It's really amazing, as Hep C kills more Americans per year than HIV.
There's a bit of a dark side, though, in that this miraculous cure's creator was bid up to billions of dollars, and the cure is sold to American health insurance for ~$85k a course, which is out of reach for most people without health insurance.
Of course, if you limit the upside on the home runs, you may find yourself with fewer batters in the pharmaceutical industry. I'd personally prefer if governments directly funded research, or even better, offered X-prize style contests, rather than granting patents on drugs.
But none of that diminishes what a remarkable advance this is for millions of Americans.
Given the immense cost, but huge benefit, it will be interesting to see how it stands up to cold-hearted cost/benefit analysis. The decision as to whether it will be available on the NHS (i.e. at taxpayer expense) in the UK is due in January[1].
The British National Health Service can make that trade-off. Because the NHS covers the entire population, it knows that it will recoup the high up-front cost by avoiding other treatment later in the patient's life.
An American insurer would rather put you on the older treatment and make your life so miserable that you switch to another insurance company at the next open enrollment. It makes no sense in the aggregate, but it makes sense for any one insurer.
No insurer wants to have the most generous policy, because it will just attract Hepatitis C patients from other insurers, hitting them with the up-front costs. However, they would not get all the delayed savings, because the patients could switch to a different insurer after they were cured.
The only way to break the game-theory logjam is to force the drug to be covered nationwide. Then, all the insurers pay the up-front cost, and on average, all of them reap the savings.
An American insurer would rather put you on the older treatment and make your life so miserable that you switch to another insurance company at the next open enrollment. It makes no sense in the aggregate, but it makes sense for any one insurer.
The thing is, that's not happening at all. Nearly all US insurers are covering the new therapies. There are a couple that are holding out and only doing individual approvals.
You have to remember that private insurance competes on coverage, particularly for the insurance purchased by large employers.
Your comments about the NHS having a different viewpoint is correct. Since the NHS looks at total societal costs, they can reap the benefit of any immediate costs.
> The thing is, that's not happening at all. Nearly all US insurers are covering the new therapies. There are a couple that are holding out and only doing individual approvals.
So what are all the news articles about? A problem that is only hypothetical? The reporters don't seem to have a hard time finding cases of Hepatitis C patients who have been denied:
Then there's the fact that AbbVie and Merck are coming into the market soon with their own Hepatitis C drugs that also have 90% cure rates. It seems hard to believe that either of these companies will come in significantly below the price of Sovaldi, but that's what the insurance companies are hoping for.
Your take is correct, there are some insurers playing hard ball and saying "no" to patients. A few state Medicaid plans are the best example.
I should have be clearer as I was referring to private insurers. Yes, a few of them (Express Scripts is one) are saying no, initially, but appeals are getting approved.
I actually work in the HCV field and saw some data the other day that showed the vast majority of plans are reimbursing for Sovaldi. It was pretty surprising to me.
And yes, we'll have to see what Abbvie and Merck do. Rumor is they won't be competing on price although the insurance companies are hoping they do.
> Then there's the fact that AbbVie and Merck are coming into the market soon with their own Hepatitis C drugs that also have 90% cure rates. It seems hard to believe that either of these companies will come in significantly below the price of Sovaldi, but that's what the insurance companies are hoping for.
Why? If you apply game theory, one of the three will try to defect and undercut the other two.
> Why? If you apply game theory, one of the three will try to defect and undercut the other two.
Because they're playing a repeating game. AbbVie and Merck are big pharma companies. They don't particularly want to get into a price war.
It would be different if a small biotech firm were coming in. They might not get a second shot at it for a long time, so they are much more likely to undercut on price.
Also, three is a low number. Defection is more likely when the number of players goes up.
Of course, they're not going to come in dollar-for-dollar identical to the pricing of Sovaldi and Harvoni. However, the insurance companies seem to be hoping for some really sharp drops in price, which are less likely.
doing an X-prize style competition will probably cause a lot of "wastage" in resources spent by other contestents that _almost_ get the cure, but didn't make it. It will mean that only those who _know_ they have the cure (or it's within reach) would invest in it, and hence, won't get cures for diseases for which we don't know much about. I reckon better way is to have publically funded labs that do the lions share of research, budget split by how common the disease is.
How do you measure efficiency in research? If you use a commercial success metric - then drugs (or things in general) that aren't profitable because they target the most poor/vulnerable people don't get into consideration.
Not only that, but also a source of funds to pay x-prizes. Gilead will sell close to $10B worth of Sovaldi/Harvoni in 2014 alone. Probably close to $30-50B over their patent lifetime.
Considering most pharmaceutical companies have profit margins of ~30%, you'd need an x-prize of $10-$15B to equal their current "prize". The NIH total budget is under $40B.
If the choices offered to pharmaceutical companies are x prizes or the current patent regime, then sure, you need multi-billion dollar prizes. I'm not convinced patents are a good thing to continue to offer, in which case the option of the 30-50 billion dollar payday won't be available.
That would likely mean fewer baldness treatments, which I'm fine with. What's unclear is whether we'd get a more socially optimal investment level for DALY improvements. I tend to think we would.
The example I gave was a cure for hepatitis C, not a baldness treatment.
What you're suggesting is limiting the upside for investment. How do you think investors (the ones giving money to develop a drug) would react if you told them that the best they can do is a 2x return on their money when before they could get a 5-15x return?
There's a bit of a dark side, though, in that this miraculous cure's creator was bid up to billions of dollars, and the cure is sold to American health insurance for ~$85k a course, which is out of reach for most people without health insurance.
Of course, if you limit the upside on the home runs, you may find yourself with fewer batters in the pharmaceutical industry. I'd personally prefer if governments directly funded research, or even better, offered X-prize style contests, rather than granting patents on drugs.
But none of that diminishes what a remarkable advance this is for millions of Americans.