4'000'000) - 6'000'000'000) × 0.1 = 9.8 billion dollars net profit.
Now, let's cure all 71 million (using the lower end of my quoted range, to be conservative) with the same medicine, same assumptions as above, but spread it out over two years since there's so many more people:
((65'000 × 0.4 × 71'000'000) - 6'000'000'000) × 0.1 × 0.5 = 92 billion dollars net profit each year. For one medicine.
Add on top of that the 3 to 4 billion you'd net every year curing new cases (again assuming insurance discount and 90% loss).
Yeah, that's greed.
(Score: 2, Informative) by frojack on Sunday April 15 2018, @09:01PM (2 children)
If it was as easy and simple as you suggest, it would already be done this way.
You're not as bright as you think you are, and those with that kind money aren't idiots. They run the odds on just about everything, under multiple different scenarios, and would have come up with your simplistic calculations before you were born.
No, you are mistaken. I've always had this sig.
(Score: 2) by VanessaE on Monday April 16 2018, @03:21AM (1 child)
Simplistic or not, the math doesn't lie. X dollars times Y recipients is still X times Y, no matter how much estimation, forecasting, etc. you do to figure out what values to plug in for each variable.
Twist it any way you want, it's greed.
(Score: 2) by Alphatool on Monday April 16 2018, @12:47PM
Hate to have to say it, but your maths is way off. First you have to allow for the time value of money, then for the fact that all of the people who can afford it will get treated at the start, so the price has to keep dropping to keep demand up. Additionally, as a cure it will reduce the transmission of the disease on a population basis. This means the demand will taper off, even with price reductions (unless something else causes the transmission to increase... it can be hard to predict). Then you have to take physical realities into account. It's not possible to instantly get a complex medicine out to tens of millions of people per year. Even if it was possible to ramp up production quickly enough, the supply chains and clinical infrastructure just won't get to that many people in a year or two - it takes time. You may doubt this, but there is enough money in it a company would do almost anything to make it happen if they could. Each country also has its own regulatory and cost structures, so each country needs its own detailed analysis. Once you get passed these issues in developed countries you need to start looking at pushing into the developing and less developed world, and that's a whole new ball game.
All of this combines so that a simple X times Y is just wrong, to the point of being a lie.
(Score: 2) by ElizabethGreene on Tuesday April 17 2018, @06:20PM
You've _assumed_ they can sell it for the same price in the rest of the world. That is not the case. Rich countries subsidize the poor ones.
Rerun your numbers again with 1/7th of the population* paying retail and the rest of the world getting it for free. Then check that against Gilead's annual reports.
* Justification for this number: (300 million americans+700 million europeans)/7 billion global population