‘Health care loans’ for Hep C cure — Andrew Lo and David Weinstock

MIT Sloan Professor Andrew Lo

MIT Sloan Professor Andrew Lo

From Boston Globe

A new class of medications was recently approved that cures more than 95 percent of people with Hepatitis C in only six weeks at a cost of about $84,000 per person, and new therapies with price tags that are likely to exceed $1 million per person are now available or coming soon. How can patients possibly afford them?

In an article published in the journal Science Translation Medicine, we outline a feasible market-based solution that could immediately expand access to transformative medications, including cures for Hepatitis C and cancer. The basic concept is to convert a large upfront medical expense into a series of more affordable payments, akin to getting a mortgage when buying a house. The challenge of curative medications that only require a short course of therapy is that the whole price is paid upfront — how many homeowners could buy their houses using only cash? Instead, most home buyers get a mortgage and make monthly payments for as long as they benefit from owning the house or until the full amount is paid. We propose the same solution to overcome the liquidity problem that prevents access to curative medications, which we call “health care loans,” or HCLs.

The second problem with upfront payment is the possibility of buying a “lemon.” Patients could unexpectedly relapse, die, or suffer a terrible side effect, in which case there’s no opportunity to recoup a portion of the upfront payment. Therefore, we propose that amortized payments stop if the benefit stops (i.e., if the “cure” doesn’t cure), thereby linking payment more closely to therapeutic value.

There are, of course, many complex ethical considerations and social ramifications related to the pricing of highly effective therapies above a threshold that permits universal access. Price gouging — like the recent 5,000 percent increase for a generic medication by Turing Pharmaceuticals — is a concern. To address this, some politicians and advocacy groups have proposed that prices be capped by legislation. Capping prices would stifle innovation and disincentivize drug development, the exact opposite of what we need.

Our HCL proposal has many advantages over price caps. It incentivizes (rather than disincentivizes) the development of highly effective therapies, because the greater the benefit, the greater the payment. And it can be implemented immediately. Our calculations indicate that bonds with competitive return characteristics could be raised to support HCLs across a range of financial scenarios. The creation of a large and liquid market for HCLs would give payers and lenders greater negotiating leverage with drug makers to get better pricing. Linking payment to value would establish a paradigm in which medications that offer very little benefit, like many of the recently approved cancer therapies, could not have exorbitant prices.

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How much do natural disasters really cost corporate America? — Jean-Noël Barrot and Julien Sauvagnat

MIT Sloan Assistant Professor Jean-Noël Barrot

MIT Sloan Assistant Professor Jean-Noël Barrot

From Fortune

As spring begins in New England after record-setting snowfall this winter, the economic consequences of natural disaster are a common topic of discussion. We know it will have a big impact on New England, but will it affect other parts of the country? If so, who will be affected and how much?

We hear these types of questions a lot following any type of disaster whether it is weather related or not. For instance, the fear of contagion was at the root of the decision of the U.S. government to bailout Chrysler and GM in 2008. Surprisingly, Ford’s CEO Allan Mullaly himself advocated the bailout of his two competitors in front of a U.S. Senate committee, as he recognized that “the collapse of one or both of our domestic competitors would threaten Ford because we have 80% overlap in supplier networks and nearly 25% of Ford’s top dealers also own GM  GM -2.69%  and Chrysler franchises.”

So the key question is: When a shock — like a natural disaster or financial crisis — hits a supplier, what really happens to the firms in that network? Is there a spillover effects? To address this issues, we studied the transmission of shock caused by natural disasters in the past 30 years in the U.S. within the supply chain of publicly traded firms. We analyzed a sample of 2000 large corporations and 4000 of their suppliers.

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How would democratic presidential hopefuls reform Wall Street? — Simon Johnson

MIT Sloan Prof. Simon Johnson

MIT Sloan Prof. Simon Johnson

From Moyers & Company

In recent years, parts of the financial sector have behaved badly — and holding the relevant executives accountable has not been a strong suit of the Obama administration. So financial reform is an important issue for the country, and whoever wins the Democratic Party presidential nomination will find that it resonates with many voters in the general election.

Former Secretary of State Hillary Clinton, Senator Bernie Sanders, and former Maryland Governor Martin O’Malley have each put forward detailed and specific plans, including more action by the Justice Department.

All of them also agree that the 2010 Dodd-Frank Act moved some issues in the right direction but there remains a substantial and important, unfinished agenda. The principal disagreement among the three camps comes down to this: what is the structural problem with our financial system, and how should we fix it?

Senator Sanders and Governor O’Malley correctly point out that in recent decades some banks became very large and the crisis did nothing to shrink their balance sheets. These banks are commonly and accurately regarded as “too big to fail,” meaning that they benefit from an implicit government guarantee. This is a dangerous and unfair subsidy.

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The best training for entrepreneurship? Hint: She doesn’t sleep through the night — Trond Undheim

MIT Sloan Sr. Lecturer Trond Undheim

MIT Sloan Sr. Lecturer Trond Undheim

From WBUR Cognoscenti

My best ideas come to me between the hours of 2 and 4 a.m. This is not by design — in fact, I wish it weren’t the case — but, as an entrepreneur, I roll with it. My third child is a terrible sleeper. In her two years, she hasn’t slept through the night once. When she wakes up in the wee hours, and it’s my turn to comfort her, sometimes I can’t fall back asleep. I tiptoe out of the room, flip on my iPad, and work on my new startup.

It’s counterintuitive, but of all the experiences I’ve had over the course of my life — including starting a business incubator, stints in government and at big corporations, and teaching in MBA programs — perhaps the thing that’s prepared me most for entrepreneurship is parenting.

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MIT Sloan Experts Twitter Chat: #FutureofWork – Erik Brynjolfsson

MIT Sloan Prof. Erik Brynjolfsson

MIT Sloan Prof. Erik Brynjolfsson

The acceleration of technology has led to remarkable benefits for business and the economy – but what about people earning middle- and base-level incomes?

Join MIT Sloan Experts’ (@mitsloanexperts) #FutureofWork Twitter chat with Erik Brynjolfsson (@erikbryn), director of the MIT Initiative on the Digital Economy, as he discusses how digital innovations can create a more inclusive, productive and sustainable future for all. Tim O’Reilly (@timoreilly), founder and CEO of O’Reilly Media, will host the chat and ask Erik questions that will help guide the conversation.

The chat will take place on Wednesday, April 13, from 7 p.m. to 8 p.m. EST.

How do you get involved? It’s simple! If you have a question or a response to one of Tim O’Reilly’s questions, just include “#FutureofWork” in your tweet.

The #FutureofWork Twitter chat will promote registration for the MIT Inclusive Innovation Competition, open from March 1 – June 1, 2016, which celebrates organizations that create economic opportunity in the digital era.