Monopoly and public health in the medication market: The case of sofosbuvir

Abstract

Pharmaceutical industries explain high price of medications with high cost of R&D. This paper investigates whether this statement is justified in the case of sofosbuvir, which was commercialized at a particularly high price. With sofosbuvir, Gilead Sciences Inc. had for several months a monopoly on the interferon-free treatment of HCV infected people. Information, usually not publicly disclosed, was derived from a report on a US Senate enquiry on the price of a course of therapy of sofosbuvir. Other sources were the Gilead website and other webpages. Revenue data were available in the Senate Report and in the Gilead financial report to SEC. R&D cost was derived again from the Senate Report, from the annual reports in the Gilead website and from literature. Gilead appeared to be rather efficient in the R&D process, showing cost and failure rate much better than those reported in the literature. Revenue was orders of magnitude larger than production and R&D costs. The premium granted to Gilead by monopoly is estimated. Pressure from patients on payor and the role of the monopoly in generating such a large amount of revenue are discussed. An ideal business plan on sofosbuvir commercialization is then designed, based on the number of patients in the USA and EU, to show the hypothetic burden on health organizations without the rent granted by the monopoly.