Bill Gates Calls U.S. Drug Pricing System ‘Better Than Most’

Bill Gates: U.S. Drug Pricing System 'Better Than Most'
  • Says Gilead’s hepatitis-curing products’ costs are justified
  • Criticizes Valeant, Turing pricing policies as ‘extreme cases’

Billionaire Bill Gates, whose foundation seeks to spread modern medicine through the developing world and wipe out diseases of the poor such as malaria, said he supports the U.S. drug pricing system even as politicians have intensified their criticism of high costs.

“The current system is better than most other systems one can imagine,” Gates said in an interview on Bloomberg Television. “The drug companies are turning out miracles, and we need their R&D budgets to stay strong. They need to see the opportunity.”

Drugmakers have come under scrutiny for their pricing practices, with companies such as Valeant Pharmaceuticals International Inc. and Turing Pharmaceuticals AG lambasted by Congress for sharply raising the cost of older drugs. Investors have been urging biotech and pharma leaders to defend their industry by educating the public about the value of their products and the importance of rewarding innovation when most drug candidates fail in clinical trials. At the same time, drugmakers have tried to shift the blame to insurers.

Valeant and Turing are “extreme cases that I think have been properly labeled as inappropriate,” Gates said. In contrast, he said market forces were working properly in hepatitis C, invoking Gilead Sciences Inc.’s treatments Sovaldi and Harvoni, which have been criticized by insurers and politicians as too expensive at $1,000 a pill or more for 12 weeks of treatment, before discounts and rebates.

While Gilead is the market leader, it’s now facing competition from Merck & Co. and AbbVie Inc., forcing prices lower.

“Curing hepatitis C, this is a phenomenal thing, and now you have multiple drug companies competing in terms of the quality and the price of that offering,” he said.

For an in-depth look at drug pricing in the U.S., click here

For developing nations, tiered pricing is the answer, according to Gates. In such a system, drugs sold in low- and middle-income countries cost less than in developed nations. Gilead employs tiered pricing for Sovaldi and Harvoni, with 101 countries on its generics-approved list. In India, a generic pill can be bought for as little as $4.29.

“Tiered pricing is often the way that you can square the idea” of increasing access to drugs “and being able to fund new miracles; you really want both,” Gates said.

Nonprofits’ Role

Drugmakers continue to lack incentives to address diseases that mainly affect poor nations, and that’s where governments and nonprofits like the Bill & Melinda Gates Foundation have a crucial role, he said.

“Philanthropy and governments have to come in and say, ‘Malaria is a priority, despite the fact that people aren’t going to make much money,’” Gates said. “We go to the pharma companies and we say, ‘Hey, we’ll fund some of this.’ They donate some of it. We’ve gotten their attention, and that’s why we have actually a very strong malaria drug pipeline.”

Besides making grants, the Gates Foundation also employs various atypical financial tools, including equity investments and volume guarantees, to encourage drugmakers to pay attention to developing world diseases.

The foundation reported in May that it had received an unexpected boost to its endowment when a stake in a small biotechnology firm, Anacor Pharmaceuticals Inc., sold for $86.7 million -- about 17 times the fund’s original investment. While the foundation had invested in Anacor to encourage the company’s work in neglected diseases, Anacor shares took off after its toenail fungus drug was approved.

The money gained from the Anacor stake will be plowed back into the foundation, to be used for further initiatives, Gates said.

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