A new wonder drug, Sovaldi, shows how tough it’s going to be for America to pay for the coming new world of high-tech pharmaceuticals.
Sovaldi is a magic bullet that cures hepatitis C, a blood-borne disease that destroys livers and kills people. It has no serious side effects. So far, so good.
But its price is astounding. A single pill – the daily dose – costs $1,000. A low-end course of treatment runs 12 weeks and $84,000. Some patients need more. Combined with other drugs, the Sovaldi cure can cost up to $150,000.
Now combine the price with the need. Roughly 3 million Americans – but maybe many more – have hepatitis C. Treating them all would cost well upwards of $200 billion a year. Spread that cost around through insurance premiums, and average American household would pay hundreds of dollars more for health care coverage each year, just by adding Sovaldi.
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Now add a moral dilemma. Hepatitis C in recent decades has been commonly spread by drug abusers who share needles. They tend to be poor. That means much of the price of Sovaldi is going to be billed to Medicaid, the government health insurance program for the poor.
Medicaid has been relentlessly gnawing an ever-larger hole in state budgets. Sovaldi – just the one drug – could conceivably cost states as much as all current prescription medications put together. For the price of a single course of Sovaldi, Medicaid could provide full coverage for more than a dozen people who don’t have hepatitis C.
States have other priorities, too, such as public education. The Washington Legislature, for example, is under a court order to spend billions more on schools.
Why shouldn’t the federal government simply order the drug’s maker, California-based Gilead Sciences Inc., to lower the price? After all, the company charges much less for Sovaldi in other countries; it figures the United States can pay full freight.
But price controls often backfire. To develop a single successful drug, pharmaceutical companies typically sink hundreds of millions of dollars into research. No one takes that kind of risk without the expectation of big rewards. Price controls sometimes kill geese that lay golden eggs; capping the price of wonder drugs could mean fewer of them in coming years.
States are responding to Sovaldi with tight, across-the-board rules that restrict who gets it. Washington’s Medicaid people, for example, excludes reimbursement for alcoholic abusers, intravenous drug abusers and people with advanced liver disease.
This kind of problem will only get harder in coming years as other pharmaceutical firms bring effective but prohibitively expensive drugs to market, including new treatments for cancer. Some kind of rationing will be inevitable; we’d best start thinking about it now. There may be magic bullets for illnesses, but there aren’t many for costs.