Monday, April 16, 2018

An Uncomfortable Truth: No $ In Cures, Says Goldman Sachs

In a development more shocking than the capture of a live Bigfoot, a recent Goldman Sachs research report (click here and here) states in black-and-white what many have long suspected: curing diseases is not a viable business model for the companies that develop and manufacture drugs. Instead, drugs that turn terrible diseases into treatable illnesses which are kept under control by the perpetual use of medicines that sustain patients but don’t cure them have become marvels of modern capitalism.

Perhaps unwittingly, the Goldman Sachs report confirms that our current medical research model is more crippled than I am. Over the past three or four decades, the interlocking mantras of “all government is bad government" and "private enterprise is the solution for everything," have led our society to hand the reins of medical research over to for-profit pharmaceutical, medical device, and biotech companies. Most of these companies are publicly traded, meaning their stock is available for trade on the world's stock markets.

The problem with this formula is that publicly traded companies are mandated by law to be beholden to their stockholders, not the end users of their products. In the case of pharmaceutical and medical device companies, these end-users are sick people, many suffering from hideous diseases like multiple sclerosis. In the cold calculus of the free-market, the job of drug company executives is NOT to produce drugs that offer the best result for the patients who take them (like, say, cures). Instead, providing the best outcome for the companies’ stockholders – in the form of ever-increasing profits and ever appreciating stock prices – is the legal responsibility of these executives.

In fact, the CEO of a drug company with an established and successful franchise of MS treatments could very well be engaged in illegal practices if they endorsed their company marketing a cure for the disease, which would destroy their existing tremendously profitable business model. In the parlance of the financial world, that executive would be in breach of his or her fiduciary responsibilities. In the parlance of the rest of the world, that executive would likely be given the heave-ho and could spend a good chunk of time in a Club Fed.

Since finding cures for diseases like MS and cancer have eluded researchers for decades if not centuries, the recent advent of medicines that treat but don't cure have been heralded as modern miracles. The lack of cures has become the accepted status quo, despite the fact that in the days before medical research was dominated by for-profit concerns, dread diseases like polio, smallpox, and tuberculosis were wiped out through the efforts of government and academic researchers. Now, though, with the science of genetic therapies rapidly advancing, the prospect – or, in the eyes of Goldman Sachs, the problem – of curing diseases is growing tremendously, threatening to upend a business model that has become incredibly profitable. To take just one example, medicines that treat but don’t cure multiple sclerosis generated over $25 billion in revenues during the last year alone.

As more and more disease-related genes are mapped and identified, the universe of illnesses that might benefit from gene therapy is expanding exponentially. Multiple sclerosis is one of those diseases, as it seems every few weeks a new set of genes are discovered that play a role in the MS disease process. The ultimate cure for MS may one day lie in altering the genes that initiate the cascade of failures that leads the body to destroy its own tissues. Ultimately, the genetic profile of individual patients may be used to tailor cures unique to their genetic makeup.

In their research report released last week, Goldman Sachs – a company that is a central pillar of our financial system with a reach far beyond Wall Street – concludes that such genetic therapies represent a vital threat to those invested in companies involved in drug and medical device development and manufacturing. In a report entitled "The Genome Revolution", Goldman Sachs analysts ask, "is curing patients a sustainable business model?" While acknowledging the vast potential of genetic treatments, the report states “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." Heaven forbid! The almighty dollar must rule all, patient and societal well-being be damned.

The report goes on to make several recommendations for addressing the looming financial threat of curing rather than treating diseases, including that companies ignore rare diseases whose small patient pools would make any cures prohibitively expensive, and also that they avoid curing infectious diseases because "… curing patients also decreases the number of carriers able to transmit the virus to new patients", which would, of course, be terrible for business. The report cites the example of Gilead Sciences, which developed a cure for hepatitis C several years ago (click here), but has seen its profits plummet as the population of hepatitis C patients shrinks thanks to the success of Gilead's medication. As a result, the company’s stock value has suffered. More proof that no good deed goes unpunished.

Folks, this Goldman Sachs research paper states in black-and-white what to many has been long apparent but difficult to fathom: there is very little incentive for pharmaceutical companies to research and develop cures for diseases when marketing treatments that transform patients into customers for life is an immensely profitable business model. Those of us suffering from terrible conditions like multiple sclerosis must recognize that hoping for a cure from such entities is akin to hoping that the Easter Bunny hops into your local MS clinic and drops off a cure delicately encased in a colorfully decorated egg.

What is the solution to this situation? Well, how about putting a small tax on pharmaceutical company profits, the proceeds of which could be funneled exclusively into publicly funded medical research explicitly targeted at finding the cause and cure of currently intractable diseases. If a tax of 4% were placed on MS medications, which, as stated previously, generated $25 billion in revenues last year, a nifty $1 billion could have gone to fund independent researchers in the search for a cure for the disease. Would it place an undue hardship on MS drug manufacturers if last year’s revenues totaled $24 billion rather than $25 billion? Let’s not forget, pharmaceutical companies are granted extremely long patents on their products and don’t face much in the way of free-market competition. It’s no accident that every MS medication is priced between $60,000-$85,000, despite the fact that some of them have been on the market for more than 20 years.

Yes, I am aware that any talk of increased taxes is anathema to ideologically driven politicians and those who vote for them, but if we are to find our way out of a status quo that sees treating but not curing as perfectly acceptable, some radical changes need to be made. The current state of our medical research model has been corrupted by the siren song of blockbuster drugs, the profits from which are astronomical. As a society, we must reckon with the following question: Are profits more important than patients? Seems to me that in a country where “Life, Liberty, and The Pursuit of Happiness” are held as sacred, the answer should be self-evident. It’s tough to enjoy our inalienable rights while plagued with horrible illness. Will the incessant drive for ever-increasing economic gain dictate the future of medicine, or will we as a society finally stand up and say, “Enough!”