You know how it is when you're walking through a mall and
people try to get you to sample something, or register for a
promotion? Usually, I give them a quick "No thanks." and
walk on by.
You probably do, too.
But a few weeks ago, I was walking through a Boston mall, engaged
in conversation with my wife, when a cheerful young woman with a
clipboard appeared-seemingly out of nowhere-and asked, "Would you
like to register as a bone marrow donor?"
My mind whirled.
I was no more expecting to hear that question that day than I was
expecting penguins to march on Washington.
Yet the answer that came out of my mouth surprisingly easily
was, "OK."
Now, I have zero first-hand experience with bone marrow.
I've never known anyone who's needed it, and I don't know anyone
who's donated any.
But the reasoning behind my split-second decision at the time was
this: Bone marrow matches are special, in that it's often
very hard to find a match, so if I can be the person who actually
saves another person's life, that would be worth doing.
So I spent a few minutes filling out paperwork. I gave up
some skin cells by rubbing two cotton swabs inside my left cheek
and two inside my right cheek.
And for my trouble, I got a sweatshirt and a tote bag.
And then … once we were away, my wife and I had a "discussion,"
which included the phrases "What did you do that for? In
this book I just finished, they said that half the people who die
in hospitals die from infections they get there."
My response included the simple reasoning I mentioned above.
I also said, "The statistic that matters is not how people in
hospitals die but what percentage of bone marrow donors die as a
result of donation."
And I capped it off with the reassuring, "It's so hard to find a
match, they'll probably never call anyway."
So we moved on to other matters, and the words "bone marrow"
haven't been mentioned since.
But I've been doing some research, and what I've learned is very
interesting, especially from an economic point of view.
About 1,000 patients die every year from blood diseases like
leukemia because they cannot get bone marrow for
transplant. One reason they die is that it's prohibitively
expensive to store bone marrow for long periods of time, thus
donors must be found who are ready to give when the marrow is
needed.
The other reason is that matching marrow is much more difficult
than matching blood. The chances are one in a million that
two people of the same race are a bone marrow match. As a
result, the average Caucasian finds a donor 75% of the time, but
for African-Americans the number is less than 25% … and less than
18% in less than six months.
The entire process of locating and testing a potential bone
marrow donor typically takes six to eight weeks.
But once a match is found, the actual donation process is pretty
simple, and while it was quite painful years ago, it's much less
so now. In fact, it's often handled as an outpatient
procedure, and 98.5% of donors feel completely recovered within a
few weeks.
Fewer than 2% of donors experience complications due to
anesthesia or bone damage. And as far as I can discover,
none of them has died as a result. (Happy, sweetheart?)
And the number of successful transplants grows, year by year, as
the number of registered donors grows. The biggest
registry, which runs the "Be The Match" program, is the National
Marrow Donor Program, which has facilitated more than 40,000
transplants since operations began in 1987.
But there are many smaller registries in the U.S., and there are
big registries in most developed countries as well. They
share information, to some degree, but because family members are
a person's best chance for a match, and people of similar race
and heritage are the next best, matches tend to be found closer
to home.
Yet there remains a huge imbalance between supply and demand …
which is why roughly 1,000 people die each year waiting for a
match.
And I think that's too many.
So let's take a look at the National Marrow Donor Program (NMDP).
Its press releases say the "nonprofit organization manages the Be
The Match Registry; facilitates transplants worldwide; conducts
research; and provides education and support to patients, donors
and health care professionals. The U.S. government has entrusted
[my emphasis] the NMDP to operate the National Program and
provide a single point of access to marrow donors."
Entrusted. That means it gets Federal funding, through the
Health Resources and Services Administration, to the tune of $23
million annually … and rising if a new bill passes. It also
gets some money from the U.S. Navy (yes, the Navy), because the
Navy had one of the very first bone marrow registries.
The program also receives income from donations, from fees
charged to donors for tissue typing (roughly $50 to $75 … my
insurance company will pay for mine), from fees charged for
in-depth database searches (initial searches are free, full
searches can cost thousands of dollars), and from the fees
charged to the transplanting hospital once a match is found and
the stem cells have been transferred. This charge is about
$21,000, which is higher than the fees charged by other
registries in the U.S. and abroad.
You might ask why our government is subsidizing the highest-cost
provider.
One reason is that as the hub of the network of registries, it
does more, so its costs are higher. Another might be that,
because getting potential donors to register is difficult, NMDP
pays affiliated donor centers and recruitment groups for every
new donor they sign up.
By the way, the final cost to the patient or his/her insurance
company for a completed transplant can range from $100,000 to
$250,000. But it's not that price tag that's responsible
for 1,000 people dying annually; it's the lack of sufficient
donors.
Now, as a student of markets, I know that when trade is
unimpeded, buyers and sellers quickly find agreement at rational
prices … meaning prices that are attractive to both. More
importantly for this case, when trade is unimpeded, supply almost
always meets demand. The exceptions are when supply is
truly limited, like Super Bowl seats.
But trade in blood marrow is not free and unimpeded, for the
simple reason that donors cannot be paid for their marrow.
And what's the reasoning behind this?
It starts with kidneys and similar organs. The sale of all
these organs was banned with the passage of the National Organ
Transplant Act (NOTA) in 1984. Most people-though not
all-agree that selling kidneys, lungs, eyes, etc., is to be
discouraged.
On the other hand, the sale of blood, sperm and ova is perfectly
legal. The difference is these viscous products are
renewable. The organs above are not.
But when the law was being written, someone decided that bone
marrow-which in fact has the consistency of jelly-was an organ,
rather than a renewable product. In hindsight, that was
wrong. Blood marrow renews just as quickly as ova.
But NMDP has grown quite comfortable with the current state of
affairs-after all, it's nice being top dog-and it doesn't want to
change.
So a lawsuit-Flynn v. Holder-was filed a year ago by
groups-including www.moremarrowdonors.org and the Institute of
Justice-that want to try to increase the number of registered
potential donors by starting a pilot program that would pay a
person the equivalent of $3,000-as a scholarship or housing
allowance or gift to the charity of their choice)-but only if
that person was found to be a suitable match and went through
with the process of giving marrow.
As it is today, 47% of the people in this country who are matched
as bone marrow donors eventually decide not to donate. And
the groups behind the suit believe compensation would go a long
way toward changing that, boosting the number of real donors and
reducing the number of people who die waiting for a donor.
The NMDP, on the other hand-ignoring the lessons learned from the
healthy markets currently serving the need for blood, sperm and
ova-argues that commercialization of the market might taint the
process-encourage people to withhold medical information-and thus
compromise patient and donor safety.
Now 13 months old, the suit is making its way through our speedy
justice system, and it will be interesting to see if reason
eventually trumps power.
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As for the market, the current correction is likely to run its
course by the middle of December. And I fully expect the
market to hit new highs in January.
So I'm keeping my eye out for opportunities, and the blood marrow
story brings two to mind.
The first is a little company whose revolutionary new
pathogen-reduction system will make the global supply of blood
plasma and blood platelets cleaner than ever before. The
stock, trading just above $2, was recommended by our premium
investment service, Cabot Small-Cap Confidential, back in May,
and has done well. Details on
Cabot Small-Cap Confidential
are here.
The second (and far more affordable) is our annual Special Report
titled Cabot's 10 Favorite Low-Priced Stocks for 2011.
While the low-priced stocks recommended by Cabot Small-Cap
Confidential are chosen mainly on fundamental grounds, the 10
stocks in this Special Report are chosen for a mix of fundamental
and technical reasons … and included in this report because they
provide an excellent opportunity for you to make big money
quickly as the market blasts off into the new year.
We publish this report every year at this time, and the results
have been excellent!
For example, last year's winners included these:
Acme Packet (
APKT
): Up 25% in two months
Ford (
F
): Up 34% in one month
LivePerson (
LPSN
): Up 23% in one month
Micron Technology (
MU
): Up 25% in one month
And many of these stocks continued to rise!
APKT was up a huge 254% in 11.5 months.
F soared 61% in three months.
MU shot up 225% in 7.5 months.
To learn more about why these stocks are so attractive right
here, and how you can get your copy of this year's report,
click here
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Yours in pursuit of wisdom and wealth,
Timothy Lutts
Publisher
Cabot Wealth Advisory