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Do payers in other countries agree to cover 2.1M bill or is it only the US?

Payers in other countries can use their countries' negotiating power to negotiate with Novartis. The United States is definitely capable of doing the same in theory.

No, it’s not. Medicare is legally restricted from negotiating drug prices. Yes, that’s a ridiculous law.

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.

> No, it’s not. Medicare is legally restricted from negotiating drug prices. Yes, that’s a ridiculous law.

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's not misleading at all. Prior to the 2003 Medicare Prescription Drug, Improvement, and Modernization Act the federal government did negotiate drug prices. Although it had less skin in the game than Part D pharma plans, it had far more market power, and the resultant leverage made it much more potent. Additionally, it's outright incorrect to suggest it doesn't have skin in the game - it not only covers the most expensive (and biggest growth sector) in pharmaceuticals, those administered in infusions and inpatient centers (the biologicals; chemo), but they also pick up a chunk of the Medicaid spending, which covers pretty much everything.

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.

Holy shit I never even realized that.

>Medicare is legally restricted from negotiating drug prices.

Why would Medicare negotiate rates for a therapy for infants/children (even if they had the legal right)?

Medicaid (for children and financially disadvantaged people ) is a state level program that is bolted onto Medicare. The Federal agency that oversees both is the CMMS Center for Medicare and Medicaid Services

FYI at least some state Medicaid programs do infact negotiate drug prices, unlike Medicare.

To bring down the cost? I'm confused as to what you are getting at: are you trying to say that if a therapy of infants and children exists at some cost determined by the producer of the therapy that Medicare is obliged to pay that price immediately and perform that therapy on the affected infants/children? In my understanding, certain procedures already have to go through some kind of approval before being eligible to be covered by Medicare in addition to FDA approval (I might totally be wrong here). Medicare negotiating the price would be an additional step.


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.

> To bring down the cost? I'm confused as to what you are getting at: are you trying to say that if a therapy of infants and children exists at some cost determined by the producer of the therapy that Medicare is obliged to pay that price immediately and perform that therapy on the affected infants/children?

Medicare, with only a few exceptions[0], 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.

[0] none of which apply here

Thanks for that 'arkades: I'll update my comment to add "in theory".

I dont think any insurance company should be able to negotiate prices.

Might I ask why not? On a personal level, I don't like negotiating myself e.g. I don't like stores that have posted prices. On a macro level, negotiating prices is how large transactions clear such that the buyer and seller get something closest to what they want (hopefully). I do think sane ceilings and floors ceilings for prices have a place in certain situations, but I wouldn't be the best person to characterize what this sanity would be.

Its not ridiculous. How can you "negotiate" when you have 0 leverage? There is no "negotiation", ever. Even calling it that is disingenuous because it implies that some low cost could be reached if it were not for those darn evil corrupt capitalists. To illustrate how absurd it is, think of a scenario in which a woman with a gun robs a jewelry store and then boasts she got a 99% discount due to her "negotiation" skills. The clerks have 0 leverage in that situation, so it is not a "negotiation" in any way.

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).

> Its not ridiculous. How can you "negotiate" when you have 0 leverage? There is no "negotiation", ever.

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.

That doesn't make sense to me. Why would a company sell anything at a loss without some kind of complementary benefit? That's something that would lose all their investors money and have the company go bankrupt.

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 [0][1].

[0] http://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-beyo...

[1] https://news.ycombinator.com/item?id=14158772

Is this actually going to be available anywhere but the US?

Expensive, rare treatments like this often aren't paid out in socialized systems.

waits for generic treatment to surface for 1/10000 of the price in another market

this is not just synthesizing a chemical - this is using an engineered virus to deliver a newly functional gene.

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

Actually, tzakrajs is correct. These therapies are just like any other medication as far as their discovery and production are concerned. It requires enormous amounts of resources to discover them. The problem is that once you know the process for an effective therapy, it's relatively easy. So it's critical that access to any information regarding the process used to produce the therapies be as restricted as humanly possible. This is not because drug companies are dastardly profit mongers. (Although that is certainly part of it.) But it's more because we have to fund the research that found that process somehow.

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.

The socioeconomic benefits from stopping drug companies from acquiring a larger and larger chunk of the economy would mean greater equality & more societal resources that could be directed towards other purposes than medicine exclusively for the rich.

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!

> if everyone does that then the research funding dries up, and the rate of discovery slows.

Does it? Or do we go back to the system where universities use government money to do drug research with no profit motive?

Well it took $8.7 billion to build this drug (granted, most of that was for any viral genetic treatment, and so probably can be amortized in the future. I would point out that that doesn't change that that money was required to get to this treatment). How long until government university research amasses that kind of money ?

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 ?

I never actually said I had a problem with this drug or the price. (I do, but I never said that)

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.

It did not take $8.7B to develop this drug. Novartis paid that amount (a huge premium over what was expected) to purchase the company that actually did the work. As another poster has noted, if you include the cost of clinical trials this cost closer to $700M.

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.

> The problem is that once you know the process for an effective therapy, it's relatively easy.

Do you have any source for that?

I expect that the countries covering Spinraza will also cover the new Novartis treatment as it will cut costs.


Something like this is expensive because... it's actually expensive to do.

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

Even within the US it will out of reach to most people even with insurance.

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