The economics of cancer

I recently had the “opportunity” to become an active consumer of healthcare services in the field of cancer diagnosis and treatment.  Having some time pre- and post-surgery to do, well, nothing, I found myself thinking about how the economics of the transactions came to be the way they are.


First, I was lucky to be afflicted with a very common form of cancer, i.e., prostate.  Secondly, I was also lucky enough to have it diagnosed at an early stage, prior to spreading beyond the prostate.  Well, not lucky really.  I firmly believe in spending time and money on preventive healthcare, so I’ve been getting semi-annual blood work done for a decade, which showed the steadily rising prostate-specific antigen (PSA) test results.  The biopsy proved positive and my choices were radiation or surgery.

Given my relatively young age for having this diagnosis and a reasonable probability of life beyond 20 years hence, surgery was the better choice.  Enter the DaVinci robotic-assisted surgical system.

This tool allows a single surgeon (without additional hands holding clamps and soaking up blood), to finely manipulate tools on thin arms entering the body through small holes, using 3D optics and a motion reducer feature that turns an inch movement of the surgeon into millimeters of movement at the cutting site.

I went into surgery Monday morning and was at home the next night.  A week later, the catheter was removed and I was taking walks, going out to dinner with my wife.

Prior to this advance in surgical tools, a prostatectomy would take half a day, require blood transfusions to replace the blood loss in surgery, involved multiple surgeons in the operating room working through an open wound about six inches long and cut through the abdominal muscle and tissues down to the site of the prostate, which is deep and packed in around other critical items, like veins, nerves that control erections and the urethra, the rectum, etc.  Those surgeries required ten days in the hospital and six months in recovery before resuming normal life activities.

So who decided to spend millions in creating the PSA diagnostic test?  Who decided to spend millions on the DaVinci surgical tool?  Those investments were many years to conclude successfully, involving very strict clinical studies and FDA approval.  Hundreds of millions of dollars.

The answer is, the investment was reasoned to be a huge opportunity for returns.  Prostate cancer is the most common type of cancer that men get, and with early diagnosis, the cure rate is very high.  Baby Boomers make up the majority of the demographic group likely to get prostate cancer, so there’s roughly 35 million potential customers.  That’s a big market.

Somebody looked at that and said to themselves, “Hey, if we can diagnose this sooner, people will want to spend money on the test.”  Turned out to be very true.  The inventor of the PSA test, Hybritech, was sold to Eli Lilly in the early 1980s for a then-whopping $400 million.  The executives and scientists who cashed out of that deal went on to found dozens of biotech and biopharmaceutical companies in San Diego, making the region the third largest life science community in the country.

Then more recently, somebody else said, “Hey, if I can help a surgeon do more of these operations in less time, with less assisting medical staff, they can make more money, the hospitals can make more money and the overall cost of the surgery will come down so the insurance companies will buy off on it!”  Again, the 35 million potential customers drove the revenue projections.  And the DaVinci system can be used for other types of surgeries, of course, so a big win for that company.

I was lucky to have a high-volume, treatable form of cancer.  I’m the target market for many healthcare companies and professionals.  But I’m also able to pay for preventive care beyond what my insurance plan covers.  I worry about many others who can’t fork out a few thousand dollars a year on “concierge” physician services, and who don’t know how to be their own advocate in terms of buying healthcare services.  It’s an arcane, Byzantine system.

For example, I asked various parties in the web of providers how much this surgery was going to cost.  Nobody could give me an estimate.  If you’re entitled to a “good faith estimate” from auto mechanics, why can’t we get one from the folks sticking tools inside us when we’re completely asleep?


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One Response to The economics of cancer

  1. RandyHowell says:

    Way cool Stan

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