Sicko Profits

Michael Moore's most recent movie Sicko highlights the many absurdities that befall a society whose healthcare system is based upon private profit. While Moore pays close attention to the insurance industry's shady practices, little consideration is given to the burgeoning field of biomedicine and how some of its key players are rewriting the rules in ways that might even make today's insurance executives blush.

Those of you who closely follow Biopolitical Times know that I am particularly troubled by Genentech's pricing of its cancer drug Avastin (click here and here). Genentech continues to base Avastin's cost to consumers on what they perceive to be its fair market value rather than using traditional justifications based upon recouping research and development costs. This is also a dubious measure, but it at least forces companies to try to explain themselves.

Genentech, however, doesn't want to be bothered. Instead, it's trying to widgetize healthcare by basing the prices of life-extending drugs as if they are any other market commodity - letting supply and demand rule. This has led some patients' co-payments to exceed $100,000 per year.

This strategy is paying off to shareholders' glee. The Wall Street Journal recently reported that Genentech's 41% increase in second quarter profits was led in good part by a 33% increase in Avastin's domestic sales, which topped off at $564 million. With this type of quarterly report, such pricing structures in medicine are sure to catch on. Which suggests that insurance isn't the only healthcare sector needing greater scrutiny.