You may not like what Sermo Inc. is doing for a living, but you have to give the company credit for cutting to the chase in the medical information arena. It’s in the business of “information arbitrage,” which it explains as “the opportunity that arises when breaking medical insights intersect with the demand for actionable, market-changing events in healthcare.”
An example helps explain: A few physicians who prescribe Lipitor to many of their patients learn via feedback that Lipitor induces vivid and recurring nightmares in perhaps a third of their patients. The doctors shift these patients from Lipitor to other statin drugs (which reduce cholesterol levels). The drug’s manufacturer, Pfizer, may or may not know about this unusual side effect, but hasn’t published or otherwise disseminated information about it.
For investors, such information could be extremely valuable, since it suggests—before the information is disclosed by Pfizer—that Lipitor could well be losing market share. The professional investors can do the arithmetic to figure out a worst-case scenario based on Lipitor losing one-third of its existing users, and how many hundreds of millions of dollars a year that is worth. Perhaps they want to sell Pfizer stock short in anticipation of the Lipitor side effect becoming a market reality in six months or a year.
Sermo understands how valuable such information is, so it’s paying doctors $30 to $50 for their postings; on its site, it states it has paid out $132,145 for 3,578 observations, or an average of $36.93 each. It also says it has another $20,000 to hand out. Unfortunately, only physicians can register on the site.
So how much is Sermo charging the institutional and other big-time investors for access to the physician data? In a Boston Globe article Saturday, the company is quoted as saying it won’t divulge such information. Well, I don’t know the amount, either, but I do know this: those investors are being charged a lot, as in hundreds or thousands of dollars each month. I wouldn’t be surprised if eventually Sermo sells its data back to the drug companies as well.
Otherwise, why would venture capitalists put up $3 million to get this company going? Selling info Big Pharma would prefer to keep to itself is a potentially very lucratic business. It’s another way of profiting from America’s medical industrial complex.
Here’s a suggestion for patients to get in on the action: If you take prescription drugs, next time you visit your doctor, ask if he or she is participating in the Sermo data collection scheme. If so, request a discount on your co-pay or fee, in consideration of information you are providing that your physician could use to collect extra cash from Sermo.
As I said at the start, you have to give Sermo credit. If they could just find a way to make such data available to the people who matter most—the patients—it would feel a lot warmer and fuzzier.
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