Researchers at RAND Corporation have given a clear and precise description of a new financing mechanism for medical breakthroughs. The proposal would address a problem recognized about a year and a half ago, when healthcare payers launched high-profile complaints about the price of Sovaldi®, a miracle drug that effectively cures a strain of Hepatitis C.
In a nutshell, the problem is that Sovaldi® costs up to $84,000 per course, administered over a short period of 12 to 24 weeks. However, its benefits are lifelong: Hepatitis C patients live for decades with diseased livers. Transplantation is a $300,000 procedure followed by expensive drugs to prevent rejection of the new liver. However, payers with annual budgets do not have adequate incentives to pay in one year for savings that accrue over decades.
Read the entire column at Forbes.