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Goldman Sachs asks in biotech Report: Is curing patients a sustainable business? (2018)

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249 points randycupertino | 4 comments | 16 Nov 25 23:01 UTC | HN request time: 0s | source
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stego-tech ◴[17 Nov 25 00:03 UTC] No.45949690[source]▶
I feel kinda bad for the writer, because it's a good question: no, curing patients is not a good business model, just like public transit is not a good business model.

What a lot of folks neglect are N+1-order effects, because those are harder to quantify and fail to reach the predetermined decision some executive or board or shareholder has already made. Is curing patients a bad business model? Sure, for the biotech company it is, but those cured patients are far more likely to go on living longer, healthier lives, and in turn contribute additional value to society - which will impact others in ways that may also create additional value. That doesn't even get into the jobs and value created through the R&D process, testing, manufacturing, logistics of delivery, ongoing monitoring, etc. As long as the value created is more than the cost of the treatment, then it's a net-gain for the economy even if it's a net loss for that singular business.

If all you're judging is the first-order impacts on a single business, you're missing the forest for the trees.

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thousand_nights ◴[17 Nov 25 00:13 UTC] No.45949742[source]▶
yeah but the pharma comapnies are only in the business of selling drugs so they would need to diversify into retirement homes or somnething to profit from actually curing people
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1. stego-tech ◴[17 Nov 25 00:19 UTC] No.45949764[source]▶
I mean, that's one way to look at it I suppose, and it's why you see Healthcare Insurers and Private Equity diversify into elder care for a captive audience.

In reality though, I was not-so-subtly trying to suggest that if something is necessary for the public good (curing diseases) but a bad business model, then perhaps Capitalism itself is the wrong vehicle for that segment of industry and a different option - be it an incentive structure, government-owned pharmaceutical research, or managed economy - is needed.

Society fundamentally needs things that are simply bad business - sheltering everyone (lowers long-term housing revenue), feeding everyone (lowers long-term food revenue), healing everyone (lowers long-term healthcare revenue), educating everyone (lowers the value of degrees/credentials). If our economic model prohibits or discourages achieving optimal resource usage and human outcomes, then it's our obligation to explore and identify alternatives that may improve those outcomes respectively.

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2. tacitusarc ◴[17 Nov 25 00:36 UTC] No.45949857[source]▶
> In reality though, I was not-so-subtly trying to suggest that if something is necessary for the public good (curing diseases) but a bad business model, then perhaps Capitalism itself is the wrong vehicle for that segment of industry and a different option - be it an incentive structure, government-owned pharmaceutical research, or managed economy - is needed.

I believe the great innovation of capitalism is markets, and the next era of economic and social progress will be driven by mixed capital/social good markets.

For example, what if you tied the tax rate for an industry to a combination of broad social goods (say, homelessness) and industry-specific goods (say the incidence rate of cancer for cancer drug companies), such that if we’re in a the middle of a homelessness crisis and many people have cancer, the tax rate might be 50%, vs if there is virtually no homelessness and we’ve cured cancer, maybe it’s 10%. Obviously there are other market approaches but eventually they would be converted to capital markets, so something like the above makes sense to me as a start.

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3. marcus_holmes ◴[17 Nov 25 01:30 UTC] No.45950105[source]▶
I think we've discovered that markets are great for some things, and disastrous for others. e.g. fire services, and health.
4. parpfish ◴[17 Nov 25 03:51 UTC] No.45950709[source]▶
isn't this just a way of saying that markets aren't representing externalities correctly?

a company doesn't have to pay for bad things they produce as a byproduct (e.g., pollution) and they dont get to benefit from good things they produce as a byproduct (e.g., curing a disease).