‘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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Closer to a cure: a new approach to funding biomedical innovation — Andrew Lo

MIT Sloan Professor Andrew Lo

MIT Sloan Professor Andrew Lo

Watch Andrew Lo, the economist, hedge fund manager, and finance professor at MIT Sloan, discuss his idea to bring Wall Street-style financial engineering to solving one of the most pressing medical problems of our time: curing cancer and rare diseases. Professor Lo’s proposal—the creation of a “megafund” that invests in early-stage biomedical research and drug development —holds promise for new treatments and medicine to fight cancer and other diseases. Robert Langer, the noted entrepreneur, scientist, and Institute Professor at MIT, also appears on the program to talk about bringing investors on board..

Andrew W. Lo is the Charles E. and Susan T. Harris Professor at the MIT Sloan School of Management and director of the MIT Laboratory for Financial Engineering.

Wall Street’s next bet: Cures for rare diseases — Andrew Lo

MIT Sloan Professor Andrew Lo

MIT Sloan Prof. Andrew Lo

From Fortune

What if I told you about an investment fund that diversifies your portfolio, shields you from fluctuations in the stock market, and earns double-digit returns? Sounds interesting, right?

Did I mention that this investment also creates potentially life-saving treatments for deadly rare diseases?

This fund doesn’t exist — at least not yet. I’m cautiously optimistic, however, that in the near future we’ll see the launch of an orphan disease “mega-fund” that finances early-stage biomedical research and drug development and is also a tidy investment. Read More »

A judicial whodunnit: Shedding light on unsigned opinions — Andrew Lo

MIT Sloan Professor Andrew Lo

From WBUR Cognoscenti

Within legal circles, the mystery of “Whodunnit?” has increasingly become “Who wrote it?” as courts, including the U.S. Supreme Court, keep issuing opinions without divulging who actually authored them. Since 2005, for example, the Roberts Court has disposed of at least 65 cases through unsigned per curiam opinions. Many cases also came with unsigned concurring or dissenting opinions.

We place a high value on transparency in our democracy, and that should certainly apply to Supreme Court justices, who, after all, are already protected by lifetime tenure. Obscuring authorship removes the sense of judicial accountability, making it harder for experts and the public alike to understand how important issues were resolved and the reasoning that led to these decisions, especially in controversial cases. We’ve all heard the charge that judges are legislating from the bench — but assessing that claim requires, at the least, the ability to link opinions to individual decision makers.

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Could financial engineering cure cancer? — Andrew Lo

From Financial Times

Financial engineering failed dramatically in the financial crisis, but maybe it could be used to help persuade institutions to invest in cancer research. Professor Andrew Lo of MIT’s Sloan School of Management explains how to Long View columnist John Authers.

Andrew W. Lo is the Charles E. and Susan T. Harris Professor, a Professor of Finance, and the Director of the Laboratory for Financial Engineering at the MIT Sloan School of Management.

Watch the video at the Financial Times.