Goldman Sachs and the Optics of Drug Discovery

Goldman Sachs analyst Salveen Richter, channeling the obvious in a note to clients (excerpted by CNBC):

The potential to deliver ‘one shot cures’ is one of the most attractive aspects of gene therapy, genetically-engineered cell therapy and gene editing. However, such treatments offer a very different outlook with regard to recurring revenue versus chronic therapies. While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow.

Ew, go on (emphasis mine):

GILD is a case in point, where the success of its hepatitis C franchise has gradually exhausted the available pool of treatable patients. In the case of infectious diseases such as hepatitis C, curing existing patients also decreases the number of carriers able to transmit the virus to new patients, thus the incident pool also declines … Where an incident pool remains stable (eg, in cancer) the potential for a cure poses less risk to the sustainability of a franchise.

Yes, franchise. Long term profits depend on the riskiness of a cure.

I’m not going to begrudge a private company their desire to make money. The possibility of windfall profits are the main reason why private companies are willing to invest in uncertain and risky biomedical research. That said, when the long tail of a too-good cure only makes tens of billions in profit, it should be hard for even a staunch capitalist to be sad.

This attitude is part of what drives fringe antivaxxers and other patients away from evil “big pharma” and the medical doctors who understand the actual practice of medicine and into the arms of pseudoscience. For my part, I don’t think any company should feel bad if they develop an HIV vaccine so effective it eradicates the disease and relieves the suffering of millions, even if it eventually results in downstream profit loss due to the loss of the chronic antiviral therapy market.

We badly need and will always need public and government research support—for many reasons—but one is because the optics of the patient as a customer mindset are so toxic.

Step 1 keeps you safe from the dangers of fun

If students were to devote more time to activities that make them less prepared to provide quality care, such as binge-watching the most recent Netflix series or compulsively updating their Instagram account, this could negatively impact residency performance and ultimately patient safety.

That’s Peter Katsufrakis, MD, MBA, president and CEO of the National Board of Medical Examiners (NBME) and Humayun Chaudhry, DO, MS, president and CEO of the Federation of State Medical Boards, responding in Academic Medicine to a student-written article concerning how Step-prep has consumed medical education that advocated for a pass/fail Step 1.

There was a backlash, and they tried to backpedal on this comment (emphasis mine):

During the editing process of our manuscript, we added a statement about excessive use of Netflix and Instagram which was unfair and inappropriate. As leaders of the USMLE, we believe that students, medical educators, and the public deserve our respect. Our statement was inconsistent with that belief, and we are deeply sorry.

Yeah, right. Make no mistake, their glib response to actual student concerns is exactly what they meant to say. Humor is often the dull dagger of truth, seemingly softer and more palatable than direct honest communication but ultimately more damaging.

However, the disrespect is by far the lesser evil here. Students and residents are rarely respected on an intellectual level by administrators. Their perspectives are viewed as myopic and ill-informed. The real issue here is dismissal.

Students have valid concerns. Residents have valid concerns. Trainee complaints are often dismissed by their superiors as the whining of a coddled generation (whether decades ago or today), and then those graduates go on to perpetuate both the toxic culture and broken system it engenders.

The biggest problem in medical education is the uncanny ability of doctors to pay-it-forward instead of being agents of change.

Pitfalls of Private Equity Takeovers

You may have heard about this absurd story in the NYTimes a few months ago: An academic journal pulled a legitimate article comparing practice characteristics of groups that take on private-equity funding and those that do not. Why? Because a PE firm put the squeeze on their editor, that’s why:

In an interview, Dr. Hruza [the incoming president of the American Academy of Dermatology and board-member of United Skin Specialists, the largest PE-backed derm practice in the country] said he did not ask that the paper be taken down. He did, however, confirm that he expressed his concerns to Dr. Elston, the editor, after it was posted. Two days later, Dr. Elston removed the paper.

From the reporting in the times, this situation is absurd. If people have quibbles with the conclusions of a peer-reviewed article, then they should write a commentary. You don’t get to line-edit someone else’s manuscript.

Dermatologists account for one percent of physicians in the United States, but 15 percent of recent private equity acquisitions of medical practices have involved dermatology practices. Other specialties that have attracted private equity investment include orthopedics, radiology, cardiology, urgent care, anesthesiology and ophthalmology.

PE firms are following the money. However, their primary objective of extracting profit doesn’t necessarily equate with an understanding of how to actually run a successful, responsible, and sustainable medical practice.

Dr. Konda, [the paper’s lead author], said he first grew interested in the topic when several of his trainees went to work for private equity-backed practices and told him of clinical environments that emphasized profits at the expense of patient care.


With that preamble, check out this interview with radiologist and former PE analyst, Kurt Schoppe, MD on Radiology’s Nearest Threat, Commoditization, and the Misguided Notion That You Will Be Paid for Everything You Do.


Lots of excellent responses, but these three quotes give you a nice flavor of private-equity takeovers in broad strokes:

One of their favorite marketing lines is “physician-owned or physician-operated.” That’s really a misdirection because, frequently, they set up a holding company under which the physician group is a wholly owned subsidiary. Yes, the physician group is owned and operated by physicians, but it is not controlled by physicians because, as a wholly owned subsidiary, the parent corporation, or the holding company, is going to have absolute control. That holding company is not majority-owned by the physicians. The wording on the contracts is going to be such that the PE firm or the corporate entity is going to have control over the parent entity when it needs it.

What I’m getting at is no matter what the marketing says, no matter what they are telling people when they are selling services, these entities must make money for their owners/investor as their primary objective. Changing the economics of radiology group ownership is not fundamentally about the patients or saving money for the payers. They do these things to make money for their investors. This is not a negative judgement, it’s just a fact. If physicians want to sell their practice, if someone is only 4 or 5 years from retirement, and they only have a 4- or 5-year hold on their contract after they sell their group, well, that is just logical. From a purely personal economic point of view, it makes sense for them to sell, because they are not looking at a 15- to 20-year timeline.

The people who need to look out for this are the people in training, the people coming out of training, and the younger physicians in the group who have a 15-, 20-, 30-year timeline. If your goal when you came out of medical school was caring for patients, positively affecting the health care environment, or doing things for the greater good, I think you are better able to do that as a physician group in which you decide, as a group, how much money you need to make, what sacrifices you choose to make, and for whom you will charge less. If you cede control of your decision-making to a group that will only be motivated by its ability to make returns for its investors, you’ve put someone else in that conversation who does not necessarily share your values and ethics as a physician.

Anyone joining a hot-bed field like dermatology or radiology needs to understand the business model of your chosen profession and evaluate the health of both the practice and local market you consider joining.

While partners may get short-term windfalls in some buyout scenarios, non-partner employees are the primary profit source. Spending time in a partnership-track without eventually being a partner is a waste if the position becomes untenable and you need to start fresh somewhere else.

NRMP Says: Rank Them How You Want Them

President and CEO of the NRMP, Mona M. Signer, talking with Medscape:

I certainly understand why applicants and programs engage in post-interview communication, but applicants and program directors shouldn’t create their rank-order list on the basis of post-interview communication from the other party. They ought to create their rank-order list based on their true preferences. Applicants should rank the programs where they want to train in order of preference, not where they think they will match. Program directors should rank applicants in order of preference, not the applicants with whom they think they will match. The matching algorithm works best when Match participants rank each other in order of true preference.

YES. Seriously people. I would also add that people shouldn’t create their ROL based on communication (or assurances) during the interview, either.

After all these years, some students and programs still think there should be other considerations to the ROL. But there aren’t. It shouldn’t really matter what the other side wants in this system. It matters what you want. It’s your list.


From “The Residency Match: Interview Experiences, Postinterview Communication, and Associated Distress” in the Journal of Graduate Medical Education:

In terms of postinterview communication, more than 70% of respondents indicated that they wished such communication were explicitly discouraged, and more than half said they wanted programs to bar candidates from notifying them of a high rank in order to avoid match manipulation.

There are no positives to the ego-stroking, play-acting, and intermittently grossly-misleading game that programs (and applicants) play. Everyone wants to be loved and get their top choices, but the only communication that should really have any impact (or be permissible) is new information:

  • My spouse early-matched to a program at your institution.
  • My mother has become ill, and I truly hope to end up in your city so that I can help take a greater role in her care.
  • I just won the lottery, and there is a significantly increased risk of me not completing your grueling program.

Though the NBME allows everyone to dance, the best advice will always be rank them how you want them.

Retort of the week

Do you have any idea how many bullets I pull out of corpses weekly? This isn’t just my lane, it’s my [expletive] highway.

Pathologist Dr. Judy Melinek, responding on Twitter to an NRA tweet admonishing doctors to “stay in their lane” and stop discussing gun control.