Game Changer

CHAPTER 22Access: How Pricing Can Eradicate Diseases

With contributions from David Matthews, Suchita Shah, and Shashanka Muppaneni

Pharmaceutical innovations – particularly those that cure chronic or life‐threatening diseases – create enormous value for society by preventing deaths, improving lives, and lowering health care costs. They fit very well to the Value Game, because a cure is much better than any chronic treatment, especially one with side effects. This is the case for the direct‐acting antivirals (DAAs) that cure hepatitis C (HCV), and would apply to other medicines that hold great promise to cure other diseases, such as certain types of cancer.

But the pharmaceutical industry's predominant economic model – charging per treatment at the time of care – can limit society's ability to reap the full benefits of a cure. The problem: a mismatch in the timing of payment versus the timing of benefits. The prevailing model front‐loads the payment to pharmaceutical companies while the treatment's value to society accrues over time, sometimes decades.

The advent of cures creates a true pricing dilemma for pharmaceutical companies and for the insurance companies and national health care systems that pay for medicines. If drugs were priced today to reflect all the value that accrues over time, the resulting (high) costs would strain payers, prompting some of them to limit patient ...