Question

Harvoni is a lifesaving medication for people with hepatitis C. A four -week supply averaged $32,114 for privately insured patients in the united states in 2015. In Switzerland, the price was $16,861. Why are the prices so different? Should the government intervene to reduce the price? How might the government intervene?

Answer 1

Why there is high price.

Factors Accounting for the High Prices and Pharmaceutical Companies’ Justifications

The high prices of these drugs have been widely criticized. In response, pharmaceutical companies’ argue, as they have previously for other drugs, that the prices reflect the cost and risks of research and development, taking into account that the overwhelming majority of candidate drugs fail clinical trials. Moreover, they claim that the high cost of their products is justified because the income generates money for crucial research on new treatments. However, while the pharmaceutical and biotech industries may assume considerable risk, they have also consistently been among the most profitable sectors of the U.S. economy. Moreover, data show that large pharmaceutical corporations invest just 10 to 20 percent of their revenue in research and development. Additionally, an analysis of corporate filings indicates that between 2005 and 2010 drug companies spent 19 times more on promotion and marketing of new drugs than on research. It should also be noted that most of the truly innovative new drug products that have become available do not come from research conducted by the large pharmaceutical companies. Instead, research that leads to new drug products often takes place in academic institutions supported by investment from public sources such as the National Institutes of Health (NIH) or small biotech firms.

Recently pharmaceutical executives have used another tactic linking drug prices to the value they provide. For example, Gilead points to Sovaldi’s comparative effectiveness of providing a 90 percent plus cure effect with minimal side effects. The companies have also argued that their therapies for hepatitis C drugs are cost effective because they avoid the future need for costly hospitalization and expensive liver transplants. However, public payers calculate affordability on the basis of single year costs and cannot make decisions based on savings into the future.

Yes government should definitely intervene to reduce the price. Otherwise treatment for hepatitis will be a burden to the common man. Because they cannot afford it

Options that government can implement to lower the prices

1. Laws requiring greater cost transparency
As complaints have grown about the exorbitant price of Sovaldi and other high cost drugs, pharmaceutical companies have come under pressure to disclose information about the development costs and profits of these drugs and to explain the rationale for their pricing. At least ten states have introduced pharmaceutical cost transparency bills that require manufacturers of prescription drugs to provide extensive data on research and production costs and profits.

2. Negotiating lower prices

Most European governments and the Canadian government routinely negotiate drug prices, impose price controls, and engage in bulk purchasing of drugs to lower costs. Consistent with that approach, many European countries demanded and received discounts for hepatitis C drugs before they initially placed them on their drug formulary.

3. The ‘Government Patent Use’ law

A little known law, codified at 28 U.S.C. section 1498, accords the government the right to use patented inventions without permission with the requirement that the government pay the patent holder a “reasonable and entire compensation.” Under the law patent holders can demand royalties but they cannot prevent the government from producing the medicine or allowing others, most likely generic drug manufacturers, from doing so.

4. Seeking voluntary licensing from or purchasing of one of the Hepatitis C innovator drug companies.
One of the most intriguing proposals, made by the National Academy of Sciences Committee on a National Strategy for the Elimination of Hepatitis B and C, is that the federal government, acting on behalf of the Department of Health and Human Services, purchase the rights to a direct-acting antiviral for use in neglected market segments, such as Medicaid, the Indian Health Service, and prisons through licensing or assigning a patent in a voluntary transaction with an innovator pharmaceutical company with reasonable compensation offered.

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