Expense of new Hepatitis C drug casts a bad light on U.S. Health Care system

By Robert A. Vella

High demand means high prices.  That’s the system of capitalism which dominates our world today.  In theory, market competition rises in proportion to growing demand which exerts downward pressure on prices through innovation and increased efficiency.  However, reality often doesn’t match theory in the realm of economics especially in the U.S.  Enabled by the de facto practice of corporatism, business interests can monopolize markets, drive out the competition, and exploit consumers and workers.  In the health care industry, this leads to exorbitant costs that can limit or exclude vital medical services from whole groups of sick and injured people.

Such is the case now with a new and effective hepatitis C drug called Sovaldi.

From Reuters (March 21, 2014) – U.S. lawmakers want Gilead to explain Sovaldi’s hefty price:

(Reuters) – U.S. lawmakers have asked Gilead Sciences Inc to explain the $84,000 price tag of its new hepatitis C drug Sovaldi, which is encountering resistance from health insurers and state Medicaid programs.

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Separately on Friday, Gilead confirmed that it had agreed to supply the new drug in Egypt – which has the world’s highest prevalence of the virus due to use of contaminated needles in the 1970s – at around $900 for a 12-week course of therapy, or about 1 percent of the U.S. price.

The company has proposed a system of worldwide tiered pricing based on a country’s per capita gross national income. Sovaldi’s U.K. price is about $57,000, while the price in Germany is around $66,000, Gilead has said.

Per capita national income is essentially GDP divided by the total population which represents the average income of a nation.  If there is great economic inequality, such as in the U.S., then this figure is less indicative of living standards than the more meaningful median income measurement.  The U.S. has a significantly higher per capital national income than either Germany or the U.K., while the difference in median incomes is much smaller.  By any measurement, typical living standards in the U.S. cannot be accurately described as superior to either Germany or the U.K.  Therefore, Gilead’s justification for the extremely high price of this drug is questionable at best.

A more likely reason for the price disparity is the fact that both Germany and the U.K. have national, socialized health care systems which limit costs.  Even with the newly implemented Affordable Care Act, the U.S. health care system is still largely privatized.

Today from Salon – $1,000 Sovaldi now hepatitis treatment of choice:

Even with insurers reluctant to pay, Sovaldi prescriptions have eclipsed those for all other hepatitis C pills combined in a matter of months, new data from IMS Health indicate. The promise of a real cure, with fewer nasty side effects, has prompted thousands to get treated.

But clinical and commercial successes are also triggering scrutiny for the drug’s manufacturer, California-based Gilead Sciences Inc., which just reported second-quarter profits of $3.66 billion, or 56 percent.

Two senators have unearthed documents that suggest the initial developers of Sovaldi considered pricing it at less than half as much. The health insurance industry is publicly scolding Gilead, and state Medicaid programs are pushing back.

The repercussions go beyond one drug and one disease. A number of promising cancer medications near approval could be drawn into the storm over costs.

Once again in America, the obsessive pursuit of the almighty dollar takes precedence over the lives of ordinary human beings.