One of the most perplexing institutions in this country is Big Pharma. Unlike any other industry, success is not the end goal. Rather, “controlled failure” represents this sector’s ultimate objective.
The point is rather obvious. If pharmaceutical companies developed medical breakthroughs that completely cured diseases, they would of course receive a one-off sentiment burst. But after insurance-armed patients have finished their procedures, they are no longer patients. And what medical institution can survive if it doesn’t have an abundance of sick customers?
But placing blame on Big Pharma has always carried the undesirable “conspiracy theory” tag. While we instinctively recognize that pharmaceuticals profit from disease management, we’re likely to hear this from an Alex Jones-type broadcast. Pursuing this logic leads to the inevitable credibility suck.
That is until a Bloomberg article set the record straight.
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Big Pharma and Its Not-So-Delicate Balancing Act
Contributor Joe Nocera detailed the intriguing story behind Gilead Sciences and its groundbreaking Hepatitis C drug Sovaldi. Unlike every other concoction from Big Pharma, biomedical experts designed Sovaldi to fully eradicate the Hepatitis C virus.
Although the initial costs associated with the treatment are expensive, health insurers willingly absorbed most of them. The reason? Sovaldi is incredibly effective. After a treatment process that lasts a few weeks, patients receive a clean bill of health. According to available data, it’s unlikely that the liver-killing disease will return.
For Big Pharma, this is an unbelievable achievement. Prior to this, medial institutions have had virtually a 0% success rate for curing serious ailments. But at the same time, Nocera implies that Sovaldi doomed Gilead.
Is This a New Age for Pharmaceuticals?
On the other end of the spectrum, AbbVie introduced its own Hepatitis C therapy. However, its variant was only marginally effective compared to Gilead’s solution. After all, Sovaldi meant a permanent respite from the awful condition.
Still, Wall Street apparently loved AbbVie more. In this sick world we live in, it’s better for Big Pharma to produce ineffective therapies that require constant care. Gilead’s way leads to a one-off payment. AbbVie rakes in consistent cash flow.
Or does it? While AbbVie shares have witnessed more success, Gilead shares fell due to issues not directly related to opportunity costs. And in the long run, I argue that controlled failure is not a recipe for lasting success.
Even in a sick world, people can recognize a good deal when they see one.
Chief Editor, CrushTheStreet.com
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