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Extremely High Cost Drugs

July 29th, 2017
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Let's say a company discovers a new drug that's far more effective than the current standard of care. [1] They get it through clinical trials, it still looks amazing, then they start selling it. But they set the price incredibly high.

My understanding is that insurance companies in the US are not allowed to refuse to cover a drug on the basis of cost, and they're not allowed to have limits on what they'll pay for someone's care. So what happens? Why aren't new drugs much much more expensive than they currently are?

Update 2017-08-01: From the comments it sounds like it's coinsurance (percentage co-pays) on high cost drugs that keeps this in check.


[1] If it's only a little bit better the insurance company could argue "sure it looks good in your N=500 tests, but we don't think this effect will hold up" or something. But if it's plainly much better then they wouldn't be successful with this I think?

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