Potential for Exploitation : AIDS Treatment Opens New Market in Medicine
With low oil prices casting a pall over the petroleum-based economy here, Citizens General Hospital faced a grim financial future until owner American Medical International Inc. decided to convert it to treat patients with acquired immune deficiency syndrome.
Suddenly the half-empty, 150-bed hospital found itself at the center of intense new interest as AIDS sufferers from around the world beat a path to its door.
One man arrived two weeks before the facility opened Sept. 2 and camped out on the front steps. On opening day about 40 outpatients reported to the AIDS hospital for blood tests and drugs. About 45 calls began pouring in daily from as far away as Europe and South America.
Today, the once financially beleaguered hospital has treated more than 400 AIDS sufferers and seems poised to become a thriving center of AIDS research and treatment, officials say.
“The demand has exceeded our expectation,” said Jean Settlemyre, chief executive officer of American Medical’s AIDS hospital, the Institute for Immunological Disorders. “We hope to at least break even by the end of the fiscal year in August.”
Hospital owner American Medical is not the only profit-seeking enterprise trying to serve the growing health-care market created by the deadly AIDS.
Everything from drug companies, blood storage businesses, medical supply firms and home nursing agencies are lining up to reap financial rewards that will come to those who discover remedies and sell equipment or services needed by the growing numbers of those afflicted with the disease.
“The reality of disease is that there will always be people who profit from illness,” said Neil R. Schram, a physician who is chairman of the Los Angeles City/County AIDS Task Force.
“I’m a physician. If nobody got sick, I would not be able to make a living,” he said, adding that “the important thing is that people get involved” with fighting AIDS.
The potential medical market created by AIDS is difficult to pin down because many experts are reluctant to discuss the profits that could flow from diagnosing or combatting the devastating disease, which the U.S. Public Health Service forecasts will strike 270,000 Americans by 1991. And virtually every scientist and entrepreneur in the field is quick to point out that the urgent search for an AIDS treatment or cure is driven by a sense of humanity more than by any financial reward.
Yet AIDS, which has so far struck about 28,000 Americans, has attracted a surprising amount of investment interest from Wall Street, analysts say, even though other less serious, but more widespread, infectious illnesses--such as herpes and the common cold--might seem to offer a bigger and potentially more lucrative health-care market.
In October, for example, more than 100 investors and entrepreneurs met at a New York City conference organized by Liebert Associates of White Plains, N.Y., to discuss profits and AIDS. Analysts attribute the interest to the deadly consequences of AIDS and the desperation of its victims.
‘Charge Virtually Anything’
“If you can develop something that cures AIDS and (are able to) patent it,” said Kenneth Abramowitz, a health-care analyst for Stanford C. Bernstein & Co. in New York, “you can charge virtually anything you want.”
Concerns as varied as Eastman Kodak Co., maker of film and photographic equipment, and small mom-and-pop home nursing agencies have been attracted to the field.
In addition, AIDS has sparked the emergence of some unusual and controversial health-care enterprises.
These ventures range from Santa Monica-based Coastal Insurance Co. and Provident American Insurance Co. of Dallas, which briefly sold AIDS health insurance last year, to Daxor Corp., the New York-based sperm bank that last year obtained the first U.S. license to operate a blood bank for long-term self-storage of blood in order to protect against possible contamination from AIDS and other infectious diseases.
“I think AIDS has benefited from so many private companies being involved,” said Katharine Russell, a spokeswoman for Cetus Corp. of Emeryville, Calif., which is working with Kodak to develop a new diagnostic test designed to recognize the AIDS virus in blood samples.
“I know the public gets very frustrated” at the slow progress, Russell continued, “but imagine if AIDS had appeared 30 years ago. We probably wouldn’t have even identified the virus by now.”
In such an emotionally charged environment, the potential for exploitation looms large.
Last January, a Van Nuys company drew sharp criticism from the Los Angeles City Council for attempting to sell $100 identity cards to clients determined by blood test to be free of AIDS antibodies. The company subsequently scuttled plans to issue the ID cards, which bore a photo, an expiration date and the notation “OK” to indicate that the bearer did not have AIDS antibodies.
In Houston, Daniel G. Moreschi, the Institute for Immunological Disorders director of development who masterminded the idea for an AIDS hospital three years ago, said he has heard of so-called “AIDS investigators,” who for fees as high as $1,000 a week offer to go overseas and procure the latest in experimental AIDS treatments.
Exotic Treatment
One exotic, if not outlandish purported treatment, Moreschi said, offered to fight the deadly disease by injecting AIDS-infected human blood into sharks and then extracting the mixed blood a few days later to be reinjected into the AIDS sufferer. Needless to say, the treatment does not work.
“Whenever we have an illness with no effective cure, it becomes fertile ground for charlatans offering treatments which have no beneficial effect,” said Lonnie Bristow, an internal medicine physician who is a trustee of the American Medical Assn. Laetrile, the bogus cancer cure substance extracted from apricot pits, “is a classic example of what can happens when victims are particularly vulnerable.”
Observed Mark Pastin, director for the center for ethics at Arizona State University in Tempe, Ariz.: “The tremendous profit opportunities (created by deadly diseases) may help accelerate the pace at which a cure is found. On the other hand,” the desperation of victims make them especially vulnerable to “placebos and even worse.”
At present, treating AIDS involves battling the infections and cancers caused when the virus infects healthy human cells and causes a breakdown in the body’s immune system.
There is no known cure, but treatment can be extremely expensive.
A recent study conducted for the federal Centers for Disease Control estimates that the cost of treating the average AIDS patient during his or her average 18-month life expectancy following the onset of symptoms runs from $60,000 to $75,000 in 1984 dollars. While there are no directly comparable figures for other diseases, Ann Hardy, a Centers for Disease Control epidemiologist, said the cost for treating cancer in a patient’s terminal year averages about $20,000.
Yet most of the revenue generated by AIDS today is going not to pharmaceutical firms or hospitals trying to treat the disease but to companies selling diagnostic tests to protect blood banks from contamination by the virus.
The present worldwide market for the six companies that furnish AIDS antibody tests to detect contaminated blood amounts to more than $120 million annually, said Larry N. Feinberg, a health-care analyst for Dean Witter Reynolds Inc. And several firms, including Abbott Laboratories and Cetus, are readying more sophisticated tests that should dramatically expand the market by drastically improving accuracy.
However, some experts concede that if AIDS does not spread as widely as is predicted, companies working on expensive AIDS therapies could find themselves having to swallow billions of dollars in research and development costs if the market for their products proves to be too small to be profitable.
Bold Financial Gamble
One of the boldest financial gambles is the one under way at the Institute for Immunological Disorders in Houston.
American Medical, one of the nation’s largest profit-seeking hospital chains with 137 facilities in 11 countries, including 11 hospitals in the Houston area, will contribute annual installments of $250,000 for four years to the institute for research by University of Texas faculty members. In addition, American Medical will provide a fully equipped hospital, support staff and hospital management.
Although hospital officials say privately they expect to turn a profit in three to four years, that timetable depends on being able to hold down costs as well as developing a reputation for quality compelling enough to keep the hospital more than 60% full.
“We know what our (medical) costs are going to be,” said Moreschi, the institute’s director of development. “The biggest unknown is how many patients are we really going to get.”
The institute has some powerful drawing cards, however.
In addition to being the nation’s first hospital devoted exclusively to caring for AIDS patients, the institute is one of only 14 facilities chosen by the Public Health Service to conduct experimental AIDS drug testing under a five-year, $100-million federal program.
Over the next year, the Public Health Service said it expects the 14 centers to test about six drugs.
Moreschi said the AIDS drug-testing program will help doctors at the institute to more quickly identify the best treatment methods and develop less costly ways to care for AIDS patients. That, he said, may help mollify insurance companies that have threatened to sharply limit benefits for AIDS treatment due to its high cost.
Even without a drug breakthrough, Moreschi believes the institute will be able to treat patients for less than half the $1,500 to $2,000 a day most other hospitals charge by cutting overhead to a minimum.
Moreschi said the institute eliminated many department heads normally found in a general hospital by consolidating departments and eliminating others altogether.
For example, the hospital did away with its delivery ward and more than $300,000 in surgical facilities because such equipment is not needed to treat AIDS patients, Moreschi said.
What’s more, Institute doctors--drawing on their AIDS research at the University of Texas--have developed ways to stabilize patients more quickly so that they can be taken care of more inexpensively at home.
Hospital Stay Trimmed
That approach has cut the average length of stay for AIDS patients to under 15 days from the more than 30 days that was typical 18 months ago, said Dr. Peter W. A. Mansell, director of the institute’s medical staff. Prodded by the federal government and insurance companies, other hospitals have also reduced length of stay, Mansell said.
That development is benefiting companies such as Progressive Nursing Services Inc. and We Care Nursing Services Inc. in Los Angeles.
The two companies report doing brisk business specializing in supplying nurses to AIDS patients’ homes as doctors discharge AIDS patients more quickly from expensive $700-a-day hospital rooms. Both companies, which take care of 25 to 30 AIDS patients each, declined to disclose their annual revenue or profits.
The $4-billion-a-year disposable medical products industry, once overshadowed by reusable hospital supplies such as trays, intravenous and respiratory therapy products, is also experiencing rapid growth because of concern “related to infection-contamination prevention . . . in the era of AIDS (and) hepatitis,” according to Biomedical Business International, a Tustin-based trade newsletter.
The newsletter predicts that the disposable products market will grow to $4.8 billion over the next four years as hospitals seek to reduce the risk of infection by switching to disposable products.
Yet another potential AIDS health-care provider, the nursing home industry, has so far shunned AIDS patients, claiming that Medicare--which pays an average of $124 a day for skilled nursing home care--and private insurance reimbursement provide insufficient compensation.
Pasadena-based Beverly Enterprises, which announced last June that it planned to open a nursing home in Los Angeles devoted to AIDS patients, has yet to open such a facility. However, Kay Lehman, Beverly’s project coordinator, said that Beverly, the nation’s largest investor-owned nursing home chain, is still pursuing the project.
“We feel it’s worth a really well-run model program before we join those in the industry who say” operating a nursing home for AIDS patients cannot be done profitably, Lehman said.
Also taking a hopeful attitude is Feld Schuh, president of the blood bank company, Daxor Corp.
Schuh said that only about 200 people have agreed to pay the $150 a month it costs to have their blood preserved since his company started the service early this year. And the Food and Drug Administration, he said, puts a three-year limit on such blood storage.
But Schuh said he expects more demand as national concern mounts about not only AIDS but hepatitis and other diseases that can contaminate blood and cause devastating illness or death.
“The demand will come as public awareness increases,” Schuh said. “It’s like 50 years ago when the concept of hospital insurance must have seemed far-out. AIDS is creating a whole new awareness.”
