Seeing One Way Out

By Karen Shaw Petrou and Basil N. Petrou

Can a change in financial policy that speeds cures for blindness also cure the way disability now exacerbates U.S. economic inequality?  Legislation introduced just yesterday shows how. 

Like most severe disabilities, blindness and significant vision impairment are major causes of un- and under-employment.  72 percent of blind Americans are not employed on a full-time basis, which by definition almost always makes them among the most economically unequal of all Americans regardless of race, age, or region.  To be sure, some blind people are gainfully employed – determination over the years and, now, technology and guide dogs drop the barriers to full achievement in almost every line of work and profession.  But far too often, the problems in education that disadvantage all too many Americans are still worse for the disabled, as are perceptions about incapacity and even downright discrimination. 

We can’t quickly fix educational disparities or implicit and explicit discrimination.  We can, though, advance one financial-policy change with significant promise not only for speeding treatment and cures for blindness, but – if it works here – also for many other treatments and cures across the spectrum of disease and disability. 

H.R. 6421 was introduced on July 18 by Rep. Sessions (R-TX), the chairman of the House Rules Committee, Rep. Fred Upton (R-MI), the former chairman of the House Energy & Commerce Committee which has jurisdiction here, Rep. Bilirakis (R-FL), vice chair of the Veterans Affairs Committee, and Rep. Sanford Bishop (D-GA), a senior Member of the House Appropriations Committee. 

The bill creates a $1 billion, five-year pilot program to bring in far more billions of investment in treatment and cures for conditions such as age-related macular degeneration, injuries to wounded warriors, and causes of childhood vision loss and sickle cell anemia retinopathy. This new money would come from long-term, risk-averse private investors such as insurance companies and pension funds.  Banks might well invest in these bonds and underwrite them to considerable reputation benefit.  How does this work? 

First, the legislation mobilizes the formidable intellectual capital of the National Institutes of Health (NIH) to pick the most promising blindness treatments and cures that have succeeded in the basic-research work NIH funds and that now needs to move into the clinical trials that take biomedicine from the bench to the bedside.  Second, H.R. 6421 creates unique financial instruments that satisfy these fiduciary responsibilities through a limited federal guarantee and thus spur billions of dollars of institutional investments in translational biomedicine. 

The risks to taxpayers are negligible not only because NIH picks deserving projects – eliminating information asymmetry for large investors now outside the biomedical arena – but also because the federal guarantee would back packages of projects – $250 million each year – large enough to diversify risk and sharply increase the odds of bond repayment.  Importantly, these financial instruments are not traditional social-impact investments – bonds or other products in which investors try to do good without also hoping to do well.  This program ensures that institutional investors such as insurance companies and pension funds can honor their long term claims with the returns achieved on guaranteed financial instruments even as work to cure and treat blindness revs up.  

We call these financial instruments “Eye-Bonds” – in short, they mobilize billions of investment dollars to treat and cure blindness without sacrificing the long-term interests of investors.  Because Eye-Bonds have been carefully structured to ensure portfolio diversification and include numerous other taxpayer protections, our initial estimate about “scoring” is that this program will cost taxpayers little to nothing.  Thus, $1 billion is mobilized to treat and cure blindness without raising the federal deficit. 

Don’t venture capital and biopharma firms do this?  Yes, but only when translational medicine is getting close to the bed.  There’s a “valley of death” between great research and money-making cures that requires long-term, patient capital willing to fund innovative research when there’s a strong prospect of long-term return at reasonable margins.  High-risk investors such as venture capitalists require much faster returns at far higher margins, leaving a lot of promising research behind. 

Of course, blindness is far from the only disability that undermines economic equality.  It’s also far from the worst of the ills that befall us.  Many other diseases and disabilities not only set individuals back, but also cause needless suffering, loss, and grief.  There’s nothing about the Eye-Bond idea unique to blindness.  This is a pilot that tries the concept in one arena to prove it for many, many others. 

To learn more, read a speech by Karen Petrou in 2014 on key features of the legislation as it was initially conceived and the discussion in Karen’s 2018 distinguished lecture at the Federal Reserve Bank of New YorkTo help realize this pro bono project, give us a call at 202-589-0880 or reply by return email.

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