By Rachel Sachs
The internet (not just the health policy part of the internet!) is fascinated by today’s New York Times story about dramatic recent increases in the costs of many decades-old drugs. The story focuses on the case of Daraprim, the standard of care for treating the parasitic infection toxoplasmosis. Daraprim was recently acquired by a start-up, which then raised the drug’s price from $13.50 a pill to $750 a pill. Daraprim has been around for decades, and as the story notes, it’s just one of many recent examples of dramatic price increases for generic drugs, often after their acquisition by other companies (as in this case).
The article raises an enormous number of issues of interest to intellectual property and health policy scholars, both explicitly and implicitly, and other commentators have begun to canvass them. But I want to spend the rest of this blog post unpacking a single point made in the article, because it actually contains an enormous amount of complexity. As the author notes, “[the company’s] price increase could bring sales to tens or even hundreds of millions of dollars a year if use remains constant. Medicaid and certain hospitals will be able to get the drug inexpensively under federal rules for discounts and rebates. But private insurers, Medicare and hospitalized patients would have to pay an amount closer to the list price.”
The author is right that there’s one sense in which Medicaid and entities eligible for the 340B program (I assume this is what the author is referring to when he says “certain hospitals”) will be able to obtain this drug “inexpensively” – but there’s another sense in which they won’t be able to.