Buying Cures vs. Renting Health: How Financial Engineering Can Expedite Medical Breakthroughs

Recent breakthroughs in biomedicine have yielded transformational therapies for cancer, hepatitis, C, and several rare and deadly diseases—in some cases, we now have cures. These cures do not come cheap, either for patients or for drug makers who invest in their discovery and development. At the heart of these financial challenges is a mismatch between cost and benefit—large upfront costs lead to benefits over time—and this mismatch can discourage innovation and prevent patients from getting access to potentially life-saving therapies. In this talk, Andrew Lo reviewed these challenges and described how novel applications of well-known financial engineering techniques to healthcare contexts can overcome these challenges. Using portfolio theory, securitization, credit default swaps, and other standard tools of the financial industry, we can reinvent the biopharma industry to yield many more transformative therapies at lower cost, lower risk, and in less time.

Support

This event was supported by Mesirow Financial and the institute’s Health Economics initiative.