Googling shows the existing interferon treatments cost significant amounts - $15-50k if a quick skim is accurate - and are far less effective. I'd imagine the eventual liver transplants cost far more than $90k too.
The math may work out here.
The actual problem here is not the price of the drug, it's that you have an expensive cure for a widespread disease which becomes available all at once. So instead of insurers paying for interferon and liver transplants over the course of 50 years, you have every patient in the country handing a $90,000 tab to the insurance company at the same time. Even if the total cost is lower over 50 years, the insurance companies may not have the reserves to handle such a large hit in year zero.
But the underlying problem is this:
> Gilead wants to tier its pricing based on a country's per-capita income. So patients in the U.K would pay about $57,000, Reuters reports, while Germans would pay $66,000 and Americans are paying $84,000.
That is why the American healthcare system is falling apart. That alone, by itself. Because it happens with everything from drugs to MRI machines to heart monitors. We pay twice as much as the next country for exactly the same product and then people are like, why is medicine in this country so expensive? It's because we don't have laws against that sort of naked price discrimination, that's why.
Laws against price discrimination makes sense only under the assumption that they (the company) would set the common price to the lowest among all prices, or at least a reasonable average. What happens if they run the numbers and realize that, even under a price discrimination law, their profit would be maximized by dropping all poor countries, and then selling to everyone else at the highest price ($84K/year in this case)?
When discussing laws, you have to take into account unintended consequences, and how the affected parties will react to the law you're proposing.
The existing system creates a de facto subsidy for healthcare in other countries by the insured in the United States. If you feel for the plight of people in those countries then feel free to enact a de jure subsidy which doesn't have the side effect of bankrupting the poor in this country.
It's true, they wouldn't. However, the buyers might not be able to afford it. If the average comes out to about 10-20k, then US/Westerners will be able to afford that, but poorer people will not, so they'll just completely skip the treatment. If you remove poor people from the market, that shifts the average up by a lot, and then the process repeats.
As opposed to your proposed alternative where the average US WalMart employee without health insurance is expected to pay $89K in cash up front? Or perhaps we'll just require them all to buy health insurance and the insurance company can cover the $89K by charging a $12K/year insurance premium to workers making the ~$15K/year federal minimum wage?
The fundamental flaw you're making is US citizen = rich, which is factually incorrect. Especially if you expect them to subsidize medical care world-wide.
> If you remove poor people from the market, that shifts the average up by a lot, and then the process repeats.
Nonsense. The poorest people who would forgo life-saving drugs for financial reasons by definition have no money. Losing the minimal revenue they could have provided would have no effect on the drug company's revenues and require no recalculation.
And once again, if you want to help those people in other countries, by all means propose a bill to explicitly subsidize medicine in those countries. But take the money to fund it from this country's rich rather than its poor.
Price discrimination is only a subsidy if the drug manufacturers are selling the drug below cost in poor countries, therefore losing money on it. What's the marginal cost of the drug itself? I imagine it's pretty cheap, so the company makes a profit either way. Why would they sell in poor countries, if it loses them money?
I see the cost of a drug as two parts: the one-time, large research cost, and the marginal cost per-treatment. The former is quite big (hundreds or thousands of millions of dollars), while the latter is quite small. This is why companies can afford such price discrimination.
I can't really understand what kind of subsidy you're seeing here, except maybe for how poor countries get to benefit off research paid by rich country patients. Is that it?
> Nonsense. The poorest people who would forgo life-saving drugs for financial reasons by definition have no money.
I don't think that they really have "no money". The question is how much money they have. The Walmart worker in your example would probably be able to afford the treatment at India prices. The problem is that you can't easily do individual price discrimination in the same country. You can't sell the drug cheaply to the poor US worker, and very expensively to the American millionaire (if you could, that itself would be the solution to everyone's problems).
> And once again, if you want to help those people in other countries, by all means propose a bill to explicitly subsidize medicine in those countries. But take the money to fund it from this country's rich rather than its poor.
Drug companies don't take money from either rich or poor, they take it from whoever needs the drugs. Now if you're proposing government-funded or -operated drug research, that's another discussion. Otherwise, I don't see what the rich have to do with the economics of medical drugs.
Also, after posting my previous comment, I realized I can make a good economic argument for price discrimination. When you look at countries as independent markets that a drug company operates in, the company will set the per-country price for each drug at the point where the profits for each country are maximized. In reality, the countries are not independent markets. The existence of black market for drugs in richer countries (where individuals smuggle in cheaper versions of a drug) should have a positive effect: it pulls the price down, due to the competition (because the company now has to compete with its own drug, it has to lower the price). The only real problem here is that, in many cases, it's either illegal or very difficult to move drugs across borders.
Well, if there is ever a 'place' for the open-Source ethos, medicine is it. Stories like this confirm it for me, anyway.