Good stuff. On the cost offset argument, I definitely hear that a lot. Every healthcare company makes the case that 'if everyone used our product, the total cost of care would be lower'. Sometimes it is true, but mostly it is self-serving. For example, if everyone took a diagnostic test to screen for xyz, and the cost to treat xyz if caught early is $1,000 vs. $20,000 if it isn't caught early...well you could argue that the test costing $18,000 saves money. Of course the catch is if 1 in every 1,000 people has xyz and they all take the test, you end up spending 1,000 x $18,000 = $18,000,000 to catch one case of xyz and save money on that one patient.
For Gilead and their Hepatitis C drug that has garnered a ton of negative attention, the reality is that it is a new and much better standard of care, it is less expensive than alternative treatments, it is highly efficacious (over 95%), and the costs highlighted aren't even the costs. Initially it was $84,000 list price for a 12 week treatment cycle...$1,000 per day...but the price negotiated with insurers is actually much less than that and now they can treat earlier/less severe cases for much shorter treatment cycles (6-8 weeks). In that case, the drug is actually reasonable value.
Then you get to Jublia, which cures ~15% of toe-nail fungus cases...not a dissimilar percentage vs. Vicks Vapo-Rub. Yet Valeant charges ~$8,000 for a treatment cycle. Who in their right minds would pay that? Well..no one. But, due to their owned distributor/specialty pharmacy Philidor, they were able to push prescriptions out, and let Philidor work the system to try and get reimbursement wherever they could. This is not a value-add drug, and the natural market for it (i.e. what informed consumers would pay for the drug) is very small at $8,000, or would require a much lower cost if they want to sell any. I suspect that they will be forced to drop the price very considerably to generate business. Jublia is typical of a Valeant product/strategy, and I think as the air comes out of this over-time, they just won't be able to earn enough to meet their debt obligations (unless, as a poster above speculates, Ackman steps in...although with the amount he has already lost on this, I start to wonder how much deeper his pockets are).
