“Is curing patients a sustainable business model?” - Goldman Sachs

https://www.cnbc.com/2018/04/11/goldman-asks-is-curing-patients-a-sustainable-business-model.html

Goldman Sachs’ biotech research report raises a provocative question: “Is curing patients a sustainable business model?” This inquiry stems from the observation that cures for diseases, particularly infectious ones like polio, can negatively impact pharmaceutical companies’ profitability. Here’s a breakdown of the concerns:

1. Recurring Revenue: Chronic treatments generate ongoing revenue streams for pharmaceutical companies. Cures, by definition, eliminate the need for ongoing treatment, resulting in reduced revenue.
2. Declining Patient Pool: Infectious disease cures reduce the number of new patients, shrinking the market for treatments and potentially leading to decreased sales.
3. Profit Maximization: Pharmaceutical companies are driven to maximize profits. Cures, which eliminate the need for ongoing treatment, may not align with this goal.

Industry Responses

Some potential solutions proposed in the report include:

1. Focusing on Chronic Diseases: Companies could shift their attention to diseases with a high incidence rate, such as hemophilia or spinal muscular atrophy, where ongoing treatment is necessary.
2. Innovating and Expanding Treatment Portfolios: Pharmaceutical companies could develop new treatments or expand their existing portfolios to maintain revenue streams.
3. Prize Funds: Governments or non-profit organizations could establish prize funds to incentivize innovation and development of treatments for costly diseases, potentially bypassing traditional profit-driven models.

Implications

The question of sustainability raises concerns about the motivations behind pharmaceutical research and development. While cures are undoubtedly beneficial for patients and society, the industry’s focus on profit maximization may lead to a reluctance to invest in disease cures. This highlights the need for alternative models, such as prize funds or public-private partnerships, to encourage innovation and drive progress towards disease eradication.