The $84,000 Cure

Earlier this month, Polly Mosendz covered the debate over Hepatitis C drug Sovaldi:

[I]nsurers cannot stand this life saving, revolutionary medication. That’s because it runs $1,000 a day and the average patient requires a 12-week treatment of Sovaldi.That’s $84,000 for one cycle. For patients with a strain that is more difficult to treat, the regiment is 24 weeks. That comes in at $168,000. It is projected to rake in between $5 billion and $9 billion in profits in the United States this year alone. There are an estimated 4 million Americans with Hepatitis C, and 15,000 are killed each year by untreated chronic infections.

Unfortunately, there is not much insurers can do about the price. A comparable drug is not yet on the market.

Dr. Frank Huyler fumes:

The low cost of manufacturing the drug means that it can be sold all over the world. Only the price varies, and that price is set by Gilead executives and protected by patent law and the FDA. At the moment, Gilead has a monopoly.

In poor countries, such as Egypt, they can’t sell many $1,000 pills. But they can sell a lot of $10 pills. So that’s how much Sovaldi costs in Egypt — and Gilead Sciences is still making a profit. Thanks to the FDA, the Egyptian version of the drug can’t be imported.

This sort of blood money is nothing new. But it is among the worst of recent examples; yet another evil act, yet another predation on mostly poor, mostly desperate people, who inevitably will ask taxpayers to save them.

“Blood money?” “Evil act?” I have to say I find that rhetoric appalling.

A miracle drug like this does not appear out of thin air. Developing these kinds of drugs can be hugely risky – so many end up as duds – and extremely expensive. If there were no real return on the few that make it to market, the economic incentives that make them possible in the first place would disappear, along with the drugs. And these drugs really do save lives – as Tim Mullaney, who has Hepatitis C, notes:

After two bouts with cancer, I can check hep C off the list of things that may kill me, thanks to virus-clearance rates of 97% in cases like mine. I’ve had no side effects. Prior therapies had much lower cure rates, and so many complications that patients refused treatment. Including me.

Surowiecki uses the outcry over Sovaldi to discuss drug pricing more generally:

Price restrictions have always been a political non-starter here, but at some point the math of the situation will be hard to resist. According to a study by the research group I.S.I., by 2018 spending on “specialty drugs” like Sovaldi could account for half of all drug spending in the U.S. Furthermore, one traditional argument against price controls is looking weaker: biotech companies claim that prices need to be high to reward risky and expensive innovation, but the fact that they’re churning out drugs and profits so consistently seems to undermine that claim. Biotech, in other words, may become the victim of its own success: the bigger the profits, the bigger the likelihood of regulation.

You might think that this prospect would encourage companies to be more cautious. But, if you assume that price controls are coming, the rational play is to squeeze out all the profits you can now.

I think there’s a trade-off here. Price controls on drugs in existence could make them far more affordable for the healthcare system as a whole. And there is a strong, moral argument for doing that. But the trade-off is that the innovation that occurs outside the NIH – and the bulk of all drug research is done by the pharmaceutical industry – would inevitably suffer. At some point a society has to navigate these two goals – innovation and access. And both matter.