In Please give us all your money – Bad Science, Ben Goldacre discusses the situation with patents and the world drug market. The first example noted is Tenofovir, which he says costs $5,700 per patient per year in developed countries and $800 per patient per year in the rest of the world. The reason for the price difference is Indian pharmaceutical companies, which manufacture generic versions of many drugs, apparently within the bounds of Indian law, but to the dismay of the patent-holders.
The math on this is puzzling. Goldacre says that “75% of the 4m people in the world taking medication for Aids are using generic copies.” I don’t know what percentage of those four million are taking Tenofovir or its generic equivalents, but to make the math simpler, let’s say it’s all of them. That means that one million in the developed world are taking Tenofovir at $5700 per year, grossing $5.7 billion per year for Gilead, the patent-holder, and three million in the rest of the world are taking the generic equivalent at $800 per year, grossing $2.4 billion for various Indian companies.
If Gilead lowered their price to $800 per year across the board from the beginning, they could have four million people taking their original version of Tenofovir, grossing them $3.2 billion per year. I’d take $3.2 billion with no competitive headaches and a ton of worldwide goodwill over $5.7 billion any day.
Of course, perhaps if Gilead started at $800, competitors would rush in at $600, or $400. Obviously there’s a cost to manufacturing the drug and I have no idea what it is. Let’s say it’s $500 for a year’s supply. Then the math gets trickier. As things are now, Gilead is grossing $5.7 billion against a manufacturing cost of just $500 million — $5.2 billion of sweet sweet profit. If they take the $800 route as I’m suggesting, they gross $3.2 billion with manufacturing costs of $2 billion, so they only make $1.2 billion profit. I’d still say that’s a bargain for not looking like heartless jerks.
Of course, unfortunately, it’s almost impossible not to look like a heartless jerk when you’re trying to make a profit saving lives. It’s a tough situation for Gilead, and probably there are no easy answers, including mine.