What I Learned at the Brookings Institution

By John Rother

Gilead President:  We Price Based on How Others Priced Before

HCV Expert:  Perhaps as many as 10 million infected with HCV

I attended a panel discussion at the Brookings Institution today entitled, “The Cost and Value of Biomedical Innovation: Implications for Health Policy.” There were a number of interesting issues discussed at the panel, including how we do a better job of paying for value in health care.

Price Based on Previous Prices

One of the panelists was Dr. John Milligan, the President of Gilead. In his remarks Dr. Milligan discussed how Gilead priced Sovaldi and, just as importantly, how they plan to price future all-oral iterations. Dr. Milligan indicated that while they were aware of a variety of factors, it was ultimately the prices of previous therapies that determined their approach to price. He acknowledged that while they believe Sovaldi has a return on investment (ROI), Gilead did not attempt to factor ROI into any consideration of the price–it was simply looking at the previous, less desirable therapy and going up from there.

Perhaps even more concerning he indicated that their approach to future pricing for their all-oral therapy would be the same: looking at the price of current therapies and then basing their price off of those. Current combination therapy for HCV can range from $100,000 to $150,000 per patient. This approach to pricing is indeed disturbing news because it creates an upward spiral of prices. As many panelists pointed out, we need more independent measures to deal with how companies price when they have monopolistic pricing power.

10 million infected?

Douglas Dietrich, MD also presented on the panel and noted that in his experience testing for HCV in urban settings, the incidence was roughly 8% and that by his rough calculations we may be looking at a total patient population of as many as 10 million Americans infected with HCV. If that’s even close to accurate it blows the doors off all current cost projections.

The Big Picture

While there was a lot of discussion about Sovaldi at the event, only a couple of panelists touched on the bigger issue: the huge number of high-cost specialty medicines in the pipeline and the fact that many of them are chronic medications. For all the talk about cures, the reality is that most high-priced medicines are not cures. Some panelists talked about taking out “mortgages” for high-priced medicines, but unlike a house (where you only need one) the reality of medicines is that a single patient might need several over a lifetime. Simply spreading out the cost is not a workable solution to the issue of increasing costs any more than letting Americans borrow more than they could afford for homes was a good idea. That policy drove up the price of housing and eventually led to economic disaster. Let’s learn from our mistakes.