Goldman Sachs says water may be wet

A Goldman Sachs report says that the way for biotech companies is through medical treatments, not medical cures.

Selling medical treatments provides a stream of income that continues indefinitely.   Selling medical cures provides one-time sources of income, and even these may dry up if the disease disappears.

The moral feelings of any normal person will be outraged by this, but the logic is watertight, obvious and, according to the report, supported by experience.

You can’t stop for-profit companies in a free enterprise economy from pursuing the course that is most profitable, and you can’t stop analysts for investment companies from noticing the most profitable course.

Since cures are better than treatments (although treatments are useful), how can resources be shifted to cures?

A free market fundamentalist would say that the solution is to raise prices of cures to equal the lifetime cost of a treatment, plus a premium.

A neoliberal would propose subsidizing biotech companies’ work on cures.  A left-wing liberal would propose requiring biotech companies to devote a certain percentage of their research budgets to working on cures.

A radical would say that for profit-companies operating in a free market cannot be counted on to produce cures, and we should look instead to government or philanthropic institutions if we want a cure for cancer, AIDS or other life-threatening diseases.

Historically few if any medical breakthroughs have come from for-profit companies.   Dr. Jonas Salk developed the Salk vaccine for polio as head of a research laboratory at the University of Pittsburgh.

Dr. Alexander Fleming, the discoverer of penicillin, was a professor of bacteriology at St. Mary’s Hospital in London.   Penicillin and other antibiotics came into widespread use through efforts of the U.S. military during World War Two.

Probably the most profitable and widespread drug developed by a private company was aspirin—a great example of a drug that generates a continuing revenue stream.  Aspirin of course is of great benefit.   It’s just not the same thing as the Salk vaccine or penicillin.

So here again, the supposedly radical policy is to adopt time-tested policies that have worked in the past, while the supposedly un-radical policies are justified by theory and not by experience.

LINKS

Goldman Sachs report asks: ‘Is curing patients a sustainable business model?’ by Tae Kim for CNBC.

When What’s Good for the World Is Bad for Business by Nathan J. Robinson for Current Affairs.

Tags: Biotech Industry, Drug Companies, Free Enterprise, Goldman Sachs