
$1,000-a-day miracle drug shocks U.S. health care system - jjoe
http://www.cbsnews.com/news/1000-a-day-miracle-drug-shocks-us-health-care-system/
======
refurb
This drug is a _huge_ jump forward in the treatment of HCV. Most patients who
take this drug will be _cured_ and they won't have to take interferon at the
same time, which produces side effects so severe, many patients discontinue
therapy.

So even though you have an $84K per course price tag, patients given this drug
get cured, significantly reducing the overall burden to the healthcare system,
especially if they don't need a liver transplant.

One of the difficult things in showing value in the healthcare system is that
nobody is looking at the overall costs. Hospitals worry about their costs,
insurance companies about theirs. So even if a drug saves money _overall_ ,
you'll often find many healthcare providers saying "no" because it doesn't
save them money.

~~~
chrisBob
Sounds like a good argument for nationalized health care to me.

~~~
mhb
Because you're confident that with that system and its incentives this drug
would have been invented? As well as the ones which haven't been invented yet?

~~~
justinreeves
> Because you're confident that with that system and its incentives this drug
> would have been invented?

No way to guarantee this drug would have been invented. However,

> As well as the ones which haven't been invented yet?

I'm absolutely confident that we will work on curing disease until we no
longer have to.

------
cs702
The drug does not "cost" $1,000/day. Rather, the manufacturer, Gilead, is
_selling it at that price in the US._

According to the article, Gilead is offering the same drug in Egypt "at a 99
percent discount to U.S. prices, or about $900 for a full course of
treatment," and "wants to tier its pricing based on a country's per-capita
income. So patients in the U.K would pay about $57,000 ...while Germans would
pay $66,000 and Americans are paying $84,000."

Inevitably, a black market will develop for this drug, because the arbitrage
opportunity is substantial. People who're willing to break the law will buy
the drug in Egypt for north of $900 and sell it in the US for a lot less than
$90,000.

\--

PS. Even though the title of the article is linkbait, and the article itself
has little content, I found it worth reading, because I learned something new:
pharmaceutical companies are selling drugs in developing countries at a 99%
discount (!) to developed-country prices. I knew prices were lower in
developing countries, but not _that_ low.

~~~
jvm
I'm sure it's quite cheap to produce, but the true cost is in the research.
Having the US shoulder that cost while offering a much cheaper rate is a
commendable model in my book.

If they are charging an excessive amount in the states I'm not defending that
policy, but varying by national wealth is surely a step in the direction of
fairness.

~~~
bryanlarsen
I was under the impression that the bulk of the cost of a drug was not the
research, but the clinical trials and the FDA approval process. If so, it's
only fair to charge more in countries where it costs more to get the drug
approved.

~~~
tinco
I think it's acceptable to file clinical trials and the FDA approval process
under research.

~~~
LyndsySimon
Clinical trials, sure - but anything that's specific to the FDA is squarely
"regulatory compliance", not "research".

------
bargl
Another way to look at the huge price tag to cure 90% ($227 billion) is that
this would could eventually give us herd immunity. We could then treat this at
a lower cost per year going forward. That thought is mind boggling.

While the cost is high in the USA the drug company is basically subsidizing
their own distribution to other countries based on the GDP of the buyer. WOW,
honestly that sounds like a pretty darn awesome thing to me. That $1000 price
tag on those drugs is similar to a $10 price tag per day on other drugs to
people in other countries where they make $1 per day. It just makes this drug
more attainable for everyone and if that is Actually what they are doing I
applaud them.

Sure I don't want to pay $1000 per day for this drug, but is it ok for us to
drive the cost down relative to our cost of living and make it prohibitively
expensive for others?

This is also what they did with some of the better drugs for curing MDR TB. I
only know that because of the book Mountains Beyond Mountains. Where the
better drugs were nearly unattainable for the poorer countries.

~~~
revelation
Interesting, I had the exact opposite reaction to that line. There is no
"subsidizing their own distribution" here, making the drug is dead cheap and
distribution isn't even an item on their budget.

No, what this means is they are setting their prices to extract the maximum
possible amount of money out of each country. Obviously, the price that will
yield the largest profit is not always the highest; if you can get four times
as many customers at half the price, you doubled your profit while reducing
your price.

~~~
Houshalter
It pays for the cost of researching this drug (and all the other drugs which
failed before making it to market) and it creates an incentive to produce more
drugs like this in the future.

You don't want drugs to cost so much? Encourage the government(s) to fund or
subsidize research. Maybe even lower barriers to entry to getting drugs
approved. But no one is forcing you to buy the drug and the patent will
eventually expire.

~~~
revelation
I want to end this charade of free market and capitalism. It's obviously not
capitalism or a free market if a company can maximize their prices to fit each
countries GDP and not be instantly killed by arbritrators.

It's not a good fit, which is presumably why even the current market doesn't
_resemble a free market_ at all, but the illusion is unnecessarily costing a
lot of money and wasted productivity.

~~~
Houshalter
How is that not a free market, let alone capitalism? That's how club goods
work. The cost per individual is low, but the total cost is high. In those
cases it makes sense to have different prices for different regions, or even
different individuals. A poor person in Egypt can't afford $1,000 a day. But
if they charged everyone the Egypt price, they wouldn't make enough money to
even cover the cost of researching it.

Besides that's not an argument for why it's bad. Your just saying you don't
like it because it doesn't look like what you think a free market looks like.

------
refurb
An interesting aside is that Gilead acquired the drug through the purchase of
a small biotech company called Pharmasset. They purchased the company for $11
_billion_ dollars and at the time, everyone in the industry though they were
absolutely nuts for paying that much.

Total sales this year alone are projected at $5-8 billion.

[1][http://www.forbes.com/sites/matthewherper/2011/11/21/gilead-...](http://www.forbes.com/sites/matthewherper/2011/11/21/gilead-
could-revive-itself-with-11-billion-purchase-of-pharmasset/)

------
jere
>Perhaps motivated by the high costs to taxpayers, lawmakers are pushing
Gilead to explain why it charges so much. It doesn't help that Gilead is
offering Sovaldi in Egypt at a 99 percent discount to U.S. prices, or about
$900 for a full course of treatment.

I wonder how difficult it would be (from a legal perspective) to take a 3
month vacation to Egypt and save almost six figures.

~~~
melling
Medical tourism is already a market.

[http://en.wikipedia.org/wiki/Medical_tourism](http://en.wikipedia.org/wiki/Medical_tourism)

Now it just needs a new big Silicon Valley behind it. The "Uber" of medical
tourism?

~~~
fennecfoxen
The Law of One Price strikes again!

------
ceejayoz
$1k/day for three months is $90k.

Googling shows the existing interferon treatments cost significant amounts -
$15-50k if a quick skim is accurate - and are far less effective. I'd imagine
the eventual liver transplants cost far more than $90k too.

The math may work out here.

~~~
ecaradec
I wonder if they actually did the same math on purpose to set a price just
below current treatments.

~~~
fit2rule
Of course they did this in their pricing/costs calculations, how could they
not have - given that 'they' are pharmaceutical executives whose job it is to
make as much money per pill as possible.

Well, if there is ever a 'place' for the open-Source ethos, medicine is it.
Stories like this confirm it for me, anyway.

~~~
refurb
An open source ethos in pharmaceuticals would pretty much guarantee you'd have
a lot fewer new drugs developed. If it costs $500M-$1B to develop a drug, how
on earth do you raise that money if some random company can come by and sell
the same drug for $5/day because they didn't pay any development costs?

~~~
fit2rule
If the reason it costs 500millions to develop a drug is because you have to
have lots of junkets to pimp the new profitpill to the politicians so they'll
let you get a majority of their nation high/dependent on it, then I'm all for
a revision to how society 'gets these things done'. surely you can't be
relying on that same ol' pimp statement, "sorry man, it cost me a lot to get
this stuff, you gotta pay ..", for it is scurrilous to assume that drug
dependency doesn't have a profit side.

------
dia80
My questions: 1) How much did it cost to develop? 2) How big is the potential
market? 3) How much money will it save society overall for each person cured?

~~~
Retric
1) Is really hard to calculate as you need to look at the ratio of successful
to failed drugs not just this single home run.

However, drug companies spend more on advertising than research which should
give you some ideas for savings.

~~~
mhb
_However, drug companies spend more on advertising than research which should
give you some ideas for savings._

Right. Because all they have to do is offer the drug in an app store and the
world will beat a path to their door.

~~~
mikeyouse
It's _medicine_ not some trivial app. If you have Hepatitis C, your doctor
will prescribe you this drug. Allowing direct-to-consumer marketing corrupts
patients and allowing drug companies to lavish doctors with food / drink /
entertainment corrupts physicians.

I grew up in a medical household, you wouldn't believe the shit these
companies do to curry favor. Some of it has been limited but much of it still
continues.

~~~
rayiner
People argue against creating a profit motive by saying "it's medicine, not a
trivial app," and then wonder why all the bright kids at Stanford go off to
build trivial apps instead of curing diseases.

There are lots of things that should be in the public sector, but "it's too
important" is a bad criteria to use. Because then all the money will be in
doing things that are unimportant.

~~~
mikeyouse

        People argue against creating a profit motive
        by saying "it's medicine, not a trivial app,"
    

What in the world does that have to do with advertising?

There are literally two countries in the world that permit direct-to-consumer
advertising. It is strictly and explicitly banned by the European Union.
Somehow I don't think it's harmed the profit motive at Bayer, Roche (who were
profitable enough to buy one of the most profitable US pharmaceutical
companies), GSK, Novartis, Sanofi, etc. etc.

The point isn't that drug companies shouldn't make money, they clearly should.
At one point, 97% of the people on earth receiving treatment for AIDS were
taking drugs developed by the Chief Scientist that also developed this
Hepatitis breakthrough. He deserves to be a billionaire dozens of times over.
The point is that it's disingenuous to try to justify the high costs to
consumers by blaming R&D spending when the R&D budgets are smaller than their
advertising budgets.

Pharma advertising is indefensible in nearly all cases. We have actual
scientific and cost data that shows, for instance, that before Lipitor was
generic, Crestor was more effective at treating high LDLs for a lower cost.[2]
No amount of Pfizer sponsorship will change this fact. Allowing them to
blanket the air waves and bribe doctors to get Lipitor on the formulary
instead of Crestor is an ethical failing we are all responsible for. If Pfizer
wants to change people's minds about Lipitor, their advertising should take
the form of a sponsored independent study that shows better outcomes for
patients on Lipitor. Or they could compete on price. This is how a sensible
pharma market would operate.

[1] -
[http://europa.eu/legislation_summaries/other/l21143_en.htm](http://europa.eu/legislation_summaries/other/l21143_en.htm)
[2] -
[http://www.ncbi.nlm.nih.gov/pubmed/18489494](http://www.ncbi.nlm.nih.gov/pubmed/18489494)

------
goatforce5
"It doesn't help that Gilead is offering Sovaldi in Egypt at a 99 percent
discount to U.S. prices, or about $900 for a full course of treatment."

Time for someone to start selling medical holidays to Egypt.

Are there areas of Egypt that would safe/pleasant for a Westerner to spend 90
days for less than $1k/day?

~~~
rguldener
According to the article most recipients of the drug don't pay for themselves
so I think few would be incentivized by the savings. I am sure there are
suitable places in egypt though.

~~~
swamp40
Wait till you see your BCBS fine print, that says the only approved hospital
to treat Hep C is Cairo Medical Center.

------
swamp40
Two powerful quotes:

> _More than half of those with hepatitis C are veterans, prisoners, uninsured
> or on Medicaid, the New York Times reports. That requires taxpayers to pick
> up the bill._

> _It doesn 't help that Gilead is offering Sovaldi in Egypt at a 99 percent
> discount to U.S. prices, or about $900 for a full course of treatment._

Tiered pricing by country (from a US company, no less).

I'm not sure what to think about this - very complicated ethics. I can
sympathize with both sides.

------
mindslight
This is the flip side of the brokenness of the patent system - even when it
ends up working correctly to facilitate research, the results are still a
horribly broken game that pits the drug maker directly against the general
public interest.

Gilead needs some way to fund themselves, but long-shot lottery-like
reimbursement based on a monopoly followed by the inevitable politicking to
stop Gilead's "gouging" (of which this article is a part of) is not a good
system for doing this.

Not that I think pure publicly-funded research is the way forward either,
especially if we'd like to increase incentives for science. That current
system works in spite of its brokenness only because the people who are there
truly care about their work - scaling it up would be disastrous.

But, especially in this case where the boundaries of ownership arise out of no
natural phenomenon, we really need to be _smoothing out discontinuities_ ,
rather than exacerbating them with simplistic approaches and pretending that
the betting wisdom of investors (who by construction are abstracted and out of
touch from what's actually going on) will achieve the desired result.

~~~
Houshalter
How is the system broken? This drug wouldn't even exist if they weren't able
to charge such a high price for it. And nothing is preventing the government
or other organizations from also researching drugs. It's not mutually
exclusive and it's unlikely two labs would discover the exact same drug.

~~~
mindslight
They're charging much more than the cost to develop the drug, because they
need to pay for all of their failed attempts (and at this point, the only
constraint is when the insurance companies will balk). And if they're able to
charge this indefinitely, then they're effectively just extracting rent
regardless of how much goes into further research (which you can say that
they've earned the right to do this, but that's still what they're doing).

I'm certainly not saying they shouldn't be compensated, but taking issue with
they _way_ they're compensated. As I said, the problem is that it's an extreme
gamble, and the only thing this is conducive to is business gamers and the
overhead and blindspots they bring. Since the current reimbursement mechanism
completely relies on the utterly artificial construction of the patent system,
it's reasonable to believe that the entire model could be redesigned.

~~~
Houshalter
Failed drugs are part of the cost of getting working drugs. And it's not
indefinitely - it's until the patent expires, or in this case until other
treatments start getting on the market in a few years.

~~~
mindslight
You are nitpicking specifics that don't actually change what I'm saying while
completely ignoring the crux of my point.

~~~
Houshalter
What's the crux of your point? How would you prefer the system work? As I
said, it's not mutually exclusive. You can have government funding and
subsidies without getting rid of private research or patents.

------
rayiner
Basically, people are being asked to pay $90k to be cured of Hepatitis-C.
About the same price as a Tesla Model-S Signature model. Is this an "unfair"
price? I would argue that the value to someone of being cured of Hep-C is if
anything greater than the value anyone could derive from driving around a new
Tesla.

------
fasteddie31003
The Elysium future is looking more and more likely to me over a Star Trek
future.

~~~
crusso
For years we've heard the charge that pharmaceutical companies are little more
than parasites creating perpetual users of their drugs rather than curing
anything.

It's worth noting that this drug company is curing something significant and
the fact that they're trying to make a go of a business out of it is a bad
thing?

------
kolbe
I at least appreciate the fact that Gilead produced a cure, rather than just a
treatment. Medical research has taken a frightening turn in the last decade
towards working on treatments that patients will have to take (and pay for)
the rest of their life, rather than cures. Already, we're looking at a
potential drug-resistant bacteria epidemic thanks largely to the fact that
antibiotics are just taken a few weeks at a time. So, at least they're
charging $90k to cure Hep C, rather than taking $10 out of your pocket every
day for the rest of your life?

~~~
thenmar
Can you provide more info about this? That medical researchers are actively
avoiding looking for cures for diseases? It just screams "baseless conspiracy
theory" to me. And what do antibiotics have to do with it? As far as I know,
antibiotic resistant bacteria are the result of factory farms pumping animals
full of antibiotics, and patients simply not completing the full course of
drugs once they feel better.

~~~
kolbe
It was a comment in a Frontline episode[1]. If my memory serves me correctly,
one of the top researchers claimed that they could conquor this problem, but
nearly every drug company has cut funding for antibiotics research, as it
doesn't result in long-term usage.

[1] [http://www.pbs.org/wgbh/pages/frontline/hunting-the-
nightmar...](http://www.pbs.org/wgbh/pages/frontline/hunting-the-nightmare-
bacteria/)

~~~
refurb
The biggest reason why drug companies don't invest in antibiotics is because
if you come up with the best antibiotic ever, it will never get used because
docs will save it for the sickest patients.

Hence, you'll never make much money on an antibiotic and likely not even turn
a profit.

------
vampirechicken
The shock is in the short term costs, rather than those costs being amortized
across the long miserable sickly term of the patients lives.

So it's not a show to the health care system, it's a shock to the system of
companies who sit between the health care system and the patients, and siphon
out money.

I don't knoe about your health insurance, but mine would just declare this
drug to be 'not on the formulary' and refuse to pay for it, like they did with
the newer anti-clotting meds that were more effecting and safer for patients.

------
cryptolect
Just have to wait for India to copy it, then visit India for medical tourism.
They are one of the few countries standing up against big pharmaceuticals when
important medicine is priced out of the reach of average citizens.

------
jrs235
I wonder if they would adjust their pricing (and which way) if Congress
threatened to shorten the life of patents, perhaps particularly on "drugs".

------
conductr
Market cap of this company is $110b right now. Insurance companies might just
want to band together and buy them.

------
ctdonath
Like mortgages and tuition assistance, government-backed insurance leads to
ever-higher prices. So long as the cost gets paid, prices will rise to match.

~~~
andybak
> government-backed insurance

Can you therefore explain the cost of health-care in the UK on the National
Health Service?

~~~
omgriffiths
I'm from Australia, so I think our system is similar (single payer type
system). Our government won't be offering this drug in the short term. If it
is really this good, they will negotiate a deal over time.

The advantage of that system is the government can give the company the
choice: a) Sell to us for $x, and patients can use for no/low cost b) Go
direct, and try to convince patients to pay $y themselves

This gives a pretty strong incentive for x << y, and avoids a lot of
advertising expense.

