Drugs are Cheap: Why Do We Let Governments Make Them Expensive?

Dean Baker at the Center for Economic and Policy Research:

Art-drugs-generic-620x349I am not crazy for saying that drugs are cheap. They are in fact in almost all cases cheap to manufacture.

To take one example that has frequently been in the news in the United States, the Hepatitis C drug Sovaldi has a list price of $84,000 for a three-month course of treatment. By all accounts, the drug is genuine breakthrough in the treatment of the Hepatitis C, in most cases curing a debilitating and sometimes fatal disease. There has been an extensive public debate as to whether insurers or government health care programs should be forced to pay for this expensive drug. The issue is complicated further by the fact that many people suffering from Hepatitis C might have contracted it through intravenous drug use.

The United States is estimated to have 3 million people suffering from Hepatitis C. This implies a bill of well over one hundred billion dollar if everyone were to be treated, even if its manufacturer, Gilead Sciences, provided substantial discounts.

But it doesn’t cost $84,000 or anything close to that figure to manufacture Sovaldi. In fact, in India a high quality generic version of the drug is available for $200 for a three month course of treatment, less than 0.3 percent of the list price in the United States.1 We wouldn’t need a major debate to decide whether we would spend $200 for a drug that would hugely improve a patient’s health and would possibly save their life. The reason we have this debate is that the drug has a list price that is more than 400 times higher.

More here.