If the alternative is no cure at all, what's the issue? I guess you could argue that some governmental organization could be doing it so you can save money by not having to pay out profits, but I doubt voters would support tax hikes to help the 0.001% (or whatever) of the population that has this disease.
>There’s also competition. Spinraza, approved in late 2016 and sold by Biogen, has already been used to successfully treat thousands of patients with severe and milder forms of SMA. The drug requires regular spinal infusions costing $750,000 in the first year and $375,000 annually thereafter, for life.
$2.1M vs $23.2M (assuming 60 years of life). Seems like a bargin compared to Spinraza.
If you or somebody you cared about suffered from this disease, and knew a cure existed, and knew that cure was out of your reach because you didn't have the money to pay for it (or lived in a system that privatized gains and socialized losses), you'd feel a great deal of emotional pain. You wouldn't die the same way.
Saying $2.1M is a bargain because the other solution is $23.2M is like saying the $SOCIAL_MEDIA_APP terms and conditions are fair because they're available and you should have read it in full as a preteen. It doesn't account for human nature and gives a cold shoulder to factual reality. It's not kind or empathetic to a lot of people, even if it is fair and just. That's where I think why people talk past each other a lot about healthcare.
Full disclosure: I am a software engineer in the U.S. who had his life saved about 32 times in the E.R. in Canada from supra-ventricular tachycardia. I grew up in lesser means and I might be dead or my family bankrupted had I grew up in the U.S. and paid the fair ER fees each time. So I owe Canada my life, and a blood debt I really can't pay off in my lifetime. I'm certainly not unbiased.
So for a rare disease there might exist a current treatment that results in them being bedridden and unable to feed themselves without an assistant. But with this new treatment the patient will be able to move around themselves in a wheel chair and feed themselves with some minor aid from an assistant.
How much more expensive can such a treatment be for it to be worth it? If you are the person involved the difference in life would be immense and worth any money but for someone on the outside those millions might be better spent on other care.
What an optimist you are!
Wanting something non existent and magical hurts way less than knowing a cure is there, and you just can't afford it.
It reminds me a bit of:
Where a community of people secretly and selectively bred for longevity are found out by "normals" who then try to kill the long-living people for not sharing their secrets to a long life
If it's a fair price based on all their costs, then there's no issue. But if it is exorbitant even after considering all the costs- well, many people take umbrage with healthcare profiteering.
For things like drugs and treatments, which often are covered by patents, you shouldn’t necessarily get to charge whatever the market will bear. But even then, looking to costs is a bad idea. If saying “you should be entitled to a 10% return above your costs” actually worked, why not do it for everything? Why not pass a law that says that smart phones can only be sold for 10% above cost? If that would work for drug development, it would work for smart phones too. From the supply side, the two are very similar: top talent + massive capital investment + high-tech manufacturing = product. We’d have $300 iPhones every bit as good as what we have now, right?
For drugs, a “fair price” is best determined by looking to return on investment. If the investors in Novartis are earning 10x what they could have earned by investing in a web tech start up, maybe that is unreasonable. Such high returns are unnecessary to keep capital from fleeing to alternative industries.
But that’s not what is happening. Novartis’s return on invested capital last quarter was 9.5%. Alphabet’s was 37%. Novartis is not making outsized profits. It’s making healthy profits consistent with investing in a high-risk, high-tech industry.
A contrary moral rule creates perverse incentives. It tells people that if you want to save lives, you need to invest billions of dollars while getting a minimal return. But if you just want to peddle advertising, you’re free to make as much money as you want. If you consider some things “too important” for the profit motive, what you’re doing is incentivizing people to invest money, time, and their careers in things that aren’t important.
money isn't free. If for profit companies didn't fund this research, no one would. Opportunity cost of money is a real cost and it is reflected in the price of any commercial good -- drugs are no exception
Is there profiteering in some cases? Yes. Is there in this case. Probably a bit. But it is not realistic or fair to think drug companies should price solely based on a cost-plus model, ignoring losses from failed research efforts and the cost of capital
However, cost of capital is a huge driver of costs and reducing it would be very valuable. The question is how to do that
If you're curious to see how these different things affect drug price, I made a tool where you can play around with different drivers of drug prices (incl cost of capital) to see how they affect price: https://www.baybridgebio.com/drug_pricing_calc.html
The full ICER cost effectiveness is worth a look: https://icer-review.org/wp-content/uploads/2018/07/ICER_SMA_...
False dichotomy. We have robust public and private medical research universities.
Which drugs on this scale were brought to market by these universities?
We have a few that give treatment for some things. That does not mean everyone can get treatment; they are not just free hospitals.
in any country with socialized healthcare they are paying it anyway
At what price point or at which percentage of population do you stop?
Yes,this means super expensive drugs will be only for the rich.but I don't see any other way...
However, did Novartis have to charge $2M? Avexis was trading at a $3B market cap not long before Novartis bought it for $8.7B. Analysts were projecting a $1-1.25M price tag, which is closer to the cost effective range
Novartis probably paid up for avexis bc it was a competitive deal process and they thought they could get away with a higher drug price than the market expected. At the time of the acquisition people thought Novartis was paying a premium for the platform, by charging $2M for the drug it seems like more of a pricing play than platform deal
I wrote a case study on avexis with more detail here: https://www.baybridgebio.com/blog/most_expensive_drug.html
Of course the follow up question is there any way to get that number lower.
Per the financial statements, ~$500M of that $700M was r&d (the rest was general and administrative expense). A lot of the r&d spend was payments to third party research and manufacturing firms. Given the small clinical trial size I'd imagine more money went to contract manufacturing than research.
There are very few companies and people that can make gene therapies at scale at acceptable quality levels. It seems like this expertise is quite expensive. There was probably a lot of process development here since making these drugs at scale is so new (here "at scale" means "enough for ~100 patients")
They also spent a lot building out their own manufacturing site.
They also had a $135M license payment, I think to the company they licensed their viral vector from
So something like they spent $100M on this one winning idea but also $600M on 50 other ideas that went nowhere.
> Peter Bach, director for the center for health policy and outcomes at Memorial Sloan Kettering Cancer Center, is troubled by Zolgensma’s price and believes ICER’s updated cost-effectiveness analysis takes too many liberties.
> “You can look at this in either of two ways. It’s an amazing treatment and only a few kids will need it so a million here and million there is not worth more than shoulder shrug,” he said. “Or we have a big problem. Biopharma has been entirely redirected to rare diseases because the market will tolerate any price and the FDA will require pretty minimal data.”
Pharma companies do not operate by any moral mandate but are only seeking profit.
So, if the average person wouldn't tell themselves they're "just not meant to be", there is also no point where you get to say that for a child.
1) much more sophisticated/cutting edge in terms of R&D,
2) the R&D is all of a new kind, so there has been little prior amortization of resources from prior successes.
3) _curative_, so from a purely market perspective a XX% discount on a [cost/year * lifetime] relative to a small-molecule drug that needs to be taken regularly, forever, is in these very high ranges, and still economically appealing from a cold hard actuarial perspective.
The high prices also attract advanced technology development in the area, and I think society wants & demands that rapid technological development of these powerful tools. Imagine trying to pay competitive salaries to a large number of sophisticated genetic engineers and all of their tools and equipment, when there are literally only a five or six products on the market with which to support their efforts.
It is still very unclear how we as a society should be paying for that development. And placing that burden on (those) individuals seems unreasonable.
zolgensma is the second gene therapy ever approved in the US. The technical risks are very high and making them at scale at a high level of quality required rare and expensive expertisr
So for example you can buy engineered AAV viruses online. They sell this stuff for research. Looks like its about $350 a pop
Novartis aren't using CRISPR here but as another example these guys sell CRISPR for your research experiments:
Here's some Crispr for plant experiments for about $400
So I'm sure there a lot more to it than that, but even so, it seems to me that the nuts and bolts of this stuff - once known - are going to be easy to produce. How long till we get a generic?
Edit: to clarify, Medicare does not only cover seniors. Other important groups include those with end-stage renal disease and those with significant disabilities. Those often also receive Medicaid, and are known in industry jargon as “dual-eligible.” Medicare becomes their primary payor, with Medicaid picking up the balance of what Medicare won’t cover. Both programs are ultimately overseen by CMS (center for Medicare and Medicaid services). Pay negotiations for Medicaid occur on a state level, but a huge chunk of the tab is picked up federally, so they tend to weigh in.
Newborns with SMA will almost certainly be initially covered by parental private insurance (pre-dx), and transition to dual coverage afterwards. Please note that there are a combination of gene therapies under discussion, only one of which will be given once at birth- the rest will entail ongoing costs that will be borne by Medicare and Medicaid.
This misleading misconception gets brought out on nearly every discussion of pharmaceuticals on Hacker News.
Medicare doesn't negotiate rates; the insurers who provide Medicare coverage for pharmaceuticals negotiate rates. This makes sense, because Medicare doesn't provide coverage for pharmaceuticals, so it would be a misalignment of incentives to have them "negotiate" rates that they're not paying. The insurers, on the other hand, have the incentive to drive the prices as low as possible, because pharmaceuticals are fungible goods and the lower the price, the more money they can make.
It wasn't pharma benefit managers (PBMs) that surpassed all other industry groups in lobbyingfor the final form of the 2003 Act - it was pharma companies (Ceci Connolly, Drugmakers Protect Their Turf: Medicare Bill Represents Successfor Pharmaceutical Lobby, WASH. POST, Nov. 21, 2003). They hadn't lost track of their own interests and accidentally lobbied against their own profits, and it's always kind of ridiculous when people imply they did.
Why would Medicare negotiate rates for a therapy for infants/children (even if they had the legal right)?
Replies (I reached the maximum nesting level):
'chimeracoder: Thanks! I appreciate it. I keep forgetting that Medicare only applies to seniors. I guess individual insurance companies or the parents of the affected infants would be the ones to try to negotiate the price of this treatment then.
Medicare, with only a few exceptions, only covers people above a certain age (typically 65+).
The original article is about a disease that affects infants. Almost no infants are eligible for Medicare.
 none of which apply here
The only option the company has is to sell. If they don't, they lose all their investor money and go bankrupt. The reason other countries get away with obscenely low prices is because the good'ol USA is paying for it, and the companies are better off getting anything other than 0.
If you look at how well industries are doing, you would also see that you would actually make more money investing in a burger chain than in the pharma sector. These high prices exist because of the incentives the insurance model creates (i.e. save people at any cost), not because companies are super greedy or evil and make 1.99$ million profit on a 2$ mill drug(which they do not).
Why zero leverage? Government contracts contemplate volume purchasing agreements for suppliers. Many medications include alternative suppliers which can be used as leverage.
As noted by others, extremely expensive treatments for rare conditions are often not offered in socialized systems. When they are, it's often the result of a court order forcing the government to make it happen. Better pricing could allow a treatment being provided as an option to the population (by default, without necessitating a court order), which can be interesting to the pharma company due to increased sales volume.
The companies have some leverage. They can hire PR firms to basically say, "Our new drug X treats disease Y. Your country Z doesn't want to pay to help those suffering from Y". If people afflicted by Y can garner enough influence to pressure their government's health department to get X, then they might get that.
If you want proof whether or not big pharmaceutical companies lose money by selling to countries outside the US, then try to find out if they would support a bill that forbids US pharmaceutical companies from selling at a price below what they charge Medicare.
The comparison to a burger chain is interesting: I remember reading that McDonald's makes money from real estate as opposed to burgers here on HN a while back .
Expensive, rare treatments like this often aren't paid out in socialized systems.
There is a reality here that these therapies are really fucking expensive to produce. If we want them to be cheap or free their discovery needs to be subsidized and funded in a non-profit driven manner
People laud places like Cuba because their health care is head and shoulders above the rest of Latin America. (Above even the US in some cases.) But here's the thing, the Cubans simply take all of the research that everyone has done and give it away for free. I understand. Their duty is to their people, not Pfizer. I get that. Here's the thing is though, if everyone does that then the research funding dries up, and the rate of discovery slows. (And yes, I understand that Cuba does its own research and contributes drugs to the global knowledge base as well. Drugs for Hep being a notable example.) But the balance of value is in the drugs researched and discovered by everyone in the world, not just the drugs researched and discovered in Cuba. So what happens when the rest of the world slows down? Well, Cuba gets less overall value too. That, eventually, would hurt the Cuban people just as much as it hurts everyone else.
It's relatively easy to take any therapy and use it on your own if you are a state level actor. As someone who had to do business in the health care sector for a long time, I can tell you that with authority. If the Cubans, for example, want to use this badly enough, they will. No amount of complexity will confound Cuban researchers. That's just life. At the same time, it's a very destructive practice under the present circumstances that drug research finds itself in. A more responsible approach would be some sort of global conventions on how to proceed if we want such a system.
If rich people don't want to die they can always subsidize medicine for the poor more than they are now. Then everybody could be a winner!
Does it? Or do we go back to the system where universities use government money to do drug research with no profit motive?
We all know the answer: more than a century.
And now you might say "yes, but half the research was done at universities". That's true, probably more than half, but a significant portion of that was still paid by Novartis. Furthermore Novartis helps professors coordinate, pays for conferences, ...
Novartis profit margin is about 20%. In their best years it was 30%. So even in a communist system, this drug would only be 20%-30% cheaper, and take another century before it became available. That would bring it from 1.2 million to, let's round off and say a million.
Would that solve your problem with this drug ?
Imagine we live in a world where all drug research must be given away freely. Chances are private companies would no longer do the research, since any of their competitors could pick up the research and make it. In which case almost all funding for drug research would revert to universities and drug companies would simply be manufacturers, and would have to compete on manufacturing efficiency.
Now, we know that the 8 billion came from somewhere in our economy, so at this point it would be an academic exercise to figure out how to extract that from the economy and transfer it to universities to do the research.
What I'm saying is that we need to remove the profit motive in health care, because there is no elasticity in the market. People will pay infinity to keep living. There is no price point where someone says, "that's too much" when it comes to health care, so the market doesn't operate like any other.
One can make various claims regarding what value private enterprise made in the process of getting this drug to market, but none of that value proposition was provided by Novartis. Novartis is just the one who saw something shiny and new and who (over)paid a ton of money to get the right to be the gatekeeper for this treatment and set the toll.
Do you have any source for that?
Typically that means single payer systems simply will refuse to pay for it at all.
i.e. this medication will not be available anywhere except the US
Hint: genome sequencing
I don't understand how this is justifiable. As an insurance company, the only way to cover this treatment is by raising premiums for all customers. By raising premiums, people on the edge of being able to afford insurance are pushed out. There is no way in hell this treatment doesn't cost more lives than it saves.