Goldman Sachs Says Curing Diseases Is Bad Business For Pharma
Goldman Sachs analysts are confirming what many people long believed to be a conspiracy theory. The analysts say that biotech companies are not incentivized to cure illnesses. In other words, the phrase ‘there is no money in the cure’ is being taken at face value.
The analysts published their findings in a report titled, “The Genome Revolution.” In the report, analysts look to determine whether or not curing patients is a sustainable business model.
In short, the answer is no, it is not sustainable.
“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 noted in the report. “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 used hepatitis C treatments for his example of curing gone wrong. Hep C treatments are 90% effective in terms of complete cure. But the Hep C business model is unsustainable. In 2015, Gilead Sciences, the maker of Hep C treatments, reported sales of $12.5 billion related to the medications. This year, Gilead Sciences will report in the $3 billion range. That’s a drastic financial decline and the price the biotech company pays for curing an illness completely.
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“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. “In the case of infectious diseases such as hepatitis C, curing existing patients also decreases the number of carriers able to transmit the virus to new patients, thus the incident pool also declines … Where an incident pool remains stable (eg, in cancer) the potential for a cure poses less risk to the sustainability of a franchise.”
People have long suggested that pharmaceutical companies intentionally avoid eradicating illnesses for fear of lowered profits. Unless the cure can be tied to ongoing treatments, the pharmaceutical company loses financial incentives, many people have suggested. Others have pointed to vaccines as a counter-argument, although vaccines often require booster shots.
The Goldman Sachs report is certain to increase speculation that pharmaceutical companies knowingly and strategically avoid cures.
The report suggests three potential solutions.
“Solution 1: Address large markets: Hemophilia is a $9-10bn WW market (hemophilia A, B), growing at ~6-7% annually.”
“Solution 2: Address disorders with high incidence: Spinal muscular atrophy (SMA) affects the cells (neurons) in the spinal cord, impacting the ability to walk, eat, or breathe.”
“Solution 3: Constant innovation and portfolio expansion: There are hundreds of inherited retinal diseases (genetics forms of blindness) … Pace of innovation will also play a role as future programs can offset the declining revenue trajectory of prior assets.”
Author: Jim Satney
PrepForThat’s Editor and lead writer for political, survival, and weather categories.