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Saturday, March 24, 2012

India's cure for cancer

Just read a piece by Matthew Herper in Forbes, in which I can't quite tell if he is "for" or "against" India's patent court's decision that a generic can go ahead and produce a Bayer cancer drug, which would otherwise cost $69,000 for a year of treatment for a patient.  The generic's price comes to $176 per year.  This is why we need a better plan for distributing pharmaceuticals.  If you look at any economics textbook, you'll find that the supply/demand/price curve (I should look this up) for a monopoly fixes optimal production at a point that results in an undersupply.  I.e. in order to maximize monopoly profits, price is set at a place where some consumers who would like access to the good simply don't buy it because they can't afford it.  That's fine for widgets and consumer electronics, but is it really even ethical when we are talking about pharmaceuticals?  Wouldn't it be better for a government -- or ALL the governments of the world -- to simply step in and pay the drug company its expected return on the monopoly, and then put the patent straight into the public domain?  The drug company still gets its billions, but now the patient access problem is solved -- more people get the drug -- and lives are saved.  Obviously, the devil is in the details -- how does one determine the true "value" of such a patent?  Maybe one has to permit it to exist for a few years.  Maybe one has to take into account the possibility that it is invalid at the outset and that a generic will successfully challenge it.

One thing that truly confuses me about the article is the following statement:  "Even for mass-market drugs, it is increasingly the reality in the U.S. that the patient doesn’t pay. Insured patients can get $160 worth of branded Lipitor for $4, with maker Pfizer picking up the rest of the co-payment. Meanwhile, Pfizer is negotiating with health plans to convince them to buy its Lipitor over the $120-a-month generic version."  There's no support or explanation for this statement, so it's probably just sloppiness.  It seems to assume that Lipitor is somehow "worth" $160 a month, and that by offering it for $4, drug companies are losing $116 on every single prescription.  I can't imagine how or why that would be the case.   And one also wonders why the generic drug is $120 a month, when it is presumably also being sold for $4.

Note that he says it's "insured" patients who get the drug for $4, and that Pfizer picks up the copayment. This sounds too specific to actually be wrong, so I am left wondering exactly what sort or pricing scam is at work here.  Seems likely that the truth is that it costs less than $4 for Pfizer to make the stuff, so it "generously" lets pharmacies dispense it for $4 -- unless you are not insured, in which case Pfizer will be happy to charge you its $160 price.  Is it really the case that an uninsured patient has to pay $120 or $160 a month for Lipitor or its generic equivalent?  If so, that's pretty outrageous. 

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