In defense of a $1000 pill

POST SUMMARY: If you want to understand why so many people are turning away from traditional journalists as news sources look no further than an article in VOX entitled “This drug costs $84,000, And there’s nothing the US health-care system can do to stop it.”  It’s time to look beyond the cost and instead look at the value of these medications.

warning jour

Cost must be balanced with value and this is especially true when it comes to prescription drugs.  Hepatitis C is a chronic infectious disease affecting perhaps 3.2 million Americans. Hepatitis C virus, or HCV, infection is often asymptomatic — but its severity fluctuates, and it can progress after many years. Eventual complications include cirrhosis of the liver in 20% to 30% of patients, with grave consequences in terms of health and costs.

Unknown-1

According to Harvard Business Review Sovaldi’s manufacturer has received much criticism for the price, both in the media and Congress. Many stories highlight the $1,000 cost per pill. While this may make for good theater, focusing solely on the cost of therapy — or, worse, the price per pill — misses crucial points about the value of treatment, and the reward to innovation.

1ne: Treating HCV infection costs about $85,000, but it is all paid in a matter of weeks. Using treatments available before the introduction of sofosbuvir, the present lifetime medical costs are about $175,000 to $200,000. If HCV infection progresses, there is often cirrhosis of the liver and, in some cases, the need for a liver transplant. Taking into account the upfront cost of treatment — but also the lifetime benefits — researchers have found that sofosbuvir regimens are highly cost-effective, even at current prices.

2wo: The benefits beyond the treated patient. None of these calculations takes into account additional benefits to others. The hepatitis C virus is bloodborne and can be transmitted by inadequately sterilized needles during intravenous drug use, acupuncture, tattooing, and even public shaving. Health care workers are also at risk. Therefore, each successfully treated patient functionally “cures” the disease in others (at a cost of zero for those people) — a social benefit not captured by traditional cost-effectiveness analyses.

screenshot_96

Then there is this school of thought from Forbes ““Sovaldi is a drug that cures hepatitis C. It actually SAVES the healthcare system money in that it will prevent patients from dying from liver cancer, cirrhosis and liver failure. Liver transplants alone can cost $300,000 and then patients must take anti-rejection drugs that cost $40,000 per year for the rest of their lives. The price of Sovaldi, while high now, will drop, first when competitive drugs in late stage development reach the market and then when the drug is generic. Given all of this, what price for Sovaldi would have been acceptable to you – $60,000, $40,000, $10,000? What price are you willing to pay for innovation?”

Many observers want the U.S. Government to mandate lower drug prices — for example, by allowing re-importation of drugs or by having Medicare negotiate drug prices.  Price regulation has been shown to delay the launch of new drugs, limit their availability, and reduce the pace of innovation.

Before we start blaming drug manufacturers we need to remember that Rx drug costs account for only $.11 of every healthcare dollar spent.  In addition obesity is a big factor driving soaring rates of chronic disease in the United States. It’s an expensive problem, too: According to researchers, chronic illnesses such as diabetes and heart disease account for some $100 to $150 billion in healthcare spending in the United States each year.

In May the CDC said “Chronic diseases and conditions—such as heart disease, stroke, cancer, diabetes, obesity, and arthritis—are among the most common, costly, and preventable of all health problems.

  • Eighty-four percent of all health care spending in 2006 was for the 50% of the population who have one or more chronic medical conditions.
  • The total costs of heart disease and stroke in 2010 were estimated to be $315.4 billion. Of this amount, $193.4 billion was for direct medical costs, not including costs of nursing home care.
  • The total estimated cost of diagnosed diabetes in 2012 was $245 billion, including $176 billion in direct medical costs and $69 billion in decreased productivity. Decreased productivity includes costs associated with people being absent from work, being less productive while at work, or not being able to work at all because of diabetes.
  • Medical costs linked to obesity were estimated to be $147 billion in 2008. Annual medical costs for people who are obese were $1,429 higher than those for people of normal weight in 2006.

Before “journalists” write articles like the one, appearing in Vox, they should at least look at the value of these drugs and the real costs that are keeping our healthcare prices sky high.