The Sovaldi course of treatment is about 12 weeks, with a very high cure rate (90%). Needless to say, everyone who has Hepatitis C (there are actually a few qualifiers here, but not too many -- you have to have one of the right genotypes) would like to take it and Get Better. The company which owns the rights to manufacture, market and sell Sovaldi, Gilead, is charging a lot of money ($84K is a number which comes up frequently) for the course of treatment. However, this is not necessarily more money than the previous treatments (which involved injections and interferon), and may be less -- plus way less awful and way more successful. Further, not having to deal with the chronic costs of hep C is a huge savings: hep C tends to lead to job loss, then caregiver costs, plus cancer treatment and transplant costs. It's pretty horrible. $84K seems extremely cheap compared to that.
Hepatitis C suffers from an association with marginalized groups of people engaging in activities that many people disapprove of (IV drug use, unsterile tattos), altho many people got hepatitis C from blood transfusions before the blood supply was more consistently monitored (or in parts of the world where it is still compromised). It has probably received less attention from researchers than it might have received otherwise.
There is currently a massive debate going on about whether Gilead should/will (be allowed to) charge so much for Sovaldi. From an investor perspective, there are many bears on Gilead, because it is expected that Gilead will be unable to sustain this high price level. Several other, even more effective, treatments for Hepatitis C are expected to come onto the market in the near term, which will result in competition. Many countries other than the United States are much more aggressive about regulating drug pricing. Gilead is not run by a bunch of idiots; they know they'll never sell this thing in markets like Indonesia at this price point and they are already working with generics manufacturers in India to put out a version of the drug for markets in the developing world which costs a few thousand dollars, definitely cheaper than the current standard of care for Hepatitis C there currently.
Here is an example of critical opinion of the pricing of Sovaldi, which includes a description of its development history.
Alas, it is now behind a paywall. It is also an opinion piece, so, grain of salt here. But I intend to use this development history as presented by a critic of Gilead pricing to show how the argumentation is a little disturbing (that is, take the argument against and turn it around as pro).
According to this opinion piece, Raymond Schinazi at Emory University, received a few million dollars in grant money from the US (NIAID) to research HIV and HCV and other things. He developed a drug candidate and then took that candidate and formed Pharmasset. That drug candidate did not go anywhere. Other scientists at Pharmasset worked in related areas came up with other drug candidates. In the course of going through another million dollars (or so) from the US government. It also managed to go through close to a third of a billion dollars from other sources.
"In its early years, it received $1 million in government grants. Its total losses through 2011 came to $314.8 million."
It did, eventually, come up with what would become Sovaldi, and when it became clear it really had something, Gilead bought Pharmasset. For $11 billion dollars.
"Gilead spent tens of millions of dollars to complete Sovaldi's clinical trials. Yet last August, the NIAID issued a news release touting its role in running one of those trials when positive results were reported in JAMA. The government, it turns out, had kept its hand in the development of Sovaldi.
While the risk of failure was always there, the returns on success for stockholders have been nothing short of spectacular. Gilead will recoup its total purchase price in less than three years. If Gilead had paid $5.5 billion, would the drug's price be half as much?
Some argue that the cost of new drugs must cover all the failed R&D efforts within pharmaceutical and biotechnology firms. But if that's true, where's the risk?
It's not fair to ask public and private insurers and patients through their co-pays to be the only parties at risk in the nation's search for miracle breakthroughs. The long history of taxpayer-financed involvement in the development of Sovaldi only adds insult to the financial injury."
Goozner, in essence, argues that the $10 or so million dollars put into this entire process, start to finish, including funding a bunch of drugs that went absolutely nowhere, was unfairly compensated for by the creation of Sovaldi, overwhelmingly funded by private money. It's not completely clear what he wants to happen next, but it sounds like he doesn't really what Gilead to make quite that much money. What sort of return should the US get for its $10 million or so? Plenty of owners of Gilead over the years have lost money, if they ultimately sold it lower than they bought it.
Anyone who invests in ventures like Pharmasset is looking for 10X or 20X. They know that some of these things will fail. All of them might fail. That, Goozner, is where the risk is. After Solvadi is out there and working, and highly desired by everyone suffering from Hepatitis C, it is very easy to think, hey, just regulate the price of that way, way, down, because, after all, paying off that billions of investment in a few years is totes unreasonable.
Well, fine, but what timeframe is Gilead allowed to contemplate for recovering its investment and, for that matter, how much money are they allowed to profit? With competitors coming on the market, if they don't get paid in a few years, they might never recover their purchase price of Pharmasset. True, Pharmasset may produce additional successful treatments -- but if we regulate Sovaldi down to minimal profit, who is going to want to fund more of that? Eventually, we'll be down to the government being the only people interested in participating, and it's clear from this version of the story that the government wasn't actually willing to pony up the hundreds of millions of dollars required to get it done.
It's very easy to argue that once government money is involved, that the other participants in the development process didn't really do any "work". That they were just handed the results of government funded research and allowed to do whatever they wanted with it. The assumption is that startups like Pharmasset don't actually do any real research at all -- all research occurs in a university context and is therefore publicly funded, none of it is funded by private investment looking for big returns in the devoutly desired event called success. And I've heard that argument more than once. But you could make the same argument about integrated circuits. The original ICs were developed with government funding. Everything done since then has been publicly funded by university VLSI research groups, amirite? I mean, there's no way that Intel, or AMD, or, hell, even IBM, they don't do _real_ research there, not like at universities funded by the government. The obvious conclusion is that the feds ought to be able to decide what Apple or Samsung can charge for a smartphone.
That is not somewhere I want to go.
I see the looming fiscal crisis that is the direct, predictable result of very expensive research processes succeeding in finding cures for diseases that were previously incurable. I get it. I don't know how we are going to solve it. Please let's not solve it by destroying the motivation for the beautiful public-private partnerships that resulted in these cures. Because I, for one, want a lot more of them.