We will start with a quote from page 110 of The Coming Wave, a must-read book by Mustafa Suleyman (co-founder of DeepMind and Inflection AI). His book is authored with Michael Bhaskar.
One of the most promising areas of AI, and a way out of a grim healthcare picture, is automated drug discovery. AI techniques can search through the vast space of possible molecules for elusive but helpful treatments. In 2020 an AI system sifted through 100 million molecules to create the first machine-learning-derived antibiotic, called halicin (yes, after HAL from 2001: A Space Odyssey), a drug that can potentially help fight tuberculosis. Start-ups like Exscientia, alongside traditional pharmaceutical giants like Sanofi, have made AI a driver of medical research. To date 18 clinical assets have been derived with the help of AI tools.
There’s a flip side. Researchers looking for these helpful compounds raised an awkward question. What if you redirected the discovery process? What if, instead of looking for cures, you looked for killers? They ran a test, asking their molecule-generating AI to find poisons. In six hours it identified more than forty thousand molecules with toxicity comparable to the most dangerous chemical weapons, like Novichok. It turns out that in drug discovery, one of the areas where AI will undoubtedly make the clearest possible difference, the opportunities are very much “dual use.”
Readers are advised to read the explanations in this book to understand that dual use applications “can be put toward many ends – good, bad, everywhere in between – often with difficult-to-predict consequences.”
With this sobering opening, I would like to move to the healthcare sector.
The GDP of the United States is estimated to be at a current run rate of $28¼ trillion. Of that, about $5T (17.7%) is in the sector broadly characterized as healthcare. Here’s a trove of details from Altarum: “June 2024 Health Sector Economic Indicators Briefs,” https://altarum.org/news-and-insights/june-2024-health-sector-economic-indicators-briefs.
I expect the percentage of GDP for this sector to continue to rise and the productivity in the healthcare sector to improve. In fact, I suggest that productivity, as we usually measure it, is underestimated in the healthcare sector. Here’s the public explanation from the Bureau of Labor Statistics. “How is productivity measured? > Calculating productivity,” https://www.bls.gov/k12/productivity-101/content/how-is-productivity-measured/calculating-productivity.htm#:~:text=A%20labor%20productivity%20index%20can,an%20index%20of%20hours%20worked.
Now, let me ask each reader to think about your personal recent medical treatments in the context of productivity. And then consider what the same treatments cost in time and effort a few years ago. When you do that, also think about the quality improvement, if there was some. Were meds better? Did you heal faster? Are recurrences less frequent? Did you communicate with your provider more efficiently? I know these are subjective issues and they are idiosyncratic to you. But when we add up all the yous and me and others, we get to the macro of this question. Then think about the work hours and payroll cost of the people of all the people who provide medical services. Has the per-hour cost gone up or down when you adjust it for the time saved or lost and the efficiency of outcomes?
Here’s a simple case study involving me and a flare-up from an ingrown toenail. Old days: phone, appointment, travel; doc inspects and prescribes antibiotic; travel, treatment visit, and follow up visit with more travel. New days: Send photo of toenail by text message. Receive electronic prescription. Pick-up requires travel. Doc, appointment, and treatment; requires travel. Follow up photo by text. All good so no need to travel.
I, the patient, had the productivity gain. It does not appear in the BLS statistics. Pharmacy is the same. Doc visit is the same. Follow-up visit is no longer needed and therefore doesn’t appear in BLS. So, was there a productivity gain? And if so, how much? I can give many examples of usage of patient portals or telemed consults. My point is that we are seeing gains in patient outcomes that are positive, and we are watching 18% of GDP growing while our population growth has stagnated and we are aging. Altarum has all the details in their monthly report. In my view, they are bullish for the healthcare sector.
Now here are some items for a reading list related to healthcare, disease, and the outlook.
Reading List
“Climate Adaptation Center events focus on Florida's climate challenges,” https://www.theclimateadaptationcenter.org/events/
The theme of the 2024 CAC Florida Climate Conference will be Climate and Human Health. The event will be held November 14-15, 2024, in the University of South Florida, Sarasota-Manatee's new conference facility.
“June 2024 Health Sector Economic Indicators Briefs,” https://altarum.org/news-and-insights/june-2024-health-sector-economic-indicators-briefs
“RESPIRATORY VIRUS UPDATES,” https://www.cdc.gov/respiratory-viruses/data-research/dashboard/snapshot.html
“H5N1 Update” (Katelyn Jetelina), https://yourlocalepidemiologist.substack.com/p/h5n1-update
“A Home for Infection-Associated Chronic Conditions and Illnesses (IACCIs) at NIH,” https://solvecfs.org/wp-content/uploads/2024/04/NIH_IACCI_Entity_Paper_FINAL.pdf
“Large retrospective trial out of #Oxford sheds light on #mRNA #vaccine safety and effectiveness in kids in the UK immunisation registry. #mRNA vaccines are both safe and effective in kids.” https://x.com/richardhirschs1/status/1798254032286564568
“Health officials in the Florida Keys issue a dengue fever alert,” https://www.nbcnews.com/health/health-news/health-officials-florida-keys-issue-local-dengue-fever-alert-rcna159931
“Billions of people just felt the deadly intensity of climate-fueled heat waves,” https://www.washingtonpost.com/climate-environment/2024/06/22/deadly-heat-wave-climate-change/
“Extreme heat kills hundreds, millions more sweltering worldwide as summer begins,” https://www.reuters.com/business/environment/millions-sweltering-under-extreme-heat-worldwide-summer-arrives-2024-06-20/
“Summer bugs are worse than ever: How to keep bed bugs, ticks and mosquitoes from making you sick,” https://www.sun-sentinel.com/2024/06/14/summer-bugs-are-worse-than-ever-how-to-keep-bed-bugs-ticks-and-mosquitoes-from-making-you-sick/
Covid and Long Covid
“Current Epidemic Growth Status (Based on Rt) for States and Territories,” https://www.cdc.gov/forecast-outbreak-analytics/about/rt-estimates.html
“From Long COVID Odds to Lost IQ Points: Ongoing Threats You Don’t Know About,” https://www.ineteconomics.org/perspectives/blog/from-long-covid-odds-to-lost-iq-points-ongoing-threats-you-dont-know-about
“New Insights into Acute and Long Covid” (Eric Topol), https://erictopol.substack.com/p/new-insights-into-acute-and-long
“New Report Underscores the Seriousness of Long Covid,” https://www.nytimes.com/2024/06/05/health/long-covid-symptoms-recovery.html
“Health systems and employers count economic cost of long Covid,” https://www.ft.com/content/bb09a03d-4a87-4cea-ae87-986769fd4680
“Searching for Data on Black Patients and Long Covid,” https://www.bloomberg.com/news/newsletters/2024-06-19/long-covid-among-black-patients-in-detroit
“Lab Leak Mania” (Paul Offit), https://pauloffit.substack.com/p/lab-leak-mania
David R. Kotok
Co-Founder & Chief Investment Officer
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