Questions about the Morality of Healthcare Banking

Hey all,

With junior recruiting spinning up and with group selection for my BB SA internship starting soon, I wanted to ask about what analysts in healthcare groups do and if any of you have moral qualms about the role you play? I'm super interested in HC and have read a number of books on the history of the medical-industrial complex in the USA, and personally I find it pretty disgusting how the incentives of doctors, insurers and pharmaceutical companies are fucking over Americans with high and rising prices for drugs and insurance, poorer quality and less cost-effective care, the apalling rates of medical bankrupcies, etc. I guess the long and short of it is that I think we should nuke the system from orbit and institute a single-payer regime a la the NHS, and this is coming from somebody who believes very strongly in the virtues of free markets generally.

I suspect that this might be a problem because of the sorts of assumptions that go into pitching/modeling a hc company. For example, we might make assumptions about how long a firm can maintain its patent on a lucrative drug, which is directly related to how well it can product-hop and extend its viability by changing the delivery method, tweaking the formula, i.e. gaming the system to the direct detriment of consumers. Another example might be projecting how much revenue can grow and margins improve on a drug or hc product (which is related to pricing power) where once again success as a corporation is often consumer-hostile.

Let's say we're advising a big insurer on acquiring a smaller insurer, and our client thinks they can cut costs in part by reducing the smaller firm's benefit payout ratio. The idea of pitching the transaction to investors if I know it likely will hurt people honestly just makes me want to vomit and would make an already hard job completely unbearable. Note though that I don't have any qualms with firms firing people or outsourcing functions, just with private entities in what should arguably be a government-administered public good intentionally maximizing profit at the expense of sick people.

Should I avoid hc groups for this reason? Are transactions ever justified on bases that are likely hurtful to the population, or are they justified on the usual bases of general cost-savings/synergies? Where else should I look to learn more about hc banking in particular? Do you think your work benefits society in the same way that work in other groups does?

I would really appreciate any insights, because depending on the details of the job I can see myself gunning for Healthcare as my top choice (as I would love to work in Healthcare VC in the future) or avoiding it conpletely. Thanks!

Investment Banking Interview Course

  • 7,548 questions across 469 investment banks. Crowdsourced from over 500,000 members.
  • Technical, behavioral, networking, case videos, templates. All included.
  • Most comprehensive IB interview course in the world.

Comments (17)

Jan 5, 2019

*Completely. Apologies, written on mobile.

Most Helpful
Jan 6, 2019

You should not pursue HC banking. Based on this diatribe, HC venture would not be a good fit longer term for you either. The entire goal of HC venture is to fund science that will produce drugs that you can sell at high prices.

Alternatively, you could think about HC banking / venture as facilitating the process of helping patients. Helping a biotech raise capital could be the difference in life or death for patients if the funding allows them to develop a drug faster or study it in more indications simultaneously. Selling a biotech to a big pharma will help that drug reach many more patients must faster. Finance functions play an incredibly small role in that process, but to me it's more of a "good impact" than any other industry group I know of.

Also, I think you have a one-sided view of the industry, at least re: drug prices. Quick food for thought: Innovation in pharmaceuticals is almost completely dependent on the potential profitability of drug development and the ability for this to attract private investment. If you want cures for more diseases, new drugs need to be able to command high prices. If you think this isn't true and that the government could effectively fund drug development for major unmet needs, take a look at drug resistant infections/bacteria. It's an enormous problem that is not being addressed, mainly because antibiotics are not profitable and thus there is no private investment in the field - so there is virtually no innovation. There is some price gouging in the pharma world, sure, but I always tell people that if you want to drastically cut drug prices across the board, you better pray that you never get a disease that we don't currently have a cure for.

    • 11
Jan 7, 2019

Thanks for the feedback. I do see the merits of your point with regard to drugs in particular, and I don't blame parties for acting in their own interest within the bounds of the law. I guess it's really the regulatory regime that puts me off the industry; things like medical devices being approved through the 510k program by the FDA and being implanted in people without ever being tested in humans (or animals of any kind!), resulting in people's colon's falling out or implants causing severe organ damage (like in the case of trans-vaginal mesh in the early 2000s). I don't think I could in good conscience invest in a biotech startup and/or advise one to push through a class-2 medical implant without any human testing just because it would be profitable (and the incompetent FDA would approve it in just 19 hours of deliberation vs. years and tens of millions in trials for a class-3 implant). Thanks!

Jan 7, 2019

I've been in life science banking for 5+ years and I can honestly say, I've never had a client who gave me the impression that profit was at the forefront of his/her mind. Life Science investment banking clients are usually doctors and scientists who didn't spend 4+ years getting an MD or PhD so that they could make a ton of money. They did it because they were passionate about helping patients or passionate about science and discovery. That sort of altruism tends to pervade their thinking as leaders of companies developing therapies. Obviously, there are bad actors (i.e. Martin Shkreli etc.) who exploit the nature of the industry for profit but most clients consider patient care a top priority.

From my understanding, services tends to be a bit different. Facilities (i.e. hospitals, assisted living, mental etc.) tends to be more of a real estate game and can attract people who aren't all that altruistic. I don't know much about other services (i.e. HMO's, PBM's, etc.) but given heavy regulation and significant public scrutiny, I believe these guys are generally kept in line

    • 4
    • 1
Jan 7, 2019
RexSimiiformes:

(and the incompetent FDA would approve it in just 19 hours of deliberation vs. years and tens of millions in trials for a class-3 implant).

I find it curious that you don't also see a huge problem with the latter scenario. Those years of delays keep potentially life-saving products off the market, and people die or suffer in the interim. Worse, the millions in regulatory costs change the entire cost-benefit analysis before projects get funded. Possible life-saving research for devices and drugs never even get started, because the risk-return profile is dragged down by the certainty of regulatory costs/delays.

Learn More

7,548 questions across 469 investment banks. The WSO Investment Banking Interview Prep Course has everything you'll ever need to start your career on Wall Street. Technical, Behavioral and Networking Courses + 2 Bonus Modules. Learn more.

Jan 7, 2019

Well I don't necessarily want the newest treatments to not get to patients, but the fact is that "innovative" treatments that have never been proven safe in a single human study aren't innovative, they're reckless. There is no way to know that your fancy new "innovative" metal-on-metal cobalt hip replacements won't give people dementia until you've done at least one human trial. Even the class-3 pre-market approval process, the FDA's most stringent evaluation for medical devices, requires only a single short-term study with as few as 50 people, which is FAR below the standard for pharmaceuticals, for which the FDA requires 2 studies usually on the order of thousands of patients. Under the 510k program for class-2 medical devices, new products must be shown to just be "substantially equivalent" to products already on the market, and remain legal to market even if the previous product has been recalled for (itself never having been tested). Around 98% of all medical devices are marketed under 510k approval, and the large majority have no human trials to back up their safety; even most surgeons implanting these devices do not know this. It's very telling that most Americans would never believe that the FDA would allow such practices to continue, but with the recent revision of the 510k program to promote "innovation", which requires substantial equivalence to be based on a product no older than 10 years, the few devices that have been in use long enough to be proven safe are now, ironically enough, no longer able to be used as a yardstick for safety and efficacy and dangerous, untested devices will continue to proliferate. It sure makes you want to ask a few more questions when you go in to get the lastest pacemaker.

Jan 7, 2019
RexSimiiformes:

personally I find it pretty disgusting how the incentives of doctors, insurers and pharmaceutical companies are fucking over Americans with high and rising prices for drugs and insurance, poorer quality and less cost-effective care, the apalling rates of medical bankrupcies, etc.

Yup. Unbridled capitalism is a scourge on our democracy, but suggest any solution that seeks to mitigate the negative externalities of libertarianism or winner-take-all capitalism, and the Fox News boomers and Ben Shapiro wannabe intellectuals scream you're a socialist.

when you're accustomed to privilege, equality feels like oppression

    • 5
    • 8
Jan 9, 2019

Alright, so I'll bite: what's your preferred economic model that's 'not socialism' but avoids being the 'scourge' libertarianism/capitalism is on our economy?

    • 1
Jan 9, 2019
The Stranger:

Alright, so I'll bite: what's your preferred economic model that's 'not socialism' but avoids being the 'scourge' libertarianism/capitalism is on our economy?

Capitalism with higher government regulation, plus a more progressive tax system to fund a larger social safety net, a la the Obama model which Fat Nixon has tried his hardest to undo just because.

when you're accustomed to privilege, equality feels like oppression

    • 4
Jan 9, 2019
The Stranger:

Alright, so I'll bite: what's your preferred economic model that's 'not socialism' but avoids being the 'scourge' libertarianism/capitalism is on our economy?

And I'll put a question back to you and the monkey shit throwers. Do you think the American economic model is currently working? Sure, it's fine for you, me, and most of the people on this board. But 1 and 5 millennials are now expected to die with unpaid debt. Healthcare and education costs continue to skyrocket. Still very modest wage growth despite the longest economic boom in history. Wealth distribution has skewed enormously towards the 1% since the Great Recession.

How does this end if we don't change something radically? For all you Bernie haters (and I'm not a huge fan myself), what do you think happens when the MAGA crowd realizes Trump has conned them, and some guy on the other side of the aisle will promise them free shit to get back at Corporate America? "Economically anxious" MAGA nation doesn't hate handouts, they just hate them going to other people. That sounds like a winning electoral coalition to me.

Conditions are ripe for full-blown socialism in this country (on both the far right and far left), so I suggest we find a reasonable compromise between that and unbridled late capitalism before it's too late.

when you're accustomed to privilege, equality feels like oppression

    • 1
    • 1
Jan 7, 2019

Listen, if you really wanna do this with your life you have to believe you're necessary and you are.
https://i.ytimg.com/vi/MAC5J2qgS90/maxresdefault.jpg

    • 1
Jan 9, 2019

IMO there is definitely value to the world of HC finance in general - know on PE side at least there are firms that try to target investments that benefit all constituents - payers, providers, and patients. Doesn't have to be a 0 sum game.

Jan 9, 2019

Your statement makes me think we need to ground ourselves before I answer. As such, I ask the following:

1) What is your a priori model for how healthcare should work? If that seems too broad, let me ask what the metrics are that you would use to assess the viability/defensibility of a given healthcare system?

2) What quantitative data (please spare me sharing an article unless it cites the original data) did you rely on to decide NHS performs better than our system?

3) Why would you assume that IB/VC/PE is morally defensible in other industries but not HC? If you think capital markets lead to unfair results in the latter, why would you assume they are fair in others.

Jan 9, 2019

This is not nearly as complex or morally challenging a concept as the long-winded posts by OP and commenters make it out to be.

  1. If you become a healthcare IB analyst, you aren't personally making the system worse. You're just along for the ride. That's putting it mildly.
  2. The moral issues in the system aren't as clear cut as you say. I'd explain, but I don't want to write a novel like everyone else has. Look up critiques of single payer, just for starters.
  3. If you want to make healthcare better, what better way to do it than to go inside the belly of the beast?
Jan 9, 2019
PteroGonzalez:

This is not nearly as complex or morally challenging a concept as the long-winded posts by OP and commenters make it out to be.

  1. If you become a healthcare IB analyst, you aren't personally making the system worse. You're just along for the ride. That's putting it mildly.

"I was just following orders, your honor!"

when you're accustomed to privilege, equality feels like oppression

    • 1
Jan 9, 2019

"Following orders" in this case means lining up boxes in powerpoint . . so yeah.

Jan 10, 2019