The $84,000 Cure, Ctd

A reader remains unsatisfied with the Sovaldi discussion:

I can appreciate the gratitude you feel towards the pharmaceutical industry whose anti-retrovirals Screen Shot 2014-04-27 at 12.53.49 PMdrugs saved your life. They saved my life too. However, the fact that the status quo has done great good does not mean that things could not be better.

Sure, research and development of drugs is expensive. But I would like to read your views on studies like this one suggesting that the pharmaceutical industry spends twice as much on marketing as it does on R&D. Also, I would like to see you grapple with the conflict between pharmaceutical companies’ responsibility to maximize shareholders’ profits, and the ethical responsibility to maximize human welfare. They are clearly often – many would argue always – in direct conflict.

Again, I appreciate the gratitude you feel towards the pharmaceutical companies. But I don’t think that gratitude requires an unconditional support of the status quo in the pharmaceutical industry. I would like to see you grapple more with the ethical conflicts and human costs involved.

My support of the drug companies’ innovation is not unconditional. In fact, it’s constantly derailed by some of the worst practices of those very drug companies. Over-aggressive and sneaky attempts to extend patents, heavy marketing of not-so-vital drugs, lobbying to ensure that the balance between the free market and the moral demands of healthcare is always tilted toward profits: I could go on. But my deeper point is a capitalist one: if the only incentive for curing people was human benevolence, I’d be dead and countless others would be suffering. A free market tries to harness human selfishness for the greater good. And maintaining that balance is what we need to do. Broad-brush condemnation of the private drug sector doesn’t help us with that balance. Another reader notes:

Here is an interesting look at the issue in Forbes. Basically, if every person suffering from Hep C in the US took this drug, Gilead would generate $227 billion in revenue. In comparison, the entire frigging drug industry in the US booked $260 billion in revenue last year. That right there is a sign that market forces have absolutely nothing to do with Gilead’s pricing. This is pure extortionary pricing. I completely understand that there are different aspects to consider for this one issue, but there is really no rational, defensible, quantitative way to justify the current price of Sovaldi … a price, by the way, that by itself will restrict access to this drug for many who need it.

But another defends Sovaldi:

I’ve been following this story on your site and around the web pretty closely, as I work for a consultancy that (in part) specializes in pharmaceutical price setting. We didn’t work on US launch pricing for Sovaldi, but the press reaction has stirred quite a bit of attention around our offices.

Our analysis shows that the price of Sovaldi should have actually been higher.

The drug sets a new standard for both efficacy and safety (and has a significantly shorter duration of treatment), and is potentially even better than the competitor drugs coming to market over the next few years. The crux of the problem is that Sovaldi is so effective and so tolerable that many more patients than expected want to initiate treatment immediately. For years, insurance payers have taken for granted that doctors “warehouse” patients who do not have HCV advanced enough to warrant treatment. Patients are streaming out of such “warehouse” queues, and that doesn’t even account for the >50 percent diagnosed population in the US.

So we see that the drug is clinically far superior to standard options that are priced at comparable or even higher levels, but as a result is having a huge impact on insurance risk pools. Is it really fair to tell a manufacturer that they shouldn’t price their breakthrough drugs at parity to inferior competitor drugs that have gone without a negative press reaction for years? The story here isn’t that manufacturers are gouging consumers for a life-saving product, but actually that our drug benefit insurance schemes are simply not equipped to give sick patients drugs that they need when a honest-to-goodness breakthrough comes out.


Thanks for defending my industry.  I admit I’m biased, and certainly my industry does some stuff that makes people unhappy.  That said, $84K to be CURED of Hep C is a bargain.  When I first saw the news I thought, well, $84K a year to stay alive is maybe a bit steep … but no, this is $84K to be CURED.  My industry doesn’t do a lot of curing.  This drug is a miracle, and those don’t come cheap.

Another looks at a different medication:

My 7-year-old daughter was diagnosed with asthma a few years ago and given a rescue inhaler. Recently the prescription ran out and we called to have it refilled. The pediatrician insisted on seeing her, then prescribed her another inhaler, a daily use corticosteroid – which costs twice as much as the original rescue inhaler.

Never having heard of this particular medication before (QVAR), I googled it and came across a Consumer Reports study noting that the drug is now 92 percent more expensive than it was in 2009, in part because of the FDA’s decision to ban CFCs – a ban which the pharmaceutical industry itself lobbied for.

I’m sorry. This absolutely qualifies as fleecing, as greed.

The NYT did a deep dive into the subject of asthma drug pricing as part of its “Paying Till It Hurts” series last October. Meanwhile, a reader raises the issue of waste:

I’m speaking as someone who worked for years in a firm that was hired by many large pharma companies to help make their internal processes both effective (i.e., defect-free, without rework) and efficient (i.e., not wasting physical, human, or financial resources).  Processes ranged from clinical trials, to marketing campaigns, to production of the active pharmaceutical ingredient.

You cannot begin to imagine the sheer amount of waste involved; it is truly, truly mind-boggling. For years, these firms resisted process improvement efforts (such as Lean and Six Sigma, popularized by Toyota and GE, respectively) in part because the FDA neither rewarded such efforts nor punished the lack of them, and in part because they did not see their activities as “processes” that could be tuned up. I remember first hearing about one firm’s method for analyzing adverse events from their products. So appalling was this description that when I got home, I checked to ensure that the meds I was taking for a chronic condition weren’t made by that company.

I agree that the cost of drugs needs to cover what it takes to bring them to market, and that not all research will result in a salable product. But consumers should not be paying for gross inefficiencies that are relatively easily fixed.

I’m not going to disagree with that. Lastly, a reader wants to clear up some confusion about the NIH:

I work in pharmaceuticals (specifically, early stage startup, not big pharma) and am very familiar with the relationship between academic-/NIH-funded research and industrial drug research and development. The NIH funds very basic research that allows us in industry to then discover and develop new drugs. There is no debate around this, and anyone in a pharma company will agree.

However, NIH funding, with rare exceptions, doesn’t even discover new drugs, let alone develop them. Typically, NIH funding will allow an academic researcher to identify a novel aspect of biology and associate it with a disease state. Pharma usually picks it up at this point by verifying the research, running chemical screens to identify potential drugs, and then modifying the potential drugs to the point where they are safe and efficacious. It is then that a drug will enter clinical trials. The entire process just to get to a clinical trial can take four to eight years and cost millions of dollars. The clinical trials are where the real money and time are spent, of course, but there is a substantial investment by a drug company prior to this that is easily overlooked.

I’m not defending drug pricing; I think we have a long way to go in terms of demonstrating value for money spent. But this is intertwined in healthcare costs itself and drug companies are responding to market pressures. I do however want to dispel the belief that the NIH funds academic research that discovers drugs, and then drug companies take it away and charge an arm and a leg. Drug companies assume the vast majority of the risk and the investment to both discover and develop new drugs.