The Broken Math of Drug Pricing: How a $1,000-a-Day Hepatitis C Cure Exposed the Value Gap in U.S. Pharmaceuticals

For many Americans, the price of prescription drugs is an enigma. One medication costs a few dollars, while another costs more than a mortgage. Last year, Americans spent $915 billion on pharmaceuticals — more than the gross domestic product of Ireland — as the high-risk, high-cost business of drug discovery collides with what author Paul Markovich calls "the dubious math of drug pricing."

Markovich, president and CEO of Ascendiun, a nonprofit parent company of Blue Shield of California, argues that the same system motivating companies to pursue innovative therapies may also engender bad behavior, including setting prices at "maximum" levels, employing questionable tactics to stifle competition, or aggressively creating demand in ways that increase profit without necessarily improving health.

The Scale of the Pricing Problem

Pharmaceutical costs — particularly for brand-name prescription drugs — have been one of the largest contributors to higher healthcare costs for at least six years and now account for 20% to 30% of a typical health plan's costs. In 2024, brand-name drugs still under patent protection accounted for just one in 10 of the drugs prescribed to patients, yet represented 87.7% of the costs.

When the Food and Drug Administration approves a new drug, the discovering company typically receives a period of patent protection controlling when a competitor can enter with a generic or biosimilar version. This protection is intended to give the drugmaker time to generate a positive financial return on its research and development spending and to reward risk-taking. In theory, Markovich writes, this should work; in reality, it has produced historically high healthcare costs.

The $1,000-a-Day Pill

The drug Sovaldi查看药品详情 serves as a central example of the inherent conflict. More than 2.4 million people live with hepatitis C (搜索)搜索该疾病, a viral infection that primarily affects the liver and can ultimately destroy it. For years, doctors treated patients with severe, chronic hepatitis C using an expensive regimen requiring six to 12 months of treatment, with severe side effects and rare cures.

That changed in 2013, when Gilead Sciences查看公司主页 launched Sovaldi查看药品详情, a direct-acting antiviral drug that could cure most patients of hepatitis C (搜索)搜索该疾病 in three months with fewer side effects. The price tag was $84,000 for a daily pill over 12 weeks — or $1,000 per pill.

Journalist Steven Brill, in his 2015 book "America's Bitter Pill," noted that rather than setting a price such as $989 or $1,021 to suggest a calculation beyond "Let's charge whatever we want," the company chose a simple round number: $1,000.

The financial impact was immediate and severe. In 2014, Medicaid spent $1.3 billion to treat just 2.4% of hepatitis C (搜索)搜索该疾病 patients. The same year, Indiana alone paid about $40 million to treat 462 people with one of two hepatitis C drugs available at the time. Had doctors prescribed Sovaldi查看药品详情 to all 2.4 million people with chronic hepatitis C at launch, the cost would have exceeded $200 billion. Those potential costs led many state Medicaid programs and some health plans to restrict coverage to the sickest patients.

The Value Question

From Gilead's perspective, the rationale was defensible: the company took a risk, paying $11 billion for Pharmasset (搜索)搜索该词条 to acquire the drug before FDA approval. The alternative therapies on the market had similar prices but were far less effective and carried severe side effects. Pricing a superior, curative drug at a similar level to existing treatments seemed like a good deal.

However, a bipartisan Senate investigation reached a different conclusion, stating that Gilead set the price to maximize revenue even though it knew lower pricing would dramatically increase patient access.

The Institute for Clinical and Economic Review (搜索)搜索该词条 (ICER), a nonprofit that studies medication value and issues price recommendations, found Sovaldi查看药品详情 clinically superior to existing therapies but of "low value" to the healthcare system due to its high cost. ICER concluded that an appropriate price representing good value to the American public would be less than half what Gilead was charging — a lower price that still would have allowed Gilead to reap a strong financial return while expanding access.

A Proposal for Value-Based Pricing

Markovich argues that creating an effective monopoly by issuing a patent to the same company that sets the price has led to predictable results, with prices often set far above a drug's objectively measured value. He contends that pharmaceuticals will never become affordable if tying a drug's price to its value is determined solely by the companies creating the drugs, given the financial incentive to maximize price.

His proposed solution: Congress could pass a law requiring all new drugs with a potential price above 1% of the annual national pharmacy expenditure — about $900 million at current cost levels — to undergo an external, objective, qualified third-party review establishing a threshold price during the patent-protection period. The process could be open, transparent, and designed to build trust. Drug companies pricing consistently below the threshold could ensure patients have unfettered access, with no prior authorization, while those pricing above would jeopardize their patent protection.

"Figuring out the value a new drug brings to the world is not a perfect science," Markovich writes. "But creating an objective, fact-based way of measuring this and using it to establish appropriate drug pricing is our best chance to ensure we keep rewarding innovation while making healthcare accessible and affordable to everyone."

The Broader Affordability Crisis

The affordability challenge extends beyond any single drug. More than two-thirds of Americans reported taking a prescription drug daily last year, and 26% said they take four or more. The average price of prescription medications in the United States has risen by about 37% over the last decade, with many popular brand-name medications doubling in price over the past 15 years.

One study found that U.S. prescription drug prices are nearly three times higher than prices for the same medications in 32 comparable countries. A quarter of Americans recently reported difficulty paying for their medications, and about 19% said they had skipped or rationed doses because of cost. Medical expenses are now the leading cause of personal bankruptcy in the country, surpassing job loss.

Americans spent 12.7% more on pharmaceutical drugs last year than in 2024, with a significant share of that increase coming from popular GLP-1 weight-loss drugs such as Ozempic查看药品详情 and Wegovy查看药品详情. Roughly 12% of American adults currently take one of these drugs, a number expected to rise significantly in coming years.

Markovich's central tension remains unresolved: "We want to reward innovation, but we also need the price we pay for drugs to be tied to their value."