An interesting point was made in a recent article that the stock market may "punish" companies like Gilead Sciences which has developed a drug called Harvoni to cure hepatitis C. The supposed reason for the punishment is that the prospects for drug profits will diminish as its highly effective use continues (see: Goldman Sachs report: "Is curing patients a sustainable business model?"). Below is an excerpt from the article:
In Goldman Sachs's April 10 report, "The Genome Revolution," its analysts ponder the rise of biotech companies who believe they will develop "one-shot" cures for chronic illnesses; in a moment of rare public frankness, the report's authors ask, "Is curing patients a sustainable business model?" The authors were apparently spooked by the tale of Gilead Sciences, who developed a Hepatitis C therapy that is more than 90% effective, making $12.5B in 2015 -- the year of the therapy's release -- a number that fell to $4B this year. The analysts are making a commonsense observation: capitalism is incompatible with human flourishing. Markets will not, on their own, fund profoundly effective cures for diseases that destroy our lives and families. This is a very strong argument for heavily taxing the profits of pharma companies' investors and other one percenters, and then turning the money over to publicly funded scientific research that eschews all patents, and which is made available for free under the terms of the Access To Medicines treaty (see: Innovation and Access to Medicines for Neglected Populations: Could a Treaty Address a Broken Pharmaceutical R&D System?), whereby any country that devotes a set fraction of its GDP to pharma research gets free access to the fruits of all the other national signatories.
This theory about drug profitability relating to curability can be extended to other drugs. For example, one of the reasons that statins were such a miraculous and profitable class of drugs is they that they didn't cure a disease but were taken for life by consumers to forestall the onset of cardiovascular disease. Contrariwise, is also speculated that one of the reasons so few new antibiotics are being developed is that such drugs are usually taken over a short period of time in order to cure the patent of an infectious disease.
In my opinion and discussing the future profitability of Harvoni, I think that the drug will continue to generate good revenue for the company. The high price of the drug, roughly $70,000 per inmate for the 12-week treatment, will continue to bust the budgets of the various state correctional agencies which are debating which prison inmates to treat given its high cost (see: Hepatitis C drug costs challenge corrections budget). There may also be some Harvoni cost-cutting due to competition in the market (see: Welcome to the new world order: A competitive HCV drug marketplace). Gilead may choose to gradually lower the drug's price so it becomes more affordable until there will be few patients infected with heptitis C in the U.S. to treat. The company could then provide the drug to treat the rest of the world's population with the disease. At any rate, I don't think that pharmaceutical companies will shy away from blockbuster curative drugs because, in so doing, they will ultimately limit the sales of their product.