Driving costs through roof

What is wrong with this picture?

A new drug comes on the market to treat hepatitis C. The price for treatment is $1,000 per pill. A full course of treatment for the average patient is 84 pills.

The company that markets the drug just reported its most recent quarter’s results. The company had profits of $3.66 billion – with a net margin of 56 percent.

Sound like a fantasy? It’s not. It’s more like a nightmare.

The name of the new pill is Sovaldi. The name of the company is Gilead Sciences Inc.

An Associated Press story about Sovaldi is a textbook study in why health care costs are soaring into the stratosphere. The company that originally developed Sovaldi estimated in 2011 that the average treatment would cost $36,000 per patient. Then the company was purchased by Gilead.

Two years later, the drug is on the market and the cost per treatment has more than doubled the estimate. And the company’s profit margin is 56 percent.

The story quoted a vice president of the drug company as saying recently, “To suggest that a cure for a disease like hepatitis C should be priced at $36,000 . . . would put a huge disincentive in cures for our industry.”

A mere 25 percent profit margin would be a disincentive? $36,000 is too much of a bargain to offer the treatment to a patient with a potentially lethal liver disease?

Two U.S. senators – Democrat Ron Wyden and Republican Charles Grassley – have asked Gilead to show how they came up with the pricing of Sovaldi. In the meantime, though, demand for Sovaldi is soaring.

It apparently is a very promising drug:

Promising a very real cure for hepatitis C.

Promising a very real threat to everyone’s insurance premiums.

Promising a very real threat to Medicare and Medicaid.

* Editorials reflect the opinion of the publisher.