A short story starring Big Pharma tells the tale of how price divorced cost and married the mob instead.

It’s an old story and very widespread. It happens every day in every sector of our economy. It’s a marriage made in hell and the ceremony took place centuries ago, when the state sanctioned monopoly, giving them a license to kill.

“Pharma has lost its pricing power in many countries, as evidenced by reimbursement authorities’ willingness to delay or outright deny access to drugs whose costs are deemed unacceptable. Now, the availability of a costly drug in the U.S. that could be given to millions of people has sparked the strongest backlash against drug pricing the industry has yet faced – in the last major market where the government has not adopted any form of drug price controls, according to the U.S. Department of Commerce.

Last year, in “Facing Reality,” Back to Schoolargued biopharma companies can no longer assume the market will support premium pricing, even for drugs that deliver meaningful and measurable improvements over the standard of care.

This year, BioCentury’s 22nd Back to School essay goes on to argue that the last bastion of free pricing is crumbling, and biotech and pharma had better start experimenting with new pricing models based on value for money while they still have the chance.”

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“A new model would recognize that for payers, patients, and physicians, each outcome — a month of disease freedom, or avoidance of an adverse event, or maintenance of target blood pressure, HbA1c or cholesterol — has a value, no matter how they get there. These health benefits are what the stakeholders really want when they prescribe or buy a drug — not a quantity of pills or injections.

Back to School proposes that price be based on the patient- and payer-defined value of the outcomes a drug is expected to deliver. This would divorce pricing and reimbursement from the costs to develop and manufacture drugs, and better align stakeholder incentives.”
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What does that mean in plain English?

Like any other successful extortion racket, the “price” is ‘whatever the market will bear.’ That is, everyone in the market gets taken for all they are worth and everyone ‘on the inside’ wins.