Michael Hiltzik: "High cost of hepatitis drug reflects a broken pricing system" in LA Times
This is the first in a series of posts that together seek a balanced approach:
Mr. Hiltzik:
This response is in reference to your article, the "High cost of hepatitis drug
reflects a broken pricing system" on the high cost of drugs, highlighting
Anthem and Gilead in particular. First, I’d just like to say your opinion is typical
of the hypocritical masses that demand top-tier modern health care for
Americans while simultaneously loudly complaining about the basic financial
incentive necessary to fuel such an advanced system. I am surprised such an informed person as
yourself continues to espouse the “oh, this brand new miracle drug is too
expensive” attitude, given what you know. But I am not surprised that there is a
market for your dichotomous logic considering the general expression of
entitlement of a large portion of the population, and the liberal elite that incite
them for their own selfish purposes.
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| "Ok, that's nice and all, given the chariots, but how much is this gonna cost me?" |
Although you briefly covered the role of insurance companies
in the pricing of Gilead’s new cure for Hepatitis C, you then go on
to absolve them by relating Peter Bach’s opinion that this action is necessary
to save the public healthcare system (ACA, your other sacred cow). With that deflection, you can get into the meat of your
argument against Gilead with not a trace of even-handed treatment, nor even mention
of arguments from any other point of view.
The treatment is just too expensive in your estimation. Why? Because they
lowered the price for poor countries, as American drug companies have
been wont to do for decades now, so you feel everybody is entitled to this
subsidized rate. A few points, of many, that you fail to
discuss:
·
It’s way
more successful than originally expected – When the original company (Pharmasset)
was developing the drug and envisioned its preliminary $36,000 price, it hadn’t
completed the trials. Like a great many
drugs, the cost would surely have gone up significantly given its phenomenal
success in the trials. I submit that
even if the price had been held to that level, the whining would still be in
full force.
·
Financials
figure in – you cite the Pharmasset drug price but fail to mention the
company sold itself for the hefty upcharge of $11 billion dollars in 2011. Then there were the added costs of finishing
the three phase III trials and making/marketing the drug. Gilead would have to get some ROI on that
investment, at least in the capitalistic America that develops these miracle
drugs.
·
$314,500
vs $63,000 – Understand, THIS IS A
CURE, and per your own writing, "its side effects are minimal, and its cure rate has been measured as high as 99%."
The alternative has generally been an ineffective ongoing costly drug treatment, with poor side effects,
ultimately resulting in a liver transplant. Or death.
Liver transplants cost about $314,500 per the National Kidney
Foundation. How much was that Gilead drug treatment again? - $84,000 for Sovaldi and $94,500 for Harvoni, with 40% of Hep
C patients only requiring an eight week treatment for $63,000
·
It’s a
one-time deal – Unlike many other medicines that are ongoing, sometimes
lifelong financial "drains" on the insurance system, this is a one-and-done Holy
Grail answer. It is likely that most of the
ongoing drug treatments slide under the radar of your righteous umbrage because
their yearly costs do not match that of one Hep-C treatment, but they surely
take a bigger slice of the pie. And
still, in many cases they are worth it.
Take the Novartis cancer drug Gleevac/Glivec for example. It had a yearly price of $30,000 in 2001,
going up to as much as $126,000 in the years since, and it is highly effective at keeping people
alive where they would otherwise have died long ago. How much is being alive worth? Economically, what treatment price would be correct if a company were to develop a drug that treated these patients just once and cured their cancer?
·
Pay for performance
– If you espouse payment systems in which a patient/insurance pays for
effectiveness (a la Dr. Leonard Saltz), or UPMC-like reimbursement models where
results are the bottom line, not line-item charges, this Sovaldi/Harvoni is
everything you asked for – you just have to meet your side of the
contract.
There is a window in which these drug companies have to make their money. Soon other drugs appear on the market driving down the price, as AbbVie's Viekira Pak already has and Merck's Hep C treatment may shortly. Eventually the patent runs out and the generic makers take over. And the company requires revenue not just to manufacture and market that particular successful drug, but it must pay the costs of developing all those other drugs that never made it to market, and the nascent ones still in the pipeline.
Meanwhile, a more intractable threat to the public healthcare system's finances lies in the repeat customers - the drug is one-and-done, but the patient population may not be. The primary Hep C contract-ers are IV drug users and there are notable numbers of low grade tattoo partakers infected with contaminated needles. How does a good liberal who advocates cheap subsidized healthcare for everyone address the high cost of multiple disease cures for them? By blaming the company that invents the cure, apparently.
You ended your article with this: “There's
more to come, with high-priced drugs for cancer, rheumatoid arthritis,
and other conditions filling the pharmaceutical pipeline. America's broken
system of drug pricing is going to have to be fixed, or it will bankrupt us
all.”
The reason there’s more to come is that America has a system
that encourages the invention of these drugs by allowing a financial reward
commensurate with what the invention is, i.e. what the market will bear. Otherwise, we could all sit back in your
ideal of socialized (“cheap”) medicine and enjoy 1985 medical technology at its
best for the foreseeable future.
Disclosures: I have
no affiliation with any drug or medical companies, although I worked in the
medical device industry for approximately 20 years as an engineer and
engineering manager. I do own some Gilead
stock because of the reasons above.
