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