"You can't put a price tag on a life." Except, we can

We can and do. Regularly. And it makes sense.

• The concept of QALY and why it makes sense
• The financial value that we (the public) place on QALYs
• The outcome: biotech will be the No. 1 sector of the next 10-20 years

For any new medical intervention (new medical drugs, procedures etc.), policymakers quantify the positive impact it will have on people's lives, and then compare that to the cost.

The widely accepted metric is "Quality-Adjusted Life Years" (QALY).

One year of life lived in perfect health is worth 1 QALY, while death is worth 0 QALYs. One year of life lived in less than perfect health is worth less than 1 QALY, or perhaps even negative QALYs if living in a state "worse than death".

It's simple but effective. When choosing to invest into the development of any new medicine, we can ask: How many extra QALYs does it buy us? How many dollars per QALY do we need to invest to get it to approval, and how many dollars per QALY will it cost society after approval?

Many life-saving drugs never see the light of day, because they are deemed simply too expensive. In the UK, this threshold is ￡20-30k (USD 26k – 39k) per QALY. If a new medical treatment costs more than this, then it probably won’t be offered on the NHS. In the US the number is a bit higher, for example cancer indications can see a QALY value of USD 100k or sometimes even more. In general, USD 50k is a commonly accepted ‘conservative’ value for measuring QALY throughout the developed world.

This may seem harsh and inhuman. But it’s important to see that this number is a political choice. It is a function of the public’s demand for more QALYs. It would be far higher, if only the public would shout louder about their own health and longevity. 

And then they did! 

Back in March, the UK Government were weighing up two responses to the Covid pandemic: (1) enforce a nationwide lockdown for a number of weeks, or (2) quarantine just those above 70 but otherwise allow life to function as normal.

Option 2 suggested a maximum of 250,000 dead. After some wavering – and a LOT of criticism from the public/media – they went with Option 1.

But Option 1 essentially hit the "pause" button on day-to-day commerce. This was going to cost. And surely enough, the Government announced a cool ￡330 billion in aid. Some of this was “gifted” while the rest was in loans, but let’s stick with this number, because reasonable estimates of the true economic cost to the UK go far, far higher anyway.

The public gave the package a big thumbs up.

Suddenly, the cost per QALY has gone well above ￡180,000 or approx. 6 times more than before. That’s assuming, 250,000 lives saved and 7 QALYs on average. (The vast majority of Covid-related deaths are among the elderly with co-morbidities.) We can do similar back-of-the-envelope estimates for practically every Western country.

And my numbers for the “new QALY” are most likely very conservative/low. Most experts, with hindsight, regard the “250k” deaths prediction for the UK as highly exaggerated, and at the same time the economic collateral damage will very much exceed ￡330 billion. In a few years, we’ll be able to calculate more precisely, and see whether the cost-per-QALY potentially even exceeded ￡1m.

But interestingly, the public – at least, so far – have been generally supportive of these lockdown measures, despite seeing how painful they are for society and economy. The point of this article is not to pass judgement on whether these policies are “right” or “wrong” but to examine what the pandemic has revealed about how we value health in the modern world, and how this might have changed compared to some decades ago.

QALYs are now more valuable than ever. 

There are two drivers behind the public’s support for these measures, which are completely out of line compared to business-as-usual decision making.

Firstly, unfortunately, the public cannot easily put economic numbers into context. Everything costs either millions or billions, so who’s to say how many zeroes is right? And anyway, a public budget isn’t the same thing as a household budget – can’t we just print the money?

The truth is that things don’t come for free. It’s just a matter of time until ordinary people pick up the cheque. As governments print money faster than ever before, ultimately cash gets devalued and cash savers will suffer. The collateral damage is a silent redistribution of wealth from the middle class (usually the savers) to the rich (owners of real assets, which go up in value relative to cash) and to the poor (receivers of transfer).

But not everything can be explained away by economic naivity. More significantly, I believe we are seeing a shift of priorities in epic proportions: the public is saying to politicians, “We value QALYs far higher than your ￡20-30k threshold assumes.” And in my opinion this sentiment is here to stay.

Mortality and health are back on the public agenda like never before. It seems that Western voters care about their own mortality and health (physical and mental) more than at any time in the last 7 decades.

A close friend of mine – a senior politician in Europe – explicitly said so to me last week: "More than ever before, my voters want to be alive and healthy." It might sound obvious, but it simply wasn't a conscious priority for most people until recently.

The future is biotech 

In the 2020s, I expect to see far more public funding for both physical and mental health as a % of total spending. And I believe we’ll see far higher thresholds for cost-per-QALY, because this is a function of public demand.

And gradually, it will go further than just money. I believe we will finally see AGING and DYING officially recognised for what they are: a collection of diseases that can be prevented, cured and reversed.

Invest into companies that produce QALYs.

And here’s the real conclusion: The big winners – besides everyone benefitting from these advances – will be the companies who are PRODUCING QALYs: biotech companies.

Just as Kraft produces chocolate bars and Ford produces cars, biotechs produce QALYs. That’s their product.

We are seeing it very directly already. The US government just gave emergency authorisation to a new drug from Eli Lilly and their drug discovery partner AbCellera (disclosure: a portfolio company of mine). The US government so far very much supported the development of the drug and intends to fully fund the rollout as well – such is the importance of it to the public – and meanwhile AbCellera is all-but-certain to become a multi-billion-dollar company.

The biotech boom is not new news to investors. It had already started pre Covid, thanks to some truly stunning technological breakthroughs and lower costs/ higher speed of starting a biotech company. Biotech today is where tech/software was around 2008.

But as a result of Covid, and the public’s increased appetite for such topics, biotech is undoubtedly set to be the big topic for the 2020s and beyond for one simple reason: they make the product that people really want, more than anything else.

The ultimate goal: curing aging

I can speak for myself: having achieved decent success in life, and having everything materially that one would reasonably ask for, my focus is on being/staying healthy and happy. Put simply, I want to live forever! And in perfect health! And it is my sincere belief that we will achieve the means to do this within the next 20-30 years.

If this is achieved, then perhaps one day I might want to die. But I would prefer to be the one calling the shots and deciding when the right time is. It certainly won’t be within what we consider a “normal” life span today. Far from it – I rather expect that at 100 years old, I’ll be living with the body of a healthy 30-year-old. ??

Stay healthy and happy! And invest in biotech. It is an investment in yourself!