Cancer Journal #9 Dec 31

        I’m drawn to health care economics like a moth to a candle flame. The pull this time is the invoice I got along with delivery of my oral medication. The stuff I take as i fight this thing with fists wrapped in tape. A 30 day supply, 120 pills, has an invoice price of $11,791.48. Huh. That would feed a lot of children in Bangladesh. 

         Now I’m thankful to have them. I should not quibble on price, especially since the co-pay is only $200. Surely a lot of sophisticated biochemistry and dedicated effort from highly capable people went into developing the drug. And then the FDA approval process! Like poor Sisyphus pushing that rock. 

         The costs for all this would all have been fixed costs. Unless the pills contain some rare earth element or something, the extra cost of each additional 120 pills is surely trivial. So, how do you set a price for them? A reasonable way would be to project the number of pills that will be sold and divide that into the calculated cost of developing the drug, promotional costs etc plus a reasonable profit. Let’s say that comes to $10,000 a bottle. 

         But what if Canada says, “We’ll buy the product but only if we pay $2000 per bottle.” If Canada were to buy 50,000 bottle, it would be hard to turn down the extra $100,000,000. Now the actual process is surely much different and more complicated than this but this should get the idea across. 

         If only there were variable costs, extra actual expense for each additional bottle of say $3000, the pharmaceutical would say, “Sorry Canada, no can do.” With the costs virtually all fixed, not only is it, “can do”, it’s “do do” for whatever Canada negotiates which is surely much less than my invoice price. The same with the inside my network price. Perhaps I’m cynical but I set the over/under, as the gamblers say, at $1000. Wouldn’t feed quite so many Bangladesh children.

         I do not intend to cast anyone here as a villain. It is simply the inevitable result of recovering costs when nearly all those costs are fixed. For the poor out of network, out of pocket customer, paying the invoice price, it is brutal. I wouldn’t be quite so philosophical if that were me. I would certainly seek out some cost relief arrangements which I think they have. 

         I’m tempted to say, “Hey, I have an idea! What about Medicare for All?” Well maybe. I worked for government long enough to know that perverse incentives abound and initiative and innovation wither when a profit motive is removed. Retaining profit and rationalizing price in an equitable way at the same time maybe can be done but I don’t know how.