Excessive pharmaceutical costs.

A recent item in a local newspaper on the price of pharmaceuticals caught my attention. The question is, are the drug companies price gouging? Thus in the 1960s, Thalidomide was sold as an “over the counter” drug as a sedative, and to help with morning sickness, so that was relatively cheap. It got into trouble, however, because there were birth deformities associated with its use. Notwithstanding that, it has had a resurgence and is of value for certain form of blood cancer, and prolongs life by a few months to a year. In New Zealand, however, and using $NZ, in 2002, a month’s course cost $360 (or so the news item quoted). Now we expect a higher price when a drug has only a specialist use, and there has to be allowance for inflation, but this seems grossly excessive.

However, there is worse. Lenalidomide is a very similar drug (for those with any chemical knowledge the phthalic anhydride part that is converted to a substituted imide is replaced by phthalide, with the equivalent substitution, except the substitution is to the amide rather than the imide). Now phthalic anhydride is extremely cheap, phthalide not seriously more expensive, and the more difficult part, the substitution, is the same. Lenalidomide apparently costs $8350 per month, while Wikipedia quotes it as $US163,000 per annum per patient. What justifies this price? More to the point, what justifies and annual difference of over $US 80,000 between two countries? Now, all prices here are list prices, and apparently negotiation can often lower this, but the point remains. Further, studies have shown no significant benefit in survival rates between these two. There is another drug that does the same job: bortezomib, which costs a little under $10,000 per month, and while its starting materials are arguably a little more expensive, they are not that much more.

According to the World Health Organization, over half the expenditure on health is on medicines. Here is another example. There is a drug called Sovaldi, which treats Hepatitis C with about a 90% success rate. Note that patients can survive with the disease for decades, but eventually they have a high probability of liver failure of one sort or another. The prices for a twelve-week course are of interest. In New Zealand, the cost was quoted in this article as $NZ 239,000 (~ $US 180,000). According to Wikipedia, the cost in the US is $84,000, in the UK about 2/3 of that, in Germany, about $US 46,000, and in India, $US 300. Now, these are listed prices, there are probably discounts around, but persuade me this is not price gouging. The company is getting what it thinks it can get from each country. One can argue for charity for India, but the other countries have prices depending on who knows what, other than greed?

The issue for me is the effect of this corporate greed on families of those affected. Thus if we look at this Solvadi, in New Zealand it would cost 1 billion dollars more than the total annual health spending to treat all those with the virus. It is simply not practical to send that sort of money on one subset of patients, yet by not treating them, do they die of liver cancer at some later date? In fairness, there are alternative treatments, and I have no idea what the real situation is. However, I understand the problems. My wife recently died of metastatic cancer, and as it happened, she died before the oncologists could sort out what, if anything, to do. But what would I have felt had I been left with an option that would require all my money to buy a few months more life for my wife? That is a terrible situation for both to be in. The patient will probably not want to beggar the survivors, while the spouse does not want to not take every chance for more life for the patient.

You will hear various justifications for such expense, such as the need to develop new drugs. This is true, up to a point, but if the drug companies can just charge what they like later, there is not much incentive to be efficient, is there? There is also the issue of the cost of getting approvals. Yes, this is expensive, but persuade me it is not in the interests of the drug companies to make this as expensive as possible. The point is, they can price what they like, and the higher the costs, the easier it is to keep upstart competition at bay.

The issue for me is simple. The provision of best medicine is a public good. There is an element of pure luck whether someone suffers cancer, and whether it is aggressive or not. Certainly you can help yourself by not smoking, and by taking care in the sun, but there is no guarantee, and the same goes for many other diseases. So the question then is, should your future, if you are unlucky, depend on the loading of your wallet? Would it not be better for the state to at least keep some check on the approvals process, and remove waste? What do you think?

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