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Here is an interesting article on state purchasing power in India:

www.newslaundry.com/2016/10/12/how-rohta...ts-at-just-rs-18600/

According to this report, SOF+LED and SOF+DAC are now both available in the state of Haryana for RS 6200 (USD $92).

Isn't this is how it should be everywhere?

I'm going to argue no, or not exactly, to that. I do believe that in the world of pharmaceuticals the originator (or in the case of Sofosbuvir, the purchaser of the IP) is entitled to some higher level of patent protected reward for their efforts in researching and/or developing the product. On the other hand I don't believe that the ROI that is currently being extracted from the sick by pricing of "$1000 pills" is morally justifiable.

While $92 x 3 = $276 per twelve week treatment is an excellent price it is a very large volume bulk price for a generic product that only incurs a 7% licence fee to the originator, in a country that has a per capita GDP that is only around seven times that $276 price.

I don't believe that an iPhone one size more or less fits all world pricing model is valid in the context of medicines so maybe worldwide a model that allocates patent protected pricing based on per capita income would be an idea that's time has come? A rate of 1/7 to 1/10 of GDP per treatment as per the above story in India would work out at $4-6k across much of Western Europe and $5-7k for US and Australian type countries with the rest of the world at various lower tiers. And possibly a shorter period of 'sales' patent that takes effect from the time the product hits the market to incentivise the manufacturers to negotiate and encourage early treatment programs. The actual ratio of GPD vs patent length should be balanced to give best outcome.

I know those sound like high prices compared with generics but they are just my suggestions of pricing levels that would still provide very strong incentives to big pharma to continue to invest in new product development while allowing governments or insurance companies to cost effectively fund treatment for all without being bankrupted. However, this model should also retain the ability for private individuals to self fund import of generics from cheaper markets if they are unable to access through insurance or government provision. What do others think?

That makes perfect sense.
Therefore, it will never happen in the US if it involves the government.
m

Hi Gaj,

Thank you for moving my post to a separate thread. But I have to say, I fundamentally disagree with any model of fixing the price of medical treatment according to the ability to pay (GDP or average income). This is exactly what Gilead are doing, and by taking it to its extreme they are literally getting away with murder.

Sure, prices should be "fixed downwards" according to ability to pay in poor countries, but not "fixed upwards" according to ability to pay in rich countries.

So just for fun (or maybe not), here is some simple number crunching based on Gilead's sales figures and the definition of profit margins...

In most businesses, it is quite reasonable for a company to have a profit margin of from 5 to 10%. For supermarkets, it is typically 5% or less. For specialist engineering it is around 10%. For banks, it is about 18%

www.investopedia.com/ask/answers/052515/...y-banking-sector.asp

Well, everyone knows that the banks rip every one off - left, right and centre... But let's not get into that

My target here is Gilead. Their profit margin is reported to be a whopping 45%

ycharts.com/companies/GILD/profit_margin

So what is profit margin anyway? It is the ratio of net income (gross income after deduction of expenses) over gross income.

www.investopedia.com/terms/p/profitmargin.asp

So if Gilead are charging $40 000 per treatment (after government or health-insurance negotiated discounts on the famous $1000 per pill "list price") for something that in reality costs less than $1000 to make, why is their profit margin "only" 45% and not more like 4000% ???

We can only suppose it is because they are either COOKING THE BOOKS or they have MASSIVE expenses (or both). But since Gilead is operating legally within US and international law, and apart from a few tax dodges like operating out of Ireland, they cannot be cooking the books... Right?

But hang on, Gilead paid $7 billion to Pharmasset to get the patent for sofosbuvir, didn't they? Sure, that is a MASSIVE expense. Obviously, they have to make that back, and some, in order to make a decent profit? Right! But Gilead reported $18 billion Harvoni sales in 2014 in the USA alone plus $5 billion in europe alone. In 2015, it reported $21 billion (USA alone) and $7 billion for europe:

www.gilead.com/news/press-releases/2016/...15-financial-results

So just for a quick estimate, and ignoring 2016, in these two years we are looking at Gilead profit margin = (18+5+21+7-7-X))/(18+5+21+7), where X = all other expenses. So if you do the math to find X with profit margin = 45%, you get 44-X = 51*0.45, or X = $21 billion for "other expenses".

OK, this is probably not very fair to Gilead. Lets Say Gilead spend $1 billion on Clinical Trials and $1 billion on staff salaries during the period. These are fair expenses? So now we get 44-2-X = 51*0.5, or roughly X = 42-51*0.45 = $19 BILLION for "other expenses". In other words,

IN 2014 and 2015, GILEAD MUST HAVE SPENT SOMETHING IN THE REGION OF $19 BILLION USD TO CARRY OUT ITS BUSINESS OF SELLING SOFOSBUVIR IN THE USA AND EUROPE.

Just think about that for a minute...?

So where did all this money go? If we believe the published sales figures and profit margin, and because compared to such big numbers, the COST OF PRODUCTION IS ALMOST NEGLIGIBLE, this must mean that

IN 2014 and 2015 GILEAD PROBABLY SPENT IN THE REGION OF $19 BILLION IN LEGAL, LOBBYING MARKETING, and "OTHER" COSTS.

Well, I'm not an accountant and this is just simple math. Probably I am out by a few billion.

But unless my simple math is completely wrong, surely this means something is fundamentally wrong with the pharmaceutical business?

$92 x 3 = $276 per twelve week treatment
So this is the price right now for generics if I was to order from one of the legit pharmacies in India from fixhepc?
Last I checked about 6 weeks ago it was $900.00

Tommy wrote: $92 x 3 = $276 per twelve week treatment
So this is the price right now for generics if I was to order from one of the legit pharmacies in India from fixhepc?
Last I checked about 6 weeks ago it was $900.00

Err, no. That price is only available to people like the Indian state Haryana (Rohtak is its capital) in the news story, with a population of 28 million. That is why I pointed out that it was a large volume bulk price.

Gaj wrote:

Tommy wrote: $92 x 3 = $276 per twelve week treatment
So this is the price right now for generics if I was to order from one of the legit pharmacies in India from fixhepc?
Last I checked about 6 weeks ago it was $900.00

Err, no. That price is only available to people like the Indian state Haryana (Rohtak is its capital) in the news story, with a population of 28 million. That is why I pointed out that it was a large volume bulk price.

Thank you Gaj. I didn't read into it right. Silly me.

Hi Vororo,

I'm not sure how we would apply different policies for rich versus poor countries? Who gets to define which is which? And what is rich enough to be on a level playing field rather than the tiered group? Thus my comment that per capita GDP is probably the fairest means, each according to what they can pay. (oh crap, I sound like Marx )

The profit margins you quote are the reported profit margins of those businesses, and in many cases may not fully reflect the true profit margins. I'm not an accountant either but I've spent my fair share of time working with them to help the bottom line in large corporations. The fact that Gilead seem to have managed to circumvent any sense of social responsibility in their pricing doesn't give me a great deal of faith in their adhering to anything more than the minimum legal requirement with regard to their financial reporting. I do believe they will be doing everything in their power to maximise their expenses and minimise their income. No doubt they will be doing the same as (and probably more than) many large multinational corporations do such as deferred income, purchase of raw materials at high prices from affiliated companies, loans from subsidiary companies that require high interest (therefore deductible) payments rather than using cash to purchase new business opportunities, high executive salaries to reward their diligence, educational support for physicians, massive marketing and yes, probably a fair bit of lobbying. The list will be very extensive.

I suspect that what is fundamentally wrong with the pharmaceutical industry pervades others too. There have always been greedy people but these days too many seem to see greed as a virtue and something to be aspired to. Money and profit has become the sole driving force of industry rather than the means to an end in measuring how well society and community is supporting its members (gawd, I'm really channeling Karl now ). For many items like the iPhone I mentioned earlier that probably isn't so important, it is a luxury that all of us can live without if we really must.....gen Y excepted of course.

But medicines and health are too important with their need to a great extent outside of our control for them to be auctioned off for the highest price. I'm not fully certain how we achieve that. The ideal would be for governments and insurers to take a combined negotiating stand but as Mike points out I'm not sure there is the will to do that when they can just pass costs back to the long suffering public or their members. In the mean time we can continue down the path started in the HIV era and now carried on with the current HCV buyers clubs where we do have a community of voices who can supply publicity and pressure for fairer outcomes for all while sourcing generics for personal use.

Gaj, you hit the nail right on the head.

Greed is the most pervasive "sin" of mankind. I guess it has always been that way, but in recent times the "hounds of hell" have been released to gouge the population. Gilead are the worst offender, but look at Merck, and Bristol Meyers, not much better.

The whole argument of "value" is complete, evil bullshit. How ridiculous. If you are hanging from a ledge, and I am above you and can lend a hand, by this argument I should be able to expect $500,000 USD to help you get back onto land from the ledge, since the alternative is death. If that actually transpired, in the USA I would face 'manslaughter' which is about 10 years in prison if you died. Yet somehow, Gilead condemns many to death in the same way. I guess because they pay a lot of politicians off.

Hep C patients really do need to be treated as soon as possible. I blame the governments for allowing this to happen. Our politicians have gone over to the dark side.

It's the buyers clubs who will save the people who seek out treatment. Tragically, all the other patients are doomed to wait for treatment or perish.

I think that the existing patent law leads to this type of discussions where it is extremely hard to ascertain which is the right price for HCV drugs or other drugs. Innovation needs to be rewarded, I am perfectly fine with this. The question is: up to which extent?

The price war between the branded drug producers and the generic drug producers is full of strategies on how to forbid the entrance on the market of generic drugs. And this happens when the laws allows this and give the branded drug producers a much higher power than necessary.
Changing the law to reduce the power of branded drug producers will solve on one side the problem of the patients who can not access the medication and .... I would also believe that it will boost innovation.

What we are living these days is a kind of "bubble" in the pharmaceutical industry which, as every bubble, will burst in the end. The problem is that no one can predict when this will happen. However things cannot continue indefinitely, to have high prices and a massive number of untreated patients as long as the manufacturing process is in fact a cheap one.
If the drugs would have been made on Mars... yes, the high price would be justified...... ( perhaps Big Pharma is using alien technology )

RHF