volinbham
VN GURU
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I'd say whatever it takes to recoup their development costs in the first 3 years on the market.
The most expensive drug for medicare is Eliquis at over $7 Billion a year. From what I've read, it cost $3 Billion to develop. Do you think they should recover more than double in one year than it cost to develop? I don't.
ETA: And this is just for medicare recipients, not the rest of the country and world.
A couple answers:
1) if a company is just allowed to recoup their investment; particularly such large investments then they are not incentivized to develop. Might as well take that $3 billion and put it in some interest bearing account.
2) there are ongoing costs (production, distribution, marketing, compliance and other regulatory) so development costs are just the investment to get to a revenue earning product (same as for any other company).
3) the payer is typically insurers and the Value Proposition for them is "do the costs of including this drug in our formulary reduce our total costs per patient with 'x' condition)". It is cost of this vs cost of other options
4) various regulations result in different payers (eg. Medicare) paying different amounts - not sure what the company should do about that.
5) the (likely) patent protection probably has an effective life of about 8 years (20 years total but 12 years used in pre-revenue development). After that time generics are possible and the price will drop IF companies decide to enter the market. If companies don't enter the market it probably tells you this isn't a lucrative as you make it sound.
So I don't see any way or entity that should be setting "fair" price caps. The market is already highly distorted by a myriad of complex and often conflicting regulations. I have no way of even guessing what the price "should" be.