Amazingly, this new $500,000 drug is the cheaper option

A new drug is to hit the US market imminently and there will be ructions for it costs $500,000 for a treatment. Don' expect to see NICE approving this on the NHS all that soon and do expect to see huge wailings and moanings about the immorality of the profit motive in saving lives.

At which point, two things one minor one major.

The minor being that this is actually cheaper than the current treatment for the same disease. It's for a form of leukemia,  the standard treatment for that if chemotherapy has failed is a bone marrow transplant which costs, in that US system at least, some $800,000. Still on this minor point about costs is the usual one about development costs. Depending upon who you believe a new drug costs $800 million to $2 billion to develop and that's without paying for the failures. It's expected that some 600 people a year will use this drug, at least in this manifestation of it. The patent will, roughly speaking, run for another decade or so.

Those just are the sums - and it's even worth noting that this isn't just some drug with minimal manufacturing costs either, it's specifically formulated, taking several weeks each time, for each patient.

The approval of Novartis AG’s breakthrough therapy for a deadly form of leukemia opened the door to a new class of treatments even as its $475,000 price tag reignited the debate on how to value potentially life-saving drugs.

And now to the major point.

Yet the almost half-million-dollar price tag on the Novartis CAR-T drug is a new benchmark, and more are likely to follow, with similar new therapies for blindness, blood disorders and other cancers. Spark Therapeutics Inc.’s gene therapy for a genetic disorder that causes childhood blindness is expected to get an agency decision by January.

There are two entirely different things going on in health care costs. As human knowledge advances there are more things we can do and cure. We also have more older people around, meaning more at that peak time of life for consuming health care. Both of those push up costs, significantly.

But we've also got this other thing going on. Something that's entirely analagous to automation itself. One way of looking at this drug/treatment is that it uses a variation of HIV to get the altered white blood cells to kill off the leukemia (no, do not take that as anything other than a very dodgy analogy) instead of the older method of killing all the marrow off and mechanically pumping new back in. We've in a sense, automated.

In the same way that an aspirin automates the previous treatment for a headache of a cool damp clothe bathing the brow in a cool dark room for some hours.

The total cost of health care, the change in it, is obviously the balance of these different effects. 

Which brings us to this oft repeated fact that the NHS has a higher inflation rate than the rest of the economy. Thus the NHS should be getting ever more money of course, even standing still as a percentage of GDP is to constrain it too much. Except, as above, we do have a process, that automation through innovation, which brings health care costs down. We also know how to encourage innovation, that happens in markets and doesn't in planned systems. Therefore.....well, we can see where the political problem is here, can't we?