The conundrum of hepatitis C is well known. The virus kills more than 20,000 Americans each year, more, according to Centers for Disease Control and Prevention, than the other 60 infectious causes of death combined. A cure is in hand, but is out of reach for many because it costs tens of thousands of dollars per patient. The problem is most acute in state Medicaid programs and prisons, where 700,000 people need treatment but only 20,000 a year will get it. The price controls some have asked for would make treatment affordable, but would also be likely to chill innovation in pharmaceutical companies, the very innovation that benefits society by producing such remarkable drugs.
A recent consensus committee of the National Academies of Sciences, Engineering, and Medicine proposed a novel strategy to improve access to hepatitis C medicines. Their report recommends that the firms producing the hepatitis C treatments compete to license their patent to the federal government for use in neglected patients, such as Medicaid beneficiaries and prisoners. Such a deal would protect the innovator companies’ market share in the lucrative private markets, while allowing the government to save billions of taxpayer dollars and reach more poor patients.
How Would The Deal Work?
Every year roughly 20,000 Medicaid beneficiaries receive hepatitis C treatment. After the mandatory Medicaid discount, these medicines cost about $40,000 per patient. Thus, under the status quo over the next 12 years about 240,000 Medicaid patients will receive treatment, generating roughly $10 billion in revenues for manufacturers. Since these revenues are earned over a 12 year period their worth in today’s dollars is roughly $6.5 billion. Pharmaceutical firms should be indifferent between being paid $6.5 billion today rather than $10 billion over a 12-year period.