Sovaldi and the Price/Value Debate

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  • 07/21/2014
From today's edition of the New York Post.

Why ‘pricey’ drugs save money — and lives

Expensive new drugs often get fingered as the culprit to rising US health-care costs. The truth is closer to the reverse.

First off, it’s hard to see how pharmaceuticals can be a major driver of costs when they’re just over 11 percent of the total US health-care budget.

But more important is that even extremely pricey drugs still save money if used right.

Consider Sovaldi, which has a 90 percent cure rate for Hepatitis C, a disease affecting over 3 million Americans. A three-month treatment cycle of the new drug costs upward of $84,000. On the market for just a few months, Sovaldi has already clocked in a record-shattering $2.3 billion in sales.

Some are calling foul, accusing the drug’s developer — Gilead Sciences Inc. — of exploitative pricing. “The company in this case is asking for a blank check,” says Karen Ignagni, president of America’s Health Insurance Plans. “It will blow up family budgets, state Medicaid budgets, employer costs and wreak havoc on the federal debt.”

That’s 100 percent wrong — the exact opposite of reality. New, better medications are actually the best and swiftest way for this country to cut down on our health-care expenses. By more effectively combating disease and improving patients’ lives, drugs reduce long-term medical costs and bolster the overall economy.

Consider one pre-Sovaldi “best practice” treatment for Hepatitis C, the drug Pegasys. This requires one injection a week for 48 weeks — and very few patients see the treatment through to completion, so much of that treatment, both physician time and drug cost, is wasted. Nor is it that much cheaper: At about $7,000/month, the full course of treatment is over $70,000 — barely less than cost of the three months needed for Sovaldi to work a cure.

And the price of not using Sovaldi is very high. One in three patients with the Hepatitis C virus eventually develops liver cirrhosis, and managing these patients is costly. A “routine” liver transplant (where the liver is from a cadaver) costs close to $300,000; a “living donor” transplant is even more expensive.

Thanks to Sovaldi, a pill that cures the disease when taken once a day over 12 weeks will eradicate the need, the risks and the costs of liver transplantation. Such radical innovation deserves to be both lauded and rewarded.

And Sovaldi’s costs will come down. The initial price of such breakthrough medications reflects the huge R&D costs required to bring the drug to market, not avarice.

As Food and Drug Administration official Dr. Janet Woodcock noted of the Sovaldi controversy: “We may have to put a big down payment down now to get something really good.”

It’s remarkable that some large insurers have the chutzpah to complain that curing 3 million Americans of hepatitis C will bankrupt health-care systems. Data recently published by the PwC Health Research Institute suggests the reverse. The study shows that the use of Sovaldi will actually drive down overall spending within a decade. According to the authors, “The challenge may lie in targeting the patient most in need of the more expensive course of therapy.”

In short, drugs aren’t the cause of rising health-care costs — they’re the solution. Demonizing new treatments distracts from the real problem in the US biopharmaceutical industry: top-down cost-centric policies that focus on the near-term, short-changing long-term patient outcomes, and so endanger “sustainable innovation” by denying fair reimbursement for high-risk investment in R&D. (Research and development costs big even if a drug never makes it to market — and most don’t.)

New treatments are a bargain. Disease is always much more costly.

Unfortunately, under ObamaCare health plans are sticking more people with a bigger share of drug costs — a strategy designed to discourage use by the people in greatest need and direct outrage away from insurers to drug companies.

Breakthrough drugs could generate huge new savings in the US economy — but only if federal regulators don’t smother them in the womb with expensive and unnecessary legal hurdles. Left unencumbered, domestic medical innovation will generate the new treatments to improve lives, stave off disease and cut down on long-term health-care costs.

If we don’t reward risk-taking on behalf of human health, both will shrink.

Peter J. Pitts, a former FDA associate commissioner, is president of the Center for Medicine in the Public Interest.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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