This post first appeared as an issue of the a16z Bio Newsletter. Subscribe to stay on top of the latest trends in bio and healthcare.
IN THIS EDITION:
- U.S. healthcare versus COVID-19: How bad policy leads to bad market dynamics and potentially to public health failures
- CRISPR for COVID-19: New applications in diagnostics and therapeutics
- Tracking and tracing in pandemics: The importance of contact tracking and tracing, the apps, and the security and privacy concerns
U.S. healthcare versus COVID-19: An unfair fight
In healthcare, perhaps more than any other industry, policy shapes our business models – so bad policies can lead to bad business models, sometimes then leading to catastrophic public health failures, like the one we’ve seen unfold over the last months.
COVID-19 is the latest tremor to expose the fault lines of this critical policy/market/public health intersection. But it’s far from the first. This is all too obvious in the vaccine market. When a new threat emerges – and they aren’t actually that rare: SARS, West Nile, H1N1, Zika, etc in just the last few years – we need to quickly develop novel vaccines. In each of these cases, pharmaceutical companies spun-up furious efforts to develop new vaccines, with enormous pressure to make them available either free or at cost. Then as the immediate threats recede, demand for these new vaccines disappears with them. It is very hard to justify a business model where the ability to generate supply is an arduous, risky, and expensive process, but demand waxes and wanes unpredictably on a massive scale – especially when you may not even be able to “price to value”. This is why the same companies who spun up vaccine development efforts in desperate times feel like they are left “holding the bag”, sometimes even getting out of the vaccine business entirely – and unfortunately leaving us less prepared for the next crisis.
That same fault line also exists in diagnostics. A robust testing capability to detect and respond to an invisible invader would have been a total game-changer for COVID-19. But we didn’t have that in place, in large part because we have historically underinvested in diagnostics. Policy drives coverage decisions (which tests can you order?) and reimbursement rates (how much will you get paid for this test?), ultimately determining how diagnostics are used in clinical care. Reimbursement rates for diagnostic tests have historically been low – or certainly not priced for the value they can deliver – and so few are incentivized to take, order, or develop novel tests.
The same negative policy/market/public health dynamic also plays out in the world of antibiotics. We are in desperate need of better, targeted antibiotics against resistant strains of bacteria, but the business model for developing those novel antibiotics is broken. Antibiotics also need to be inexpensive – and novel ones are intentionally used as a last resort to ward off resistance. So even if you manage to successfully develop a new antibiotic (which is hard!), it will likely be used sparingly. This does not make good business, as companies like Achaogen show us: after fifteen years, the company was able to get one novel antibiotic approved – but only able to generate about $1 million in revenue, and thus forced to file for bankruptcy.
It’s a tragic tension that, in the healthcare industry, saving lives is not enough if you can’t make enough money doing so. Diagnostics, vaccines, antibiotics – these are hard things to create. As this pandemic has shown us so starkly, we need a system that can adapt and respond to a changing landscape. Some of the biggest problems we are going to face as a world are healthcare driven – truly biological in nature. If there is a silver lining in this pandemic, it is that it gives us an opportunity to rethink the status quo in our healthcare system. We need to reverse this flow. Protecting public health should be a viable business model – where need drives market opportunity, and policy is crafted to support business models that can most effectively meet those needs and therefore protect and enhance public health.
—Jorge Conde, a16z general partner
LISTEN TO “When Bad Policy = Bad Business Models = Bad Public Health” with Jorge Conde, Julie Yoo, and Hanne Tidnam HERE.
CRISPR for COVID-19
When one hears “CRISPR”, the first thought is usually “gene editing”. And while clinical trials for this application of CRISPR have only just commenced, very recently we saw the first authorized use of CRISPR technology as an infectious disease test – specifically, for COVID-19. This test relies on CRISPR’s ability to seek out and cut specific genetic sequences, in this case, from the SARS-CoV-2 genome. On our news show 16 Minutes, Jorge Conde, bio deal partner Andy Tran, and Sonal Chokshi talk about the FDA’s emergency use authorization and the broader regulatory debates when it comes to CRISPR. And what if CRISPR could also be used as a prophylactic therapeutic against not just COVID-19, but nearly all coronaviruses and influenza strains? We discuss recent research on this possibility from Stanford on our show a16z Bio Journal Club, with general partner Vijay Pande, Andy Tran, and Lauren Richardson. What would it take to go from proof-of-concept to practice, and what are the broader implications of such innovations?
Tracking and tracing disease during pandemics
There’s a lot of important discussion and activity around the “test-trace-isolate” framework when it comes to tackling pandemics at scale, but tracking – and especially predicting – them is also important. Even a two-week headstart would increase our ability to allocate resources and save lives. Sociologist and physician Nicholas Christakis (Director of the Human Nature Lab at Yale’s Institute for Network Science, author of the book Blueprint, and co-creator of the app Hunala) joined Jorge Conde on the a16z Podcast to discuss network spread, the role of superspreaders, privacy-preserving tracking technology, and more. Meanwhile, on 16 Minutes, a16z operating partner for security Joel de la Garza and Sonal Chokshi discussed how to think about the security and privacy aspects of contact tracing, including Apple and Google’s recently announced approach, the South Korea model, and others.
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