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> Novartis is likely to face backlash from critics who believe charging millions of dollars for any medicine — no matter how effective — renders it unaffordable for a healthcare system already under financial stress.

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.




I think it's probably more of a psychological issue. I doubt even a Roman emperor would really care if he got this disease, since he wouldn't know about the cure. It'd be God's will, or something, and he'd die in a warm bed with warm memories.

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.


I live in Sweden and there will be debates about things like this as well because often these treatments are about improving lives compared to alternative treatments.

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.


>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.

>or

What an optimist you are!


> If the alternative is no cure at all, what's the issue?

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: https://en.wikipedia.org/wiki/Methuselah%27s_Children

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 the alternative is no cure at all, what's the issue?

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.


Determining the “fair price” based on costs is not rational. What is the “fair price” for an iPhone? It’s certainly not based on costs. It’s based on what the alternatives cost.

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.


Avexis spent ~$700M on developing this drug. But drug prices don't just cover costs for developing the drug. They also have to cover losses from other failed r&d projects, and also cover the cost of capital

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


When I say cost, I mean everything. Including R&D, including those other failed projects, including rye cost of capital.


there is no such thing as a "fair price"


In a capitalist free market, sure, but people argue that that's not what healthcare should be.


It's also not what healthcare is, so long as we have patents.


At $2.1M, zolgensma will be more cost effective than spinraza, but it is not at all clear that zolgensma will be durable enough to provide 60 years of extra life

The full ICER cost effectiveness is worth a look: https://icer-review.org/wp-content/uploads/2018/07/ICER_SMA_...


It's also important to note that advanced drugs for rare illnesses are expensive for a reason: high development costs and a very small market. Costs must amortized over a very few. There also aren't really any economies of scale, because each treatment is unique. Socialized medicine won't cover something like this; the option is a very high price in America or nothing at all.


> the option is a very high price in America or nothing at all.

False dichotomy. We have robust public and private medical research universities.


None of which will pay the billions in R&D and testing required to bring a drug like this to market.

Which drugs on this scale were brought to market by these universities?


> We have robust public and private medical research 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.


> but I doubt voters would support tax hikes to help the 0.001% (or whatever)

in any country with socialized healthcare they are paying it anyway


Where do you stop?

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...




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