Question

1. Give a leading reason for why limited liability (ie being a corporation) is beneficial to an electric utility company that has power generating stations. (for example Pacific Gas and Electric)
2. Give a leading reason for why limited liability is beneficial to a biotech company in the business of innovating new treatments for cancer. (Give a different perspective to your answer than what you describe for the electric utility)

Answer 1

a) Once you have determined the viability of your business idea and are ready to start your venture, you need to choose a legal structure for your business and register it with government. Almost every country requires that you register a new business with a relevant regulatory authority that is established by the government. Most countries typically permit a variety of legal structures for a business, such as a sole proprietorship, a partnership and a limited liability company. In nearly all cases, the type of legal structure that offers the most benefits and flexibility to a new start-up is a limited liability company.

Early-stage entrepreneurs can often get discouraged from incorporating their business due to the initial costs involved, but this is a mistake. Apart from creating an image of professionalism with partners and clients, incorporation brings numerous other advantages, including limited shareholder liability, easier access to venture capital, ability to align interests of multiple stakeholders and various tax benefits. This is true regardless of what jurisdiction the company is founded under. Moreover, since a corporation is a legal entity in the eyes of the law, it can continue to exist even after its founders have deceased or moved on to a new venture, and can be passed from owner to owner relatively easily

Limited Liability

Unless you incorporate your startup with a business structure that provides limited liability, you can be held personally responsible for the debts and mistakes of your business. For example, if you run your business as a sole proprietor, you are taking on unnecessary personal risk

Sharing Ownership

A company is owned by shareholders, which can be individuals or other business entities, such as another company. Portions of a company, divided into shares of stock, can be bought or sold without having any effect on the underlying structure or function of the company. This makes companies robust and flexible when it comes to sharing ownership or attracting experienced managers and employees.

Easier Access to Capital

Another consequence of limited liability is that it enables other investors to provide capital to the company. Banks, angel investors and venture capitalists have one thing in common — they seek to minimize unnecessary risk on their investments. As incorporation limits liability to the amount these investors put into the company, it makes a business more attractive to investors. This is not the case with a sole proprietorship or a partnership.

Professional Image

Incorporating a company established a professional identity. It increases credibility with customers and suppliers as it conveys legitimacy, authority, and permanence. As well as increasing revenue, this helps in the long-term as the business engages in marketing activities and seeks to establish itself as a brand in the consumer consciousness.

Conclusion

Forging ahead with a startup without incorporating a company is a foolish idea. Corporations give founders flexible ownership and tax advantages, while minimizing the chances of disputes or deaths shutting the company down prematurely. Limited liability protects owners. And, incorporating increases credibility among clients, other businesses, banks and investors

b)

Curing cancer is certainly one of the big challenges of the 21st century. Our knowledge of cancer has greatly improved in the last two decades. This has revealed the huge variability that can be found between not only different types of cancer, but also between patients with the same type of cancer.

It seems increasingly evident that there won’t be a single ‘cure’. Rather, each patient will be treated accordingly to their specific needs. But for personalized medicine to become a reality, we need a range of therapies wide enough to cover the whole spectrum of cancer.

In recent years, there has been a surge of new technologies aiming to help the immune system identify and attack tumors, a field known as immuno-oncology. These technologies could make a big difference in the way we treat cancer, taking us closer to being able to ‘cure’ this disease

Cancer is a devastating disease that takes the lives of hundreds of thousands of people every year. Due to disease heterogeneity, standard treatments, such as chemotherapy or radiation, are effective in only a subset of the patient population. Tumors can have different underlying genetic causes and may express different proteins in one patient versus another. This inherent variability of cancer lends itself to the growing field of precision and personalized medicine (PPM). There are many ongoing efforts to acquire PPM data in order to characterize molecular differences between tumors. Some PPM products are already available to link these differences to an effective drug. It is clear that PPM cancer treatments can result in immense patient benefits, and companies and regulatory agencies have begun to recognize this. However, broader changes to the healthcare and insurance systems must be addressed if PPM is to become part of standard cancer care.

In health care delivery systems in which third-party payers cover the costs of cancer treatment and the insured public has a presumed and possibly legal right of access to all approved drugs, the soaring price of cancer drugs poses at least 3 major problems. First, the absolute cost to society will become increasingly unaffordable if every drug with statistically significant but clinically unimportant benefit is approved. Second, it becomes problematic for insurance companies to price policy premiums accurately.3 because the approval, clinical acceptance, and incorporation of expensive new drugs is unpredictable and geographically variable. As a result, insurance premiums need to be meaningfully increased to keep up with the cost of care. Third, almost all approved cancer drugs are eventually used for conditions and settings not approved by the FDA The data to support these indications are almost always much less rigorous than those used to gain FDA approval. Off-label use may increase expenditures on a drug that offers little or no efficacy.

High Cost of Drug Development

Drug development costs are high. Many years and millions of dollars are spent in preclinical research to identify a compound or design a drug, describe its mechanism of action, and generate preclinical data. Pharmaceutical companies spent $50 billion in aggregate on research and development in 2008

“Monopoly.”

In our view, cancer drugs represent, for the most part, a monopoly. This is due in part to the biological complexity of cancer and in part to the medical and regulatory system.

Lack of True Generic Price Check

One can argue that a monopoly as described previously herein would be temporary at best because eventually similar drugs of the same class would emerge, offering competition that should in theory act as a price check

High Cost of Generic Cancer Drugs

Even if there are acceptable generic alternatives with equal efficacy, the prices of many such drugs for cancer are high compared with those for nonmalignant diseases

Incentive for More Chemotherapy

Much has been written about the current fee-for-service reimbursement model that can drive the costs of care. In cancer treatment, intravenous chemotherapy administration is reimbursed well, which includes margins on the actual cost of the drug and reimbursement for chemotherapy suite hours, intravenous fluids, premedications, and antiemetics. Although we believe that physicians seldom treat patients who do not need treatment, the system does create a financial incentive to not only administer chemotherapy but to also potentially choose a more expensive drug when there is a choice for a cheaper alternative

Value-Based Reimbursement and Pricing

As many other commentators have observed, we are of the belief that the current payment model in the United States is not sustainable and that reimbursement for medical care should be tied to discrete measurable metrics that reflect improved outcomes for a population.