Hepatitis C, a potentially deadly inflammation of the liver, afflicts more than 3.2 million Americans. Around 70 percent of them will develop chronic liver disease, and as many as 5 percent will die from cirrhosis or liver cancer. But a new drug is curing patients of Hepatitis C at an unprecedented rate. That's right, curing.
Between 2000 and 2011, the best hope for patients was to slog through 48 weeks of interferon injections combined with the antiviral ribavirin. The chance of a cure was about 50-50. Sovaldi, a treatment that hit the shelves only a few months ago, lets patients take one pill a day for a mere 12 weeks and results in a cure in 90 percent of cases. At $84,000 for a course of treatment, Sovaldi is expensive — though only about 20 percent more than its predecessor regimen. The success rate of Sovaldi has led to a record-shattering $2.3 billion in sales.
Rather than excitement over the possibility of curing nearly 3 million people, however, the main response to Sovaldi has been outrage over its costs. Karen Ignagni, president of America's Health Insurance Plans, has been particularly accusatory, suggesting that Sovaldi's developer, Gilead Sciences Inc., has engaged in “ ‘whatever you can get away with' pricing." She's also claimed Sovaldi's high cost "will blow up family budgets, state Medicaid budgets, employer costs and wreak havoc on the federal debt."
Critics like Ignagni are dead wrong. Pharmaceutical research and development ultimately produces drugs that cut America's health-care expenses. In the long term, when patients have access to more effective medications, their overall health improves, even as their overall medical expenses go down. That, in turn, reduces national health-care spending and boosts the American economy.
Ignagni and her peers fail to understand that groundbreaking innovation doesn't come cheap. Creating a new drug is time-consuming, risky and requires massive upfront investment.
To research and develop a new medication, recent estimates suggest, drug makers must invest between $1.7 billion and a jaw-dropping $4 billion. On average, of roughly 5,000 compounds tested in the lab, only a single one gains final approval for the pharmacy, a process that can take 15 years from initial testing through clinical trials to a green light from the Food and Drug Administration. Only three of 10 new medications ever turn a profit, and often it takes as many as 20 years for developers to break even.
Suddenly, the much-maligned Sovaldi's big price tag doesn't look so unreasonable.
And that's without even factoring in the gains to the health-care system:
In fact, as the drug is more frequently used to cure hepatitis C, overall U.S. health-care spending will decrease over the next decade, according to a new study by the PwC Health Research Institute.
Put simply, taking a course of Sovaldi is expensive, but not taking it is even more expensive. Treating hepatitis C in its early phases costs on average $24,000 a year. If a patient develops liver cancer, those costs rise to $112,000 a year. And for those who ultimately need a transplant, the bill spikes to $500,000 a year.
Taking into consideration the higher cure rate and the decrease in hepatitis C-related hospitalizations, insurers can actually reasonably expect net savings of $174 billion by 2020, thanks to Sovaldi.
Sovaldi is not the only groundbreaking drug generating big savings. Cancer kills 580,000 Americans annually. But because of pharmaceutical advances, the cancer death rate has dropped 20 percent since 1991, a development that adds an estimated $8.8 trillion in value to the U.S. economy. Drugs in the pipeline hold even greater promise for patients, their loved ones and the American health-care system.
Critics of Sovaldi exhibit staggeringly short-term vision. Sure, the federal government could cut the cost of drugs by imposing price controls or allowing earlier entry of generics. But already, pharmaceutical innovation is a delicate economic balance that just barely makes business sense. Cut into potential future returns, and fewer companies will bother to invest in the cures of tomorrow.
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Detractors must stop blaming the pharmaceutical sector for the expensive medicines that result from an expensive development process. Instead, the health care industry should focus on establishing policies that encourage pharmaceutical innovation and recognize the long-term health care savings that result. The price of a cure is nothing next to the cost of succumbing to a deadly disease.
Peter J. Pitts, a former Food and Drug Administration associate commissioner, is president of the Center for Medicine in the Public Interest.