Also don't forget to take into account the price insensitivity of some buyers.
If I had a pill that could save 1 million people I wouldn't price it at $100, since I'd only make $100m. If I price it at $1m per pill, only 100 people could afford it, so that also only makes me $100m. But if I price it at say, $100k, I can get about 300k people to pay for it, which nets me $30b.
This is all aside from how much the drug cost me to make.
This is a real scenario... it's called sovaldi, and it basically cures hepatitis c. Except it costs $80k for the full course. There are around 100 million people (globally) who have the disease.
- Usually drug prices are dropped / negotiated with foreign governments for developing countries
- Drug price often starts high but drops as government / FDA criticizes and once they milk health insurance companies to pay for it
It's not an ideal system at all, but just wanted to correct the notion that the prices start high and stay that way / poor people don't get access to it!
At $1,000/pill, it's not something you can just handle on your own out of pocket. It also doesn't cover even half of the HepC genotypes. However, for the genotypes it does cover, it works very, very well compared to the previous course of treatments.
I went through the treatment last year because I had great insurance and they covered the drug. This was something I thought about every single time I had a conversation about that drug. I'm cleared of HepC because of Sovaldi/ribavirin, but I can only imagine all of the people who will deal with HepC for far longer than they need to because of the ridiculous cost. Upon reading the Wiki article on Sofosbuvir (generic name for Sovaldi), it sounds like things are already moving in the right direction, but there's still a ways to go before the cost comes down.
If I had a pill that could save 1 million people I wouldn't price it at $100, since I'd only make $100m. If I price it at $1m per pill, only 100 people could afford it, so that also only makes me $100m. But if I price it at say, $100k, I can get about 300k people to pay for it, which nets me $30b.
This is all aside from how much the drug cost me to make.