Please note: After several successful years, the Open Minds blog will be closing. For further details, please visit our FAQ

Currently showing: Funding longer lives > Health/medicine

27 Jan 14 20:57

As Gilead Sciences unveils a $1,000/day twelve-week treatment for Hepatitis C, that's 84 grand for anybody who's struggling with the maths, Bloomberg asks the big question: at what price point do insurers, consumers and governments go all Nancy Reagan and just say no to spiralling healthcare costs.

The article covers the issues far more cogently than I could but you have to wonder what the thinking is and how the insurance industry is going to respond to such high prices for treatments. Surely the industry has an obligation to both customers and shareholders to find ways to force down costs, either by refusing to pay for such treatments or lobbying to restrict patents and excessive profiteering by businesses?

At $84,000 Gilead Hepatitis C Drug Sets Off Payer Revolt

As Gilead Sciences Inc. touted its $1,000-a-pill hepatitis C cure to investors in a hotel ballroom in San Francisco, a group of about 20 protesters milled outside. “Gilead=Greed,” one sign read.

Category: Funding longer lives: Health/medicine, Long-term care

Location: San Francisco, CA, United States


Marta Antonova - 30 Jan 2014, 3:43 p.m.

An interesting question is also how much does the development, testing, introduction, production, etc. of the new cost - in other words is the price of $1,000/day justified or inflated with the aim of higher profits.
Nevertheless it is a generally known fact that health care is getting more and more expensive because of the constant research and development process. The results are also satisfying - after all live expectancy is constantly rising and cures for many previously uncurable diseases are available nowadays.

Gavin Montgomery - 30 Jan 2014, 8:03 p.m.

Fortunately, Forbes have done a lot of the heavy lifting on the numbers for drug development, so we know that as at 8/11/2013, Gilead had successfully launched three drugs over the previous decade and spent a total of USD 5.5 billion on research, or a little more than USD 1.8 billion per drug.

Those numbers are a bit slippery, as they include drugs in the pipeline and pharma firms get all sorts of tax breaks on R&D so the term is likely to be subject to some inventive accounting practices. Gilead actually does a pretty good job of managings its costs. It is estimated that companies spend an average of USD 350 million on each drug in development, of which less than 10% are approved for use. The R&D cost per approved drug is about USD 5 billion.

That is a lot of money and companies have a limited window of opportunity to recoup their investment before patents expire, but cost of development and size of market are only part of the equation in pricing. The manufacturers also have to consider what people are willing and able to pay - in the case of Hepatitis C, the alternative is long-term treatment, possible liver transplant and death so USD 84,000 is cheap by comparison.

It's also true that there are a lot of other costs that need to be considered. Future liabilities, the potential cost of a recall and patent disputes all spring to mind.

So, it's not unreasonable for drug firms to try earn a return on what is, after all, a very risky investment. On the other hand, we could probably do quite a lot to bring down the cost of drug development which has become a substantial barrier to entry for smaller firms and there is a clear need to counter the monopoly power of Big Pharma by, for example, collectivizing purchasing through state agencies or insurance.

Paritosh - 31 Jan 2014, 6:11 p.m.

It's as simple as that... take statistics from diseases of poor, manufacture a medicine and sell it to people who contracted it and could afford it...

If you would like to leave a comment, please, log in.