Project Impact: Former CEO David Green

David Green was quite a character. He makes low cost medical supplies so that people in the third world can get quality healthcare. He started out with intraocular lenses to cure blindness (mostly from cataracts), but since then, he has branched out.

He had a lot of interesting advice for running a social venture. He used a tiered pricing model. There are a bunch of different models (1/3 free, 1/3 below cost, 1/3 above cost; 80%/20%), but the key part of his model is to make the per-unit cost equal to the average monthly income of the bottom 60% of the population. He found that people can spend their average monthly income to get their sight back. 

One bit of insight is that tiered pricing works even when it's voluntary. That is, people choose how much they pay, but people tend to segregate themselves by income. The rich people don't want to sit next to the poor people when waiting in line, so they choose to pay more.

Another bit of insight is that more free customers leads to more paying customers. He has no idea why, though he theorizes that it might be the word of mouth.

He also put healthcare into perspective. International healthcare systems, when they are denied resources, are substantially more efficient than the healthcare that I'm used to. Surgeons in the US who work on blindness average about 150 operations per year. In India, they average 2,000 per year. Green's organization now restores sight to 300,000 people per year.

The main thing that I got from his talk is how sick the US medical research industry is. Most of the products that he makes are between 10 and 100 times cheaper than his competitors (his intraocular lenses cost $1 to make. His competitors used to charge $150 before he entered the market), and he is convinced that the cost of production is similar. He is convinced that most of the medical research companies are lying when they talk about billions of dollars of research and development -- he spent less than $300,000 on research, and he has talked with a bunch of industry researchers who are sick of the industry who agree with him. He also recommended checking out Marsha Angel, the former editor of the New England Journal of Medicine, for more on this subject.

The main reason that these organizations won't provide affordable medical supplies to the third world is because that would make it evident that they have such a massive price markup, so consumers in the first world would demand lower prices. Green's idea that this is the root cause comes from some organizations where he's on the board: they have technology that costs pennies to produce, but they aren't marketing it because they need to figure out how to justify making it cost hundreds of dollars. 

Another criticism he has is that the government should open up intellectual property. The NIH gives Stanford $500,000,000 for medical research. The law says that any organization that gets funding from the NIH can charge royalties, but that the government can also "march in" to ensure affordability and access in pricing. But the government never marches in, so consumers are paying twice for that intellectual property: once in tax dollars to fund the research, and again to buy the fruits of that research.

His last main criticism is that medical research companies use their clout to suppress research to ensure their profits. Merck threatened to remove their funding from any organization that published research showing that Vioxx increased the rates of heart attacks. Green argues that, as a result, conservative estimates are that are that Viox killed 68,000 people.

In short, Green made me mad.