The Chicago Tribune
The following editorial appeared in the Chicago Tribune on July 28.
CHICAGO — There’s a new breakthrough hepatitis C drug treatment that cures — yes, cures — almost everyone who takes it. Unlike previous, far less effective treatments, patients suffer few if any side effects. The entire regimen takes only 12 weeks, much shorter than previous regimens.
The drug, Sovaldi, could save the lives of many of the estimated 80,000 people a year who die from the blood-borne liver disease. Eventually, Sovaldi could save the nation’s health system billions of dollars by preventing liver failure and liver cancer, not to mention curbing the huge costs of liver transplants.
That’s the staggeringly good news.
Now for the not-so-good: The miracle pill costs $1,000. That’s a hefty $84,000 for a typical 12-week course of treatment. And since many of the estimated 3.2 million American hep C sufferers are low-income people or the elderly, Medicaid and Medicare would be on the hook for those costs.
Those treatments could add $200 to $300 a year to every American’s insurance premium for the next five years, warn Dr. Troyen Brennan and Dr. William Shrank, executives at pharmacy benefit manager CVS Caremark, in a Journal of the American Medical Association commentary. Sens. Ron Wyden, of Oregon, and Charles Grassley, of Iowa cite a study that says Sovaldi could cost Medicare $6.5 billion over the next year or so, boosting drug premiums by 8 percent.
That’s why some states are planning or starting to restrict access to the drug to mainly the sickest patients. Some private insurers also are imposing treatment limits, urging physicians to treat only patients who absolutely need the therapy now, Brennan and Shrank report. Not Illinois. Medicaid officials here tell us the state doesn’t restrict the drug to the sickest patients.
But there’s also mounting pressure on Gilead Sciences, the maker of Sovaldi, to cut its price. John Rother, president of the National Coalition on Health Care, says that second quarter sales of $3.5 billion showed that Gilead could afford to lower its price, The New York Times reports.
Wyden and Grassley said in a statement that Sovaldi’s pricing raises “serious questions about the extent to which the market for this drug is operating efficiently and rationally.”
But if $1,000 a pill is too much, what is the “correct” price? Rother, Wyden, Grassley and other would-be Sovaldi price discounters are free to try moral suasion on the company, but otherwise they should back off. This is exactly how the drug market operates effectively.
No, we do not defend price gouging by prescription drug companies. But we strongly defend American pharmaceutical innovation and the wondrous results it yields. Sovaldi is a prime example of why America’s drug industry is the world’s powerhouse. A company spends years and hundreds of millions of dollars developing a drug, knowing most fail in trial. The company discovers a blockbuster drug. Company execs price it accordingly, to reward shareholders and investors for the risks taken and for all the money spent chasing miracle drugs that never panned out.
State and federal officials may be forced to limit the drug to the sickest patients: The costs of a single drug, no matter how effective, can’t demolish already-strapped Medicaid budgets. Some people may have to wait to get the pills. But that calculation _ who really needs this drug or treatment and who can wait? _ is the same for many other drugs and surgeries.
Gilead also has a choice. It can stick to its pricing or it can drop the price and widen its market, introducing the drug to more people immediately.
Company execs make that choice knowing that half a dozen major competing medications are in development and expected to come to market, some as soon as the end of this year, Brennan tells us. That price competition will likely drive down costs ... and crimp Gilead’s bottom line.
There’s that market again.
High risk. High reward. Sovaldi is a triumph.
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