Second Opinion

Are cures bad for the drug business?

A glimpse at the cold calculations required to make profitable drug investments in new genetic technologies such as gene therapy.

Goldman Sachs calls potential to deliver 'one-shot cures' one of the most attractive aspects of biotech

A Goldman Sachs report offers biotechnology companies three solutions to the 'cure' problem. (Richard Drew/Associated Press)

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"Is curing patients a sustainable business model?"

That provocative question was posed on page 38 of a Goldman Sachs research report on biotechnology called Profiles in Innovation: The Genome Revolution.

The document, written by the firm's investment analysts, provided a glimpse at the cold calculations required to make profitable drug investments in new genetic technologies such as gene therapy, where replacing a defective gene could cure a disease.

"The potential to deliver 'one-shot cures' is one of the most attractive aspects of gene therapy, genetically engineered cell therapy and gene editing," the analysts wrote. "While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow."

Excerpt from a Goldman Sachs report on biotechnology. (CBC)

The report reminded investors that curing a disease might be bad for business, and that sparked headlines last week.

"It's kind of fun to see analysts like this who are very explicit," said ​Marc-André Gagnon, a Carleton University health policy researcher. "We know it's part of the discussion."

The report cites the example of a new treatment for hepatitis C by Gilead that essentially cures the disease but "has gradually exhausted the available pool of treatable patients."

Would a company decide not to pursue a cure if it's not profitable? "Absolutely," said Gagnon. "If you're a drug company with shareholders, your main priority is the return to shareholders."

If you can come up with a cure that you can charge people a lot for, then in a competitive market that's going to be very effective and you're going to make a lot of money for it.- Aidan   Hollis

University of Calgary economist Aidan Hollis said cures are still good business.

"If you can come up with a cure that you can charge people a lot for, then in a competitive market that's going to be very effective and you're going to make a lot of money for it."

Hollis said it's up to payers, including provinces and private insurance companies, to make sure they're getting value for the therapies they cover.

He said that's why provincial drug programs decide what drugs to pay for based on how much benefit they provide, measured in "quality-adjusted life-years." It's a formula that calculates how long a drug extends life along with the quality of that time.

"The standard pricing per life-year is around $50 to $100,000. Therapies that cost more than that tend not to get funded," Hollis said. "It's disturbing that the government has to make those kinds of choices, but it does have to make those kinds of choices."

The report offers biotechnology companies three solutions to the "cure" problem:

  • "Address large markets."
  • "Address disorders with high incidence" such as cancer, which it describes as "a sustainable market given the patient population is almost entirely incident driven."
  • Find new diseases that can be treated with the same drugs.

Overall the report is enthusiastic about the financial potential of the three biotechnology fields it describes — gene therapy, genetically engineered cell therapy and gene editing — stating that "investors still do not fully recognize their potential to create new profit pools" with a market estimated at $4.8 trillion.

Although Goldman Sachs provided CBC News with a copy of the report, the company did not respond to our request for an interview.


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