Wednesday, February 15, 2006

the causal effect of economics

Today in the NYT:
"Even some patients with insurance are thinking hard before agreeing to treatment, doctors say, because out-of-pocket co-payments for the drug could easily run $10,000 to $20,000 a year.

Until now, drug makers have typically defended high prices by noting the cost of developing new medicines. But executives at Genentech and its majority owner, Roche, are now using a separate argument — citing the inherent value of life-sustaining therapies.

If society wants the benefits, they say, it must be ready to spend more for treatments like Avastin and another of the company's cancer drugs, Herceptin, which sells for $40,000 a year.

'As we look at Avastin and Herceptin pricing, right now the health economics hold up, and therefore I don't see any reason to be touching them,' said William M. Burns, the chief executive of Roche's pharmaceutical division and a member of Genentech's board. 'The pressure on society to use strong and good products is there.'"


TDEC said...

God that's depressing. And I am moving from free/heavily subsidised healthcare to American healthcare.

Rhymes With Scrabble said...

This is the pressure to not die? Which has always worked on the poor so well in the past.

jnsys said...

Wow. I guess I can just plan on dying, because there is no way I could afford their treatments. Who could? Wouldn't it serve their interests better to make it cheaper, so more people could use it, prolonging their life and the amount of time they buy the drugs? I mean, they need to think in terms of bulk, as most normal businesses will do.

jeremy said...

If you can hold out until you are 65, you can get almost 95% of the tab for this picked up by your Medicare Prescription Drug Coverage. Although I don't know the details of how this drug works with specific formularies.

Tom Bozzo said...

I'd have bolded the "defended high prices... inherent value of life-sustaining therapies" part, myself. The prospect of transferring that much surplus to Big Pharma during blockbuster drugs' monopoly periods makes (more) nationalization of pharmaceutical research look less radical.

Meanwhile, it'll be interesting to see to what extent health plans actually buy into the pricing model to the forecasted extent. One can imagine an equilibrium with high price and nobody buying the stuff.

Winston said...

'The pressure on society to use strong and good products is there.'

Translation: As long as there are enough suckers out there with enough cash to pay for this stuff, why would we cheat our stockholders by dropping the price to a reasonable level.

Isaac said...

Sounds like a pretty odd game of chicken. Who will flinch first? Health care buyers who will categorically refuse to pay for such drugs, or drug companies who will give in to public pressure?