Payers in other countries can use their countries' negotiating power to negotiate with Novartis. The United States is definitely capable of doing the same in theory.
Edit: to clarify, Medicare does not only cover seniors. Other important groups include those with end-stage renal disease and those with significant disabilities. Those often also receive Medicaid, and are known in industry jargon as “dual-eligible.” Medicare becomes their primary payor, with Medicaid picking up the balance of what Medicare won’t cover. Both programs are ultimately overseen by CMS (center for Medicare and Medicaid services). Pay negotiations for Medicaid occur on a state level, but a huge chunk of the tab is picked up federally, so they tend to weigh in.
Newborns with SMA will almost certainly be initially covered by parental private insurance (pre-dx), and transition to dual coverage afterwards. Please note that there are a combination of gene therapies under discussion, only one of which will be given once at birth- the rest will entail ongoing costs that will be borne by Medicare and Medicaid.
Why would Medicare negotiate rates for a therapy for infants/children (even if they had the legal right)?
Update:
Replies (I reached the maximum nesting level):
'chimeracoder: Thanks! I appreciate it. I keep forgetting that Medicare only applies to seniors. I guess individual insurance companies or the parents of the affected infants would be the ones to try to negotiate the price of this treatment then.
Medicare, with only a few exceptions[0], only covers people above a certain age (typically 65+).
The original article is about a disease that affects infants. Almost no infants are eligible for Medicare.
[0] none of which apply here
The only option the company has is to sell. If they don't, they lose all their investor money and go bankrupt. The reason other countries get away with obscenely low prices is because the good'ol USA is paying for it, and the companies are better off getting anything other than 0.
If you look at how well industries are doing, you would also see that you would actually make more money investing in a burger chain than in the pharma sector. These high prices exist because of the incentives the insurance model creates (i.e. save people at any cost), not because companies are super greedy or evil and make 1.99$ million profit on a 2$ mill drug(which they do not).
The companies have some leverage. They can hire PR firms to basically say, "Our new drug X treats disease Y. Your country Z doesn't want to pay to help those suffering from Y". If people afflicted by Y can garner enough influence to pressure their government's health department to get X, then they might get that.
If you want proof whether or not big pharmaceutical companies lose money by selling to countries outside the US, then try to find out if they would support a bill that forbids US pharmaceutical companies from selling at a price below what they charge Medicare.
The comparison to a burger chain is interesting: I remember reading that McDonald's makes money from real estate as opposed to burgers here on HN a while back [0][1].
[0] http://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-beyo...
Why zero leverage? Government contracts contemplate volume purchasing agreements for suppliers. Many medications include alternative suppliers which can be used as leverage.
As noted by others, extremely expensive treatments for rare conditions are often not offered in socialized systems. When they are, it's often the result of a court order forcing the government to make it happen. Better pricing could allow a treatment being provided as an option to the population (by default, without necessitating a court order), which can be interesting to the pharma company due to increased sales volume.
This misleading misconception gets brought out on nearly every discussion of pharmaceuticals on Hacker News.
Medicare doesn't negotiate rates; the insurers who provide Medicare coverage for pharmaceuticals negotiate rates. This makes sense, because Medicare doesn't provide coverage for pharmaceuticals, so it would be a misalignment of incentives to have them "negotiate" rates that they're not paying. The insurers, on the other hand, have the incentive to drive the prices as low as possible, because pharmaceuticals are fungible goods and the lower the price, the more money they can make.
It wasn't pharma benefit managers (PBMs) that surpassed all other industry groups in lobbyingfor the final form of the 2003 Act - it was pharma companies (Ceci Connolly, Drugmakers Protect Their Turf: Medicare Bill Represents Successfor Pharmaceutical Lobby, WASH. POST, Nov. 21, 2003). They hadn't lost track of their own interests and accidentally lobbied against their own profits, and it's always kind of ridiculous when people imply they did.