A Case Study in Pharma’s Strategic Focus on Treatments Over Cures
For those of us involved in the in the pharmaceutical industry, we like to believe that we are progressing toward cures for life-threatening diseases. This article addresses the complex interplay between medical innovation and business strategy, using Gilead Sciences as a case study to illustrate broader trends in the pharmaceutical industry.
Gilead Sciences’ trajectory with its hepatitis C treatments offers a revealing look at pharmaceutical industry dynamics. When Gilead introduced groundbreaking hepatitis C drugs like Sovaldi and Harvoni, they effectively cured a large percentage of patients, causing a remarkable spike in their market cap. However, this success also led to a decrease in demand as the pool of patients shrank, contributing to a decline in market cap from 2016 onward. This scenario underscores a broader industry trend. Pharmaceutical companies, while often vocal about seeking cures, may prioritize developing treatments and vaccines requiring long-term use. The economic incentives are clear: chronic treatments ensure a steady revenue stream compared to one-time cures. 1
Gilead’s experience illustrates this well. Their initial market boom from curing hepatitis C was unsustainable. As the patient base dwindled, so did the demand for their drugs. Moreover, high cure rates reduced the need for ongoing treatment, cutting into long-term profits. 2
Boardroom Dynamics: The Profitability Debate
Speculating on discussions within pharmaceutical company boardrooms, it’s likely that directors weigh the profitability of developing therapies versus cures. The financial allure of chronic treatments often surpasses that of cures. Chronic treatments, such as those for diabetes or HIV, provide a consistent revenue stream, supporting long-term business growth. In contrast, one-time cures, while groundbreaking, may lead to diminishing returns once the disease is eradicated or significantly reduced. 3
Board discussions undoubtedly focus on balancing ethical and moral responsibilities with shareholder interests. While the ethical and moral imperative to cure diseases remains, the financial realities of sustaining a profitable enterprise can often tilt towards treatments that ensure prolonged patient use.
The strategic decision-making in these boardrooms ultimately influences the direction of research and development, with significant implications for global healthcare.
Food for Thought
I have some solutions in mind, but first, I would like to hear your thoughts on this critically important topic.
Notes
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- “Gilead Sciences Market Cap Data,” accessed July 3, 2024, Yahoo Finance.
- “Industry Analysis: Chronic Treatments vs. Cures,” Pharmaceutical Research Reports, 2023.
- “Ethical and Financial Considerations in Pharmaceutical Boardrooms,” Journal of Business Ethics in Pharma, 2022.