How should cures be priced?

There was a really interesting piece in Bloomberg this week about the availability and use of medical treatments that cure, rather than treat, a condition (text quoted below). The tldr gist is that it's very hard to figure out how to price cures since the benefit compared to treatment is enormous. In principle, this means that a cure would be worth a pretty penny, since the benefits accrue over the rest of the patient's life. And indeed, the only way to pay for one-off treatments as compared to long term 'maintenance' treatments is to charge quite a bit for them. The only problem is that it's hard to convince payers to cough up the money, and the company looks like they are using predatory pricing.

I'm sure we're all familiar with the Hepatitis C cure by Gilead that was priced over $80k for a treatment. A lot of ink has been spilled over this pricing, but from a purely economics perspective they probably priced the drug cheaper than they had to (either to get a market-clearing demand or to compare with lifetime costs for alternative therapies). This is also a growing issue with some cancer therapies and gene therapies that permanently cure a condition - the alternative might be death, shorter lifespan, or permanent disability (such as with blindness, as addressed in the article) - but it's hard to convince someone to cough up a few hundred thousand dollars for the treatment. This is going to get more complicated as precision/personalized medicine really gets going: a lot of cures only work with a very limited patient population (even if they work really well); this means that the development costs need to be amortized over fewer patients.

The most interesting discussion in the piece is figuring out how to get payers on board. The main focus is on the US, where private insurers might be leery of paying upfront for a cure when they are not likely to be reaping the benefits of improved health/lower costs for the rest of the patient's life. The article suggests some remedies, but it's pretty clear that there aren't any good fixes yet. On the other hand, I've spoken to some healthcare executives who highlight the opposite problem; if you can get private payers in the US on board with your pricing model, you are pretty guaranteed to have a successful product, while single payer systems may balk at substantial increases in price compared to current standard of care. (The case they were talking about was not a cure, but a much better and longer lasting treatment, which they wanted to price roughly an order of magnitude higher than the current off-patent therapy. Private payers were big fans but the company isn't even thinking about trying to launch the therapy in Europe because of payer issues there.) There are also concerns about payer revolt - if they initially acquiesce to pricing but later start pushing back because it's affecting their bottom line.

So here's the question: Companies are currently disincentivized from developing bona fide cures because of these issues - to recoup your costs, you need to charge a lot, but they get a lot of pushback for doing so. It's like a billion dollar version of the antibiotic problem. So how should our system be changed to favor permanent fixes for medical problems rather than expensive maintenance?

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Originally Posted by Bloomberg

Just How Much Is a Medical Miracle Worth?
Years of costly treatments could give way to pricier one-shot cures like Spark Therapeutics’ blindness drug. But insurers aren’t ready.
by Caroline Chen

Sofia Priebe, 14, is slowly going blind. Her parents were devastated when they were told there’s no treatment for the genetic mutation that’s causing her retinas to deteriorate. For the dozen years since Sofia received that diagnosis, her mother has lived every parent’s nightmare—being powerless to help her suffering child.

Now a gene therapy for a similar form of blindness is expected to receive U.S. Food and Drug Administration approval this year, and Laura Manfre, Sofia’s mom, is holding out hope that her daughter may soon get treatment as well. “We don’t really care what it costs,” she says.

But how much is a miracle really worth? A million dollars? Five million? More? And who will pay and how? It’s one of the most vexing challenges confronting drug and insurance companies as modern medicine advances, spurred by research on the human genome. Spark Therapeutics Inc., which developed the gene therapy to cure a rare form of childhood blindness called RPE65-mediated inherited retinal disease, is among the first to face this question. Spark’s treatment, voretigene neparvovec, delivers a functioning piece of DNA directly to the eyes to preserve remaining sight and even restore some vision. Other companies, including GlaxoSmithKline Plc and BioMarin Pharmaceutical Inc., have also been grappling with the pricing problem.


Some new treatments, such as Spark’s retina drug, are intended to work with just one shot—promising a lifetime cure from a single, costly treatment. Insurers don’t dispute the worth of cures in the pipeline but say they’re not equipped to pay one large sum upfront. The U.S. health-care system is built around managing symptoms with prescriptions that insurers pay reimbursements for monthly: For example, medicines such as cholesterol-lowering Lipitor or acid-reflux drug Nexium are often taken over a period of many years and don’t deliver a permanent fix.

Insurers are “used to paying rent for health, and we’re asking them to buy a houseful of cure,” says Mark Trusheim, a visiting scientist at MIT’s Sloan School of Management who’s leading a working group to explore financing models for upcoming drugs, drawing from examples in the housing market and activist hedge funds.

Spark Chief Executive Officer Jeff Marrazzo sees his company’s pricing decision as precedent-setting, as it would be the first gene therapy approved in the U.S. Spark has spent about $400 million to create the treatment and now wants to be compensated for the efforts and huge risks it took during the research and development phase. How the payment debate plays out will determine not only whether patients will be able to gain access to these treatments but also how hard drugmakers will push to develop other transformative medicines. “Why is it that there are not more cures?” Marrazzo says. “It’s not because there are bad actors. It’s an industry full of people who react to incentive structures.” If compensation could be redesigned to reward one-time treatments over chronic treatments, “that’s where people would play,” he says.

One idea under consideration is to spread payments from insurance companies to drugmakers over years, like an annuity. Another is to have a money-back guarantee, so if a drug or treatment stops working for a patient, the manufacturer is on the hook to refund part of the cost to the insurer.

Payback contracts, or “value-based pricing” in pharma industry parlance, are already used in Europe. In the U.S. they’re trickier to execute, because there isn’t a single payer with which to negotiate and patients frequently switch insurance plans throughout their lives. Jean-Jacques Bienaime, CEO of BioMarin, proposes creating legislation requiring patients to carry the reimbursement obligation with them when they change jobs or insurers, to ensure drugmakers continue to be paid. BioMarin is working on a gene therapy for the blood disorder hemophilia, which Bienaime argues is easily worth millions of dollars per patient for a cure.

“The average cost of severe hemophilia A is about $500,000 a year, so $1 million upfront would cover two years—that’s not much, if they’re healed for life,” Bienaime says, adding that BioMarin hasn’t decided how to price its drug, which is going through trials.

MIT’s Trusheim is considering more radical payment plans, such as having the U.S. government buy an entire company instead of paying for its drugs. “The government could sell off the research and development arm of a company, like a Carl Icahn,” he says, referring to activist investors who take over corporations, often selling off units that they deem peripheral. The idea is to then have the feds provide the drug to Medicare and Medicaid patients and charge commercial insurers a cheaper price than they likely would have paid to a for-profit private company.

Other ideas that his group is investigating include government grants or prizes to developers of cures, or volume-purchase commitments such as those used by the Bill & Melinda Gates Foundation in developing nations, which guarantee manufacturers that a minimum amount of a drug will be bought if they successfully develop it. Trusheim’s group plans to publish its recommendations by early next year.

When designing payment models, the size of the patient population matters: The larger the potential impact, the more the system will strain to deal with the huge cost of one-time cures. That’s what Gilead Sciences Inc. learned in 2015, when it launched a cure for hepatitis C at $84,000 for a three-month regimen, or $1,000 a pill.

For anyone facing the prospect of liver cancer or a liver transplant, that $84,000 is a very good value, says Jim Meyers, Gilead’s executive vice president for global commercial operations. The price was in the ballpark of existing treatments, and “there wasn’t a payer we spoke to in market research that felt a price in the $80,000 to $85,000 range wasn’t acceptable,” he says.


The drug proved immensely popular—far beyond Gilead’s expectations—thanks to a quick endorsement by the American Association for the Study of Liver Diseases. About 3 million Americans have hepatitis C, and many wanted the cure immediately. “We started to see a flow of patients well above what any of us anticipated, and a price that made eminent sense to payers suddenly didn’t make sense,” Meyers says.

Rather than winning kudos for treating an intractable malady, Gilead quickly became a poster child for high drug prices, an image it’s fought to shed for the past two years. Meyers warns that the backlash has already spooked others. “What I hear is that they call it ‘the Gilead HCV experience,’ and by that they mean everything that it entails: the publicity, scrutiny, the payers first accepting then reacting, the Senate Finance Committee,” says Meyers. “I’ve heard, ‘Why bother?’ ”

Such market realities may already be reflected in new-drug prices. When GlaxoSmithKline brought its Strimvelis gene therapy to market in Europe last year for the “bubble boy disease” that leaves children without an effective immune system, it picked what’s arguably a bargain price: €594,000 ($634,000) for the one-time treatment, equivalent to two years of the enzyme replacement therapy that patients previously had to take for a lifetime.

Martin Andrews, Glaxo’s senior vice president for rare diseases, notes that the drug could have been valued higher, but he says the company had to bow to economic realities, including the big deficits in European governments’ health budgets. “We didn’t want to have the world’s most expensive therapy that nobody ever used,” he says.

Spark has a few more months to put a price tag on reversing progressive vision loss. Employees are researching court cases involving the value of sight. “How has our judicial system awarded for damages in the case of patients who have lost their vision?” asks Marrazzo. “That’s basically everyday Americans sitting on a jury and answering this question in a way that you can’t purely do with hard and fast economics.” Whether that will help its drug reach the market without consumer or government blowback remains to be seen.

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Well, I an of course a socialist but I'd like healthcare products to be priced more what they cost than what you can get away with asking for them (this coming from someone who works at a company developing things like this). Of course there's huge development costs and high risk which should be accounted for - and sure I'd enjoy a nice payout for my stock options later. But thing is, people working in medical don't get paid crazy good, and in my experience tend to see the value of their product more in improved lives.

Then again money raised this way can be used in research again. I'd just prefer that this is not paid for by patients I guess.

Well it is interesting of course this rent vs buying price story, but I must say I find it somewhat odd that both seem to be dictated more by what the renter/buyer can afford than anything else. This becomes blatantly obvious in Hiv treatment which (produced under license) costs a fraction in the third world of what it costs in the US and EU.

That's basic Supply and Demand.

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Originally Posted by Hazir

Well it is interesting of course this rent vs buying price story, but I must say I find it somewhat odd that both seem to be dictated more by what the renter/buyer can afford than anything else. This becomes blatantly obvious in Hiv treatment which (produced under license) costs a fraction in the third world of what it costs in the US and EU.

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It's not all that odd. It's often more profitable to be able to sell to more people at the prices they can afford rather than only selling at high prices to the wealthiest. As long as you can keep rich and poor markets separate it can be a good deal for pharma companies. As an added bonus, it increases access to very important treatments, at least in theory. In practice you might see the kind of segmentation where poor markets get access to outdated and inferior (albeit subsidized) treatments while wealthier markets have greater access to the latest and greatest, eg. expensive cures to costly illnesses. Of course, this may still be better than the alternative.

I don't really agree with this argument: "But look at how much money you'll save!"

By that logic, vaccines would cost thousands of Euros per dose.

I mean, we're supposed to feel sorry for the Hepatitis guys. But with 3,000,000 affected people (and that's only a single country), who actually thinks that $80,000 per person was a good idea? It's as if they didn't do any kind of projection before launching this product. You can't tell me that nobody in that company ever asked: "But what if everyone wants this cure?"

I'm also not seeing what exactly is preventing them from lowering the price to the point where you could actually supply everyone with this drug. Say, $2000 for a treatment. That would still amount to 6 billion dollars in a single country.

Vaccines are not 100% effective and are at their most useful when their use is widespread. With a vaccine, you want as many people as possible to buy it.

Still not seeing where that makes it a counter-argument of any sort. With 3 million people in the US alone in risk of needing a liver transplant, don't we also want as many people as possible to be able to buy that?

Thanks for the responses, guys. I'll post some thoughts now and see if I come up with any other moving forward.

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Originally Posted by Flixy

Well, I an of course a socialist but I'd like healthcare products to be priced more what they cost than what you can get away with asking for them (this coming from someone who works at a company developing things like this). Of course there's huge development costs and high risk which should be accounted for - and sure I'd enjoy a nice payout for my stock options later. But thing is, people working in medical don't get paid crazy good, and in my experience tend to see the value of their product more in improved lives.

Then again money raised this way can be used in research again. I'd just prefer that this is not paid for by patients I guess.

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I think this is a pretty naive perspective (no offense). Medical technology is a business like any other, and they need to raise capital (lots of it) from people who are not in it out of the goodness of their hearts. Companies have a fiduciary responsibility to extract maximal profit from their products (albeit in the context of other concerns like reputational risk). They need, at a minimum, to make a return that justifies their cost of capital and funds future pipelines.

On a somewhat more idealistic perspective, one could argue that if a groundbreaking cure fails to make substantial profits when compared to 'maintenance' type treatments, other potential market entrants will be discouraged from doing the work to develop cures. This is a common problem - you can make a crapload of money selling low margin treatments people will take for decades, and a one-off cure need to compete with these treatments for limited research dollars and capital expenditure.

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Originally Posted by Hazir

Well it is interesting of course this rent vs buying price story, but I must say I find it somewhat odd that both seem to be dictated more by what the renter/buyer can afford than anything else. This becomes blatantly obvious in Hiv treatment which (produced under license) costs a fraction in the third world of what it costs in the US and EU.

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That's not really the story, Hazir. Yes, part of this is about what payers can afford (honestly, patients are rarely picking up most of the cost - it's government, insurance, or nonprofits for the most part). But a lot of this is about how you can justify capex for a product that is bad business sense. We've seen lots of high technology markets move to a subscription or rental model - telecommunications, software, media, etc. - precisely when it makes sense (from a patient health perspective) for healthcare to move in the opposite direction. How do we make the system work to incentivize the right kind of behavior?

With the specific example of HIV drugs, remember that the marginal cost of these drugs is very low for the most part, so price discrimination makes a lot of sense here. Say you only make a penny per dose in the 3rd world, on average (or even just break even), but you're making huge margins elsewhere. By increasing the size of your market through price discrimination you're not only looking like the good guys (we help the poor!) but you're also broadening your market while still protecting your profits. And the best part is that you've got even the poor people on the hook, and since they're probably on your drugs (or some variant) for the rest of their lives, you have a chance to charge them more if they get richer over time - dead patients can't buy drugs.

Cures would work very differently. Typically they have higher marginal costs (at least with the current crop of cures, they are often pretty sophisticated biologics/cell therapies/gene therapies/whatever) and have identical or higher fixed costs. Once your patients take your treatment, they aren't coming back. Without repeat customers, the incentive to use price discrimination on this magnitude becomes lower, and the extent to which you can lower prices is more muted.

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Originally Posted by Khendraja'aro

I don't really agree with this argument: "But look at how much money you'll save!"

By that logic, vaccines would cost thousands of Euros per dose.

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Part of the logic is obviously tied to the utility of the product (which tends to be extremely high). But obviously part of it is also to maximize income, and having an absurdly high price will dramatically reduce demand. This not only shrinks your market (and payers would probably revolt), but it also makes you look like dicks (cf Epipen and Shkreli). Vaccines are actually a special case because there is generally only one buyer (the government), and said buyer has a vested interest in getting the entire population treated. So they more or less guarantee a given purchase volume to the vaccine maker in return for low per-dose costs. Economies of scale help drive down production costs.

Also, one could argue that your math is iffy. The marginal utility you get for each vaccination is probably quite small - you only have a slightly lower chance of contracting said disease. So it probably doesn't have a utility worth thousands of Euros.

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I mean, we're supposed to feel sorry for the Hepatitis guys. But with 3,000,000 affected people (and that's only a single country), who actually thinks that $80,000 per person was a good idea? It's as if they didn't do any kind of projection before launching this product. You can't tell me that nobody in that company ever asked: "But what if everyone wants this cure?"

I'm also not seeing what exactly is preventing them from lowering the price to the point where you could actually supply everyone with this drug. Say, $2000 for a treatment. That would still amount to 6 billion dollars in a single country.

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Gilead spent a lot of time talking to payers about this, and the fact of the matter is that the majority of infected patients are asymptomatic or only have mild damage. So there's no reason to expect that many doses to be sold during the patent period; even now guidelines (while looser than expected) generally require some evidence of liver damage in addition to infection to warrant treatment. Throw in a big fixed cost of R&D and there wasn't any question that they were going to be charging a lot. Figuring out just how much to charge is mostly guesswork, though. Who knows how big the market will be? Who knows what kind of demand curve will exist? With unprecedented products offering massive (but uncertain) utility to consumers, it's really hard to figure out.

It's entirely possible that Gilead miscalculated (or got greedy). It's also entirely possible that as the market evens out after the initial surge in treatment, their calculations will end up being broadly fair (also there are now some competitors, depending on the genotype of the disease). Lifetime costs are almost certainly lower for payers, and patient health is dramatically improved. Who is losing here?

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Originally Posted by Khendraja'aro

Still not seeing where that makes it a counter-argument of any sort. With 3 million people in the US alone in risk of needing a liver transplant, don't we also want as many people as possible to be able to buy that?

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Not really. No reason to treat the asymptomatic in this case given that we don't yet have good enough antivirals to push for eradication of the disease (almost certainly better to work on a vaccine for that task).

Wiggin, they may be asymptomatic currently. That will change for at least 25% of them. There are also the other issues caused by HepC, like diabetes, depression and other stuff.

But, sure, let's wait until the damage is done and not treat them before.

Regarding the guidelines: Who writes those and what considerations go into them? Because if they're also looking at the price of a treatment it's no wonder at all they are waiting for a case to become acute - at that point it basically becomes circular reasoning.

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Originally Posted by wiggin

I think this is a pretty naive perspective (no offense).

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Oh none taken, I deliberately posted it as a naive perspective. It's idealistic not realistic, and I am fully aware the world doesn't really work that way - but it'd be nice if it did.

Will read the rest of your long post and reply with more substance later.

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Originally Posted by Khendraja'aro

Wiggin, they may be asymptomatic currently. That will change for at least 25% of them. There are also the other issues caused by HepC, like diabetes, depression and other stuff.

But, sure, let's wait until the damage is done and not treat them before.

Regarding the guidelines: Who writes those and what considerations go into them? Because if they're also looking at the price of a treatment it's no wonder at all they are waiting for a case to become acute - at that point it basically becomes circular reasoning.

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Khen, I think you don't really understand how medicine works. (This is not intended as a slight, just an observation.) There are all sorts of diseases and conditions where the first line response is 'watchful waiting' because intervention is not called for in the majority of cases. It might be compounded by the high cost or safety profile of a given intervention, but even in the absence of these pressures, a lot of the time physicians just observe the course of a disease until it requires an intervention. There are obviously important caveats - in principle it is ideal to intervene before substantial and permanent damage is done, but even then there are reasons to delay (for example, the great lengths that physicians go to delay implanting synthetic joint replacements even in the face of substantial deleterious effects on the patient's quality of life). But early stage HepC is not one of those cases.

As for the guidelines, they generally are put together with input from a lot of different stakeholders. Early guidelines tend to be informal ones developed on the basis of early clinical data, but more formal guidelines tend to be a combination of physicians organizations (e.g. the American Academic of X Specialty) with input from payers, patient groups, and regulators (especially regarding approved uses vs. 'off-label' usage). They evolve as clinical data becomes available - admittedly, sometimes too slowly for everyone's taste. Certainly price is one factor - it always is, even for relatively inexpensive therapies - but some very expensive therapies rapidly become the universal standard of care (at least in the US) if the data supports their use. In the case of HepC, since so many patients are asymptomatic and will not have substantial negative consequences from infection during their lifetimes, it makes sense to wait for some clinical manifestation for disease progression before acting.

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Originally Posted by Flixy

Oh none taken, I deliberately posted it as a naive perspective. It's idealistic not realistic, and I am fully aware the world doesn't really work that way - but it'd be nice if it did.

Will read the rest of your long post and reply with more substance later.

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I think the problem is that if medical therapies are developed with private capital, it's always going to work that way. There are certainly other models - government funding, philanthropic funding - but for various reasons these models tend to be for niches that are missed by the market and/or only for parts of the development process. I can imagine that other models are possible, and they may be superior in some ways. Short of a very comprehensive shift in how we advance medical technology, though, it's going to be very hard to do.

And yet, if 25% of them do actually become symptomatic then I rather doubt this "But we'll never make money!" and I also severely doubt your "will not have substantial negative consequences from infection during their lifetimes".

Also, you said it yourself: There's no vaccine. It's not as if HepC would go away.

But my main objection comes from this really shitty attitude they displayed with one particular argument: The money "saved". Basically they're saying: "Look, a new liver costs $1,000,000. So, isn't it great if we only take 10% of that cost?"
That's a Mafia-style argument. And it displays a complete lack of empathy and shows that their business clowns have forgotten what medicine is for.

Businesses don't run on empathy alone.

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Originally Posted by RandBlade

Businesses don't run on empathy alone.

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And where exactly did I say that? However, if you come with mobster-style arguments then you don't have to wonder when people react to you in a similar fashion.

Also: The business which ignores empathy is a stupidly-run one. Have a look at United Airlines how well that works out.

I didn't say they run without empathy now did I? :rolleyes:

Besides I don't see how it's a mafia style argument unless they were threatening to trash someone's healthy liver if their product isn't bought.

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Originally Posted by Khendraja'aro

And yet, if 25% of them do actually become symptomatic then I rather doubt this "But we'll never make money!" and I also severely doubt your "will not have substantial negative consequences from infection during their lifetimes".

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This is misleading reasoning. The question the company has to face is if they can recoup their cost of capital (and then some) during their exclusivity period, not whether theoretically treating every case of HepC on the planet would yield them a profit. There are all sorts of reasons why physicians will delay treatment - one of the big ones being the concern that overtreating will lead to mutated viruses that are resistant to the drug cocktails currently used (not surprisingly also a reason why it's difficult to get companies to develop new antibiotics, though obviously on a different order). The company needs to figure out what proportion of patients will actually be treated with their drug while they have a patent on it. It's entirely possible they will get it wrong, in one direction or another, but it's not at all an obvious determination. As a proxy, developing pricing that estimates the utility provided to the patient and the payer (which is typically how products are priced) is not an unreasonable method.

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But my main objection comes from this really shitty attitude they displayed with one particular argument: The money "saved". Basically they're saying: "Look, a new liver costs $1,000,000. So, isn't it great if we only take 10% of that cost?"
That's a Mafia-style argument. And it displays a complete lack of empathy and shows that their business clowns have forgotten what medicine is for.

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As RB said, it's not at all similar to how protection rackets work. And certainly I agree with you that there is a reputational cost to consider here. And indeed empathy could be very important if, say, it was discovered by an academic and not a company answerable to their shareholders (cf insulin). But it's a bit disingenuous to argue that only in this industry should capital be employed without a primary consideration being profit. Most industries think they're making people's lives better, one way or another, but that doesn't stop them from trying to make a profit along the way. I don't know why this should be different.

More broadly, one could argue that they are being incredibly altruistic here in saving the healthcare system huge amounts of money due to downstream costs from HepC infection; just because they're making a pretty penny hardly means they aren't doing a very good and laudable thing. IMO the problem is the optics to the public and the value proposition to payers (because payers generally aren't on the hook for most of those long term costs), not the empathy of the companies involved.

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Originally Posted by Khendraja'aro

Still not seeing where that makes it a counter-argument of any sort. With 3 million people in the US alone in risk of needing a liver transplant, don't we also want as many people as possible to be able to buy that?

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I certainly would, but I'm not talking about what I want. I'm trying to explain the rationale a pharmaceutical company may have for pricing vaccines one way and cures for serious diseases another way.

Vaccines are intended to prevent or reduce the risk of contracting an infectious disease. For any given healthy individual in a western society, the value of getting a particular vaccine is fairly low. The person being immunized is typically healthy, the vaccine's efficacy isn't 100% and the risk of getting infected may be low anyway (due to low risk of exposure), so the vaccine has to be priced accordingly, as a reasonable but so-so preventive measure that may or may not benefit any given person. The greatest value for vaccines comes from enabling herd immunity in a given population, thus reducing the risk not only of infection but, more importantly, of transmission. This is of great utility to governments, for example, but for a government to pay for widespread immunization of healthy individuals the price per dose has to be low.

For a person with heptitis C, especially one showing signs of disease progression, the utility of curative treatment is very high. The utility for society may also be high, but it may not be high enough to justify paying exorbitant prices for that cure.

As you say, a significant minority of people with chronic HCV infections will show signs of disease progression within 20 years, and a significant minority of those will suffer and ultimately die from the complications of hepatitis. But many of those progress due to modifiable risk factors such as alcohol abuse/misuse, which also have many other negative--and more costly--effects on a person's health. If you run the numbers, it might end up being in some governments' interest to spend more money on helping 10 people get out of alcoholism than to pay for one course of Harvoni or Epclusa (which would have the added bonus of sparing doctors and patients the painful indignity of uttering such ridiculous names), even at half the current cost.

With all that said, it can be argued that there is an indication for treatment, with an appropriate direct-acting antiviral, in pretty much any patient with chronic HCV infection. That is, in principle, the official position here. People showing signs of progression or extrahepatic complications, those who have received a new liver and those who are clearly suffering greatly from their infection for any other reason (eg. personal or social) are prioritized, but others aren't excluded unless there are strong medical contraindications.

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Originally Posted by Khendraja'aro

And yet, if 25% of them do actually become symptomatic then I rather doubt this "But we'll never make money!" and I also severely doubt your "will not have substantial negative consequences from infection during their lifetimes".

Also, you said it yourself: There's no vaccine. It's not as if HepC would go away.

But my main objection comes from this really shitty attitude they displayed with one particular argument: The money "saved". Basically they're saying: "Look, a new liver costs $1,000,000. So, isn't it great if we only take 10% of that cost?"
That's a Mafia-style argument. And it displays a complete lack of empathy and shows that their business clowns have forgotten what medicine is for.

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Originally Posted by RandBlade

Businesses don't run on empathy alone.

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This isn't about pharmaceutical executives lacking empathy, although many do, no doubt. People working in the industry or otherwise deeply involved with it tend to become very good at rationalizing their own bullshit and blinding themselves to--or trivializing--the most dubious aspects of their behavior, not out of malice but because of the way humans work. It's what happens when you have large and ideologically insulated groups of opinionated, intelligent and fairly accomplished individuals sharing and reinforcing each others' biases under the influence of money and dodgy organizational culture. And let's face it, even people in the pharmaceutical industry need to feel clean and want to sleep well at night. Fortunately, the bullshit is usually dealt with quite effectively by groups of clinicians and other kinds of scientists less affiliated with the industry, as well as by governments and even many powerful insurers (see for example Kaiser's refusal to buy the bullshit about Ocrelizumab).

In the case of Gilead, we don't really have to guess. We have a fairly clear picture of their reasoning, which had little to do with development costs and very much to do with taking full advantage of their head start in order to set the price floor for these and future DAAs as high as the market would bear, for as long as possible. Development and production costs have been recouped many, many times over. Even the large cost of acquiring Pharmasset has been recouped and then some. The revenue from the HCV-drugs is helping to offset failures elsewhere and even then they aren't meeting forecasts, partly due to increasingly intense competition for the favor of surprisingly determined insurers and unsurprisingly determined government agencies, to the point where they've been forced to slash their prices in many cases. On top of this they've been dealing with difficult legal challenges. Of course they tried to exploit their short-lived advantage to the fullest extent possible.

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Originally Posted by wiggin

More broadly, one could argue that they are being incredibly altruistic here in saving the healthcare system huge amounts of money due to downstream costs from HepC infection; just because they're making a pretty penny hardly means they aren't doing a very good and laudable thing. IMO the problem is the optics to the public and the value proposition to payers (because payers generally aren't on the hook for most of those long term costs), not the empathy of the companies involved.

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I think you have a very distorted definition of "altruistic". Altruism is to act in the cause of the greater good and to not expect anything in return.

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Originally Posted by Khendraja'aro

I think you have a very distorted definition of "altruistic". Altruism is to act in the cause of the greater good and to not expect anything in return.

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We can quibble about semantics if you'd like, but instead I'll just say that it seems quite likely they could have charged a lot more based on expected lifetime savings for payers (adjusted for net present value) but didn't. I doubt they did it out of the goodness of their hearts, but because of a variety of business reasons (including some of the issues noted in the OP wrt convincing payers it's a good idea), but it almost certainly is reducing overall expenditures in the healthcare system in the long term, while also dramatically improving the health of some patients. I'd call it a win-win-win.

http://i.imgur.com/86xVuXF.gif

May be an interesting development:

https://arstechnica.com/science/2017...y-just-use-it/

A bump to talk about a couple of interesting developments in the last week.

First, Gilead made a large and long-awaited acquisition, of Kite Pharma, for $12 billion. The 'long awaited' part isn't that Gilead was an obvious fit for Kite; rather, it was because Gilead was facing enormous pressure from shareholders to employ their cash for something to boost revenue. This is because, despite all of the hype about their Hep C treatments (and also their other big moneymaker, HIV drugs), their revenue numbers in recent quarters have been disappointing because it looks like their drugs (and others) have made such a dent in the Hep C symptomatic market that they've cannibalized their own customers. Awesome news for patients, not-so-awesome news for profits. In a remarkably short period of time, Gilead went from minting money to facing a sudden and dramatic dropoff in revenues, not because of patent cliffs, but because they cured the problem.

The other thing that's interesting is what Kite Pharma does. They are probably going to be the second company to get a CAR-T therapy approved (the first such therapy was approved today by the FDA for a product from Novartis). These therapies are essentially an entirely new class - they take out the patient's own immune cells, genetically engineer them with a complicated process that produces a 'chimeric antigen receptor', and reinfuse them into the patient to go fight cancer. It's a crazy-exciting idea that has the potential to completely cure certain difficult to treat cancers. It's also wildly expensive; when Novartis got approval, they also announced that they're going to trial pricing at ~$475k per patient - yes, that's right, nearly half a million dollars.

To the untutored eye, this might seem obviously exorbitant, right? Yet most analysts were surprised - early discussions with payers had suggested they'd be willing to pay more than that, and the number quoted by Novartis was actually at the low end of expected pricing. This is likely to drive pricing decisions for other CAR-T products coming online. Part of why it's so pricey is that it's incredibly expensive and complicated to make the therapy - each needs to be custom built for the patient using mind-bogglingly fancy technology. The patient population is, at least to start with, likely to be quite small. And the goal is to cure patients, so you don't get lots of doses. But some of it also had to do with the perceived utility for patients and payers - and curing, say, leukemia is worth a pretty penny.

I assume that as manufacturing processes get streamlined and CAR-T therapies get more indications approved, prices will drop a bit (as will competition; Kite Pharma is just the first in a decent group of companies that are hot on Novartis' heels). But this is never going to be cheap, and it circles back to the same issues we discussed above - what price can we put on flat-out cures?

Exciting developments. I hadn't heard of CAR-T therapies before so thanks for the explanation. Sounds like a good potential solution.

Nessus :heart:

I'm not sure I understand how "cure" is being used here. There is still no "cure" for polio, but vaccinations were crucial in preventing the disease from spreading.

Ethically, I'm not convinced typical supply/demand or capital investment/profit models should apply to the medical field, especially in pharmaceuticals. That mindset already helped to turn us into a take a pill culture, where over-use and misuse of many drugs (antibiotics, opioid pain meds, anti-depressants, anti-anxiety meds, chems for ADD/ADHD etc.) has resulted in a real mess of unintended consequences for patients....while big pharma companies rake in billions in profits.

When it comes to "cures" for genetic diseases or birth defects, some of that is already available in-utero, but it's very expensive and usually only available to a certain population (people with great insurance, early prenatal screening, and access to teaching or research hospitals). Then there's the ethical dilemma of manipulating genes at the cellular level (aka "designer babies").

And then there's the cultural valuation of demographic groups. Everyone loves the idea of saving babies and spending millions of dollars in their first weeks of life (even when medical science shows they'll die anyway, like that UK baby in recent news), and it turns pretty quickly into a political issue. Older folks have been suffering from conditions we called dementia, senility, or organic brain syndrome for decades, and that used to be considered the 'normal' process of aging....but now that we know about Alzheimer's, it's become a disease process "worth" studying.

wiggin, you once said we'd have to figure out a better way to ration care. You're probably right. So maybe you shouldn't frame the question as how should cures be priced....but instead who pays for them, what are their expectations, who loses....and who decides these things?

I mean, isn't the cost of many chemotherapies potentially equal to hundreds of thousands? If the same/better result can be realized while saving enormous amounts of time, physical pain/trauma and less absence from work...this seems like a fair price.

Quote:

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Originally Posted by Dreadnaught

I mean, isn't the cost of many chemotherapies potentially equal to hundreds of thousands? If the same/better result can be realized while saving enormous amounts of time, physical pain/trauma and less absence from work...this seems like a fair price.

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There's complexities here - different cancer therapies are approved for different stages of treatment - e.g. a lot of therapies are only approved after X therapy has failed, or only to a very small slice of cancers that express certain markers. So it's not always obvious that a given new therapy will be replacing other therapies; they might be used in sequence with existing therapies, or they might be used to treat specific subtypes that just didn't have very good options until now. So while it's possible that a 'better' treatment might obviate the need for other, equally expensive therapies, it's equally possible that you'll just get patients living longer (or being cured) but at substantially higher cost than in the past. Typically discussions about pricing with payers tend to evaluate both the expected outcome (e.g. extra years of health) as well as the costs of alternatives. On the basis of this rubric, apparently some payers thought an even higher price might be 'worth' it.

An interesting innovation Novartis is trying out involves outcomes-based pricing - that is, they'll refund a payer some or all of the cost of the treatment if it fails to improve the patient's prognosis. This is a bit risky for Novartis, of course, but it makes payers more willing to countenance shelling out such a big sum - and it gives Novartis an incentive to make sure their therapy is used for indications where there is a high chance of success.

With sincere condolences for the patient who dies, huh :donkey:

My friend's mother died yesterday. She had recently turned 94 years old, and likely only lived that long because of modern pharmaceuticals. It's amazing how long we can keep hearts pumping and lungs breathing, while the rest of the body slowly decays (including the brain), until there's eventual systemic organ failure.

It's just a shame we've come to think of longevity as a weird "cure" for death, and that "managing" chronic diseases for decades has become the norm, even though quality of life suffers greatly. Oh, I understand the deep human drive to stay alive, save life, and eke out every minute on earth....

but you're right, wiggin. We'll have to figure out ways to ration health care. Just look at the crisis in Puerto Rico after hurricane Maria: patients needing ventilators and dialysis can't live on an island without electricity, and need to be evacuated to the mainland. Talk of "cures" probably rings hollow after more than a week without power

Seems some pharma companies are working very hard on getting the famed Scum-Of-The-Earth-Award.

https://arstechnica.com/science/2018...price-of-pill/

I don't have time to look up the details, but recently I read a story about a pharmaceutical company getting exclusive rights on the sale of a long existing drug which had become obsolete for one condition for anonther condition. They subsequently made use of this exclusive right by attaching a €120.000 a year price-tag.

It seems that Trump has once again drunk the CoolAid of the pharma industry and insists on pissing everyone off as bad as possible.

As Tusk said it: "With a friend like this, who needs enemies?"