I would add they just came out with a drug to cure hepatitis C. That's amazing news for 3.2 million Americans with the disease, including my dad. http://www.webmd.com/hepatitis/news/20140729/pill-hepatitis-...
However, it's not like we couldn't cure hepatitis C before, we could, but just not very well.
The old regimen was interferon + ribavirin. You had to take it for months and months and the interferon makes you feel like you have the flu (it also put the patient at risk of depression and suicide). The cure rate was ~50%.
With the new drugs you don't need to get interferon injections anymore. You just pop one pill a day and 12 weeks later there is a 95%+ likelihood that you've been cured of HCV.
It's a HUGE medical advance.
The company who makes the drug is offering it a very low price to developing countries so the impact will be worldwide.
I'm sure that's a not insignificant amount of money for Egypt, but it's less than 1% of the price charged in the US.
[1]http://www.hepmag.com/articles/egypt_gets_sovaldi_for_cheap_...
Solvadi could be paid for with monthly payments, say, 90% of the average price of conventional Hepatitis C treatment. Once the total payments add up to the price of Solvadi, they stop.
The patient gets cured right away. The healthcare system sees a 10% savings instead of a $90,000 bill. Gilead gets a smoothed-out income stream that helps to insulate it from the feast-or-famine cycle.
What's more, this places a built-in limit on the price of the drug. If Gilead sets the price too high, then the monthly payments never add up.
In a system where the patient could switch insurers, the monthly payments would have to be imposed on the new insurer. Otherwise, we're back to the US game-theory standoff.
The interesting thing is that Sovaldi is not more expensive than earlier therapies (last generation therapies were around $85K). The issue is that Sovaldi is so good that everyone wants to take it now, where before, very few patients were willing to put up with the old therapies.
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.
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.
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.
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?
What incentive would any of those labs have to spend their budgets efficiently?
[1]: https://www.nice.org.uk/guidance/indevelopment/gid-tag445
[1]http://www.forbes.com/sites/theapothecary/2014/08/18/uk-says...
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.
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.
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:
http://kaiserhealthnews.org/news/most-illinois-medicaid-pati...
http://www.npr.org/blogs/health/2014/10/28/359553282/insurer...
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.
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.
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.