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The Pharma Drug That's Bankrupting America: $84,000 for a Drug that Costs Less Than $300 to Produce

Illustration by Mike Licht.
By Jeffrey Sachs
America is the land of breakthrough science -- and health care scams. The two seem to go hand in hand in the case of the new hepatitis C virus (HCV) cure named sofosbuvir, sold under the brand name Sovaldi by the drug company Gilead Sciences. There is no question that Solvadi is a godsend -- a lifesaver for millions of Americans, and perhaps someday for hundreds of millions of people around the world infected by Hepatitis C. Yet Sovaldi is also the poster child of a U.S. health care system that is being bankrupted by greed, lobbying and indefensible policies on drug pricing.

The basic facts are these. In December 2013, the Food and Drug Administration approved Sovaldi, and another formulation, Harvoni, which is sofosbuvir used in combination with another drug. Gilead set the price for a 12-week treatment course of Sovaldi at $84,000, amounting to $1,000 per pill. Gilead set the price of Harvoni at $94,000.

According to researchers at Liverpool University, the actual production costs of Sovaldi for the 12-week course is in the range $68-$136. Indeed, generic sofosbuvir is currently being marketed in India at $300 per treatment course, after India refused to grant Gilead a patent for the Indian market. In other words, the U.S. price-cost markup is roughly 1,000-to-1!

How can Gilead Sciences charge $84,000 for a drug that costs less than $300 to produce? First, Gilead's patent on sofosbuvir runs until 2028, giving it a monopoly in the U.S. market. Second, a range of Federal and state government programs will cover the $84,000 for a sizeable number of patients. For those not covered by government programs, some will be covered by private insurance, a few will pay out of pocket, and still others will likely die because they lack coverage and can't afford the treatment.

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