The True Cost of an Expensive Medication

http://www.theatlantic.com/health/archive/2015/09/an-expensive-medications-human-cost/407299/?single_page=true

by adamnemecek • 11 years ago

29 26 11 years ago

On the other hand, what was the suffering before Sovaldi was developed? Undoubtedly, the high cost that could be charged for treatment was a motivating factor for investors to invest the money to develop it. Sovaldi was not developed in countries that have price controls on drugs. Isn't it better to have a cure at a high price than no cure?

Be very careful when proposing price controls on new drugs. You may wind up with no new drugs.

A better solution would be to address the drivers of high cost in new drug development, and reduce regulations that grant monopolies on older drugs out of patent.

DavidAdams• 11 years ago

That's a cold calculation. It's also worth noting that in many cases these extremely expensive drug regimens replace invasive surgical procedures of dubious merit that were just as expensive. Part of the problem is that sometimes Medicaid covers expensive surgeries more readily than it covers expensive drugs. Our entire health care system is unprepared for expensive drug therapies, even as they long ago became comfortable with expensive surgeries.

WalterBright4• 11 years ago

You'd be right in noting how government distorts the market by covering one thing and not another equivalent.

themartorana• 11 years ago

This old trope about "no new drugs" is silly. Most drug companies spend more on marketing than R&D.

Add to that, profit margins are insane - they are the highest in almost any business, equal to that of banks. [0] Pfizer saw a 42% profit margin in 2013.

This industry is insanely profitable, despite spending a ton on R&D, and more on marketing. Multi-billion dollar fines are just part of doing business.

Nature abhors a vacuum, especially such a profitable one. There's no shortage of companies willing to make that margin on billions in revenue.

Drugs are vastly overpriced, and the old line about how it's necessary to recover costs (along with long, exclusive patent rights) is false.

[0] http://www.bbc.com/news/business-28212223

refurb• 11 years ago

This old trope about "no new drugs" is silly. Most drug companies spend more on marketing than R&D.

I'm not sure what you're getting at. The idea with marketing is to spend $X to get $X+Y in sales, otherwise you wouldn't do any marketing.

So if drug companies stopped marketing, they'd have less money than they do now.

And as for "the most profitable industry". Do you know how many biotechs go under because their drug fails? How many banks does that happen to? You can't just look at the ones that succeed and say "that's typical". It's called survivorship bias.

And as for Pfizer's 42% profit, you're cherrypicking. Note that in your source, most companies have a profit of 10-20%. Which is pretty decent considering the risk involved with R&D. Pfizer had a profit of 42% because it spun off it's animal health division in Nov 2014. It was a one-time windfall.

WalterBright4• 11 years ago

This old trope about "no new drugs" is silly.

Sam Peltzman in the book "Regulation of Pharmaceutical Innovation" shows with statistics how the rate of new drug development dropped massively alongside the increase in costs of such development.

cheald• 11 years ago

profit margins are insane - they are the highest in almost any business

Profits kind of have to be high to attract and justify investment. Modest profit margins can't attract multiple billions of dollars which will be tied up without return for 10+ years at a time.

Don't forget to include risk in your cost calculations.

(re: Pfizer, you cherry-picked that number. https://www.stock-analysis-on.net/NYSE/Company/Pfizer-Inc/Ra... shows wildly swinging profit margins year-by-year, almost certainly driven by the decades-long drug development and regulatory clearance cycles.)

MaysonL• 11 years ago

Note that Gilead, the current seller of Sovaldi, paid 11 billion dollars for it (or at least for the company that invented it).

zaroth• 11 years ago

It would have been nice to read at least a little bit about the development process of Sovaldi, how much money was spent developing it over how many years, what were the risks it would fall through and be worthless, are more or less people surviving HepC because of Sovaldi, etc.

From what I understand, Sovaldi saves money over the long term, it actually costs less then competing treatments. It's just gives people a mental block because it's packaged into a magic little pill.

Funny, you would think easy to take, less side effects, and lower cost would make for good headlines and a higher price. Maybe if they packaged it into 15 pills a day people wouldn't be as upset. Like Beats putting weights into their headphones to make them feel more expensive.

Sovaldi sounds to me like exactly the kind of grand slam we want our pharma industry hitting more often. High risk science developing straight up cures that work for the vast majority of patients who take them, offered at a lower cost than the current treatment regimen, with fewer side effects. The age old joke is that pharma develops treatments, never cures. Well, here's a honest cure and it sounds like it's priced relatively appropriately for what they've accomplished.

If you want a lot more drugs that are this effective against nasty and prolific diseases like HepC, then I think you want public and private insurance paying a lot for Sovaldi.

One obvious way to make it cheaper is if there was a way to get countries other than the USA to pay their fair share for the breakthrough.

DanBC2• 11 years ago

You make it sound like Sovaldi is not available in markets with fixed pricing and government buyers. That's not true, it is, and it's recommended treatment.

https://www.nice.org.uk/news/press-and-media/nice-guidance-r...

FrankenPC• 11 years ago

Heck, I'd be OK with a sliding scale regulation. If someone can afford the full cost without bankrupting them, then fine. If they have no money, the the cost is radically reduced and IDEALLY payed through public medical support systems.

Call it the "We actually care about human life price control" or something. They can use it as marketing ammo as well. Proving they actually care is good for business.

7Figures2Commas2• 11 years ago

We should do the same thing for software development. If an entrepreneur can afford the full cost of a top development shop, then fine. If he or she has no money, the shop's hourly rate would be radically reduced by law and ideally paid through programs designed to promote new business creation.

See how this works?

oconnor663• 11 years ago

You could model it as a subsidy or a transfer instead of a price control. Then the shop wouldn't have to turn itself into a charity. (You'd have the opposite problem though. The shop would lobby for higher transfers.)

mhuffman• 11 years ago

Except no one dies if you don't get to make your new killer javascript framework.

takeda• 11 years ago

That's a terrible simplification. When a developer does not receive adequate salary s/he can look for work at another place, that might pay better. This makes companies try to have competitive salaries to retain their employees. The whole thing self regulates.

When you have a disease that might cripple or kill you you bet you are willing to bankrupt yourself to cure it. The regulations are absolutely necessary. Currently companies are utilizing this and charge significant amount of money for a cure. On top of that they prefer medication that doesn't treat the sickness and instead just keeps it under control, because that way they make more money.

It is easy to sympathize with pharmaceutical companies unless you have to get one of those diseases.

hwstar• 11 years ago

Force the drug companies to convert to a 'B' or benefit corporation so that they have to consider the public good in addition to profitability.

The True Cost of an Expensive Medication

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