When Bad Policy = Bad Business Models = Bad Public Health - The a16z Show Recap

Podcast: The a16z Show

Published: 2020-04-16

Duration: 1441

Guests: Jorge Conde, Julie Yoo, Hanne Tidnam

What Happened

Jorge Conde and Julie Yoo examine how flaws in healthcare policy lead to ineffective business models and public health failures, using the coronavirus pandemic as a case study. They argue that the healthcare system's weaknesses, much like a virus exploiting vulnerabilities in the human body, have been a significant barrier in effectively addressing pandemics. Historically, investments have focused more on treatment rather than prevention, creating a reactive rather than proactive healthcare system.

Vaccines present a particularly challenging market due to their commodity status and the unpredictability of demand during pandemics. Conde and Yoo discuss how the urgency to develop vaccines during pandemics fades once the immediate threat is controlled, leaving companies without a sustainable market. The business model struggles as successful public health efforts reduce the need for vaccines, making it hard for companies to recoup their investments.

Antibiotics face a similar dilemma where new developments are reserved as last-resort treatments, limiting their usage and profitability. The lack of a viable business model has led major pharmaceutical companies to exit the antibiotic space. The guests mention Scott Gottlieb's suggestion of subscription models as a potential solution, which could provide stable revenue by offering access rather than per-unit sales.

Diagnostics also suffer from underutilization due to low reimbursement rates and a perception as a commodity. There's a disconnect between the value of diagnostic information and the financial incentives within the healthcare system. The COVID-19 pandemic highlighted these issues, with reimbursement for tests not reflecting their critical role in managing public health crises.

Conde and Yoo propose that clear policies should be in place to ensure free public access to essential diagnostics and treatments during pandemics. This would create demand and incentivize companies to invest in scalable solutions. They argue that only nation-states have the scale to provide a backstop guarantee for the purchase of such products, which is crucial for their development.

Regulatory lag is a concern, as outdated policies impede the adoption of innovations like telehealth. The hosts advocate for evolving regulations to match advances in healthcare, emphasizing the need for a balance between safety, efficacy, and rapid innovation. They conclude that closing the gap between innovation and regulation is essential for better preparedness against future health threats.

Key Insights