It's no surprise that American drug companies routinely mark up prices of medications way above the real cost, but the price of a new life-saving medication is dizzying.
The pharmaceutical company Gilead Sciences sells sofosbuvir, marketed as Sovaldi, as a new cure for the hepatitis C virus (HCV). The results have reportedly lived up to the clinical testing.
According to The Huffington Post, the FDA gave its approval for sofosbuvir in December 2013. Gilead Sciences sells a 12-week treatment of the medication for $84,000, which comes out to $1,000 per pill.
However, researchers at Liverpool University wrote in the Oxford Journals that Gilead Sciences' cost to produce a 12-week treatment of sofosbuvir is actually $68-$136 and added, "Within the next 15 years, large-scale manufacture of 2 or 3 drug combinations of HCV DAAs is feasible, with minimum target prices of $100–$250 per 12-week treatment course. These low prices could make widespread access to HCV treatment in low- and middle-income countries a realistic goal."
This theory appears to be correct as Gilead Sciences sells the same 12-week treatment in India for $300 because that country refused to allow Gilead Sciences to patent the drug and hold a monopoly, as it does in the U.S.
Back in the U.S., many federal and state health insurance programs will pay the $84,000 and so will some private insurance companies, but many Americans will die if they have to pay cash, unless they were to travel to India.
Gilead Sciences has the U.S. patent on sofosbuvir until 2028, which guarantees enormous profits for 13 more years.
While drug companies claim that they have to make these profits to cover their research and development, the U.S. government originally funded (via grants) the early research and development of sofosbuvir by Prof. Raymond Schinazi at Emory University.
Prof. Schinazi later set up Pharmasset Inc. to develop sofosbuvir and get patents for the drug. Pharmasset raised about $45 million via IPO in 2007 when it became a publicly traded company. Pharmasset Inc. was sold to Gilead Sciences in 2012 for $11.2 billion and Prof. Schinazi reportedly earned $440 million.
In total, The Huffington Post reports that an estimated $300 million of non-government money was spent for the actual research and development for the drug.
According to The New York Times, Gilead Sciences made $10.3 billion on Sovaldi in 2014, making it one of the bestselling drugs in the world.