ARI SHAPIRO, HOST:
Drugs to treat hemophilia are among the most expensive on the market. They can cost more than a million dollars a year for a single patient. People with hemophilia can bleed to death if they don't get their medicine. So why do the drugs cost so much? Jenny Gold has this story from Northern California.
JENNY GOLD: Landon Morris was diagnosed with hemophilia right after he was born. His mother, Jessica Morris, was devastated.
JESSICA MORRIS: It was like having your dreams - all the dreams you imagined for your child - just kind of disappear.
GOLD: Landon, who's 6 now, is the third of Morris' four boys. He's the only one with hemophilia, a gene mutation that prevents blood from clotting properly. Jessica Morris knew how painful hemophilia could be. Her grandfather had it, and she had decided to name Landon after him even before he was diagnosed. Life for Grandpa Landon wasn't easy.
J. MORRIS: It was almost like he was bubble-wrapped. He was coddled because his mom didn't want him to get hurt.
GOLD: Hemophilia is usually passed from mother to son. Jessica worried little Landon was destined to relive her grandfather's struggles. Life didn't turn out quite like she'd expected.
LANDON MORRIS: Ah, whee (ph).
J. MORRIS: He's wild. He's probably sometimes the roughest of them all.
GOLD: At a park near their house in Yuba City, Landon and his brothers Luke, Logan and Levi attack the climbing structure.
J. MORRIS: Landon, don't do that, please - Landon James.
He leads a totally normal life. He plays T-ball. He'll start soccer in the fall, runs and jumps and wrestles with his brothers.
GOLD: Without Landon's medication - the kind that wasn't available to his grandfather - this kind of rough and tumble play could be deadly. Three times a week, Jessica and her husband, Shane, inject a clotting protein into Landon's vein. It's called factor VIII.
J. MORRIS: So then you inject the saline solution, and you mix it around.
GOLD: The hardest part is getting Landon to sit still.
J. MORRIS: Landon, please stop.
GOLD: For the Morrises, this drug is a miracle. But for the health care system, it's a huge expense. On average, patients with severe hemophilia cost more than $270,000 a year, so it's no surprise perhaps that lots of drug companies want in. There are more than two dozen factor products on the U.S. market for just 20,000 hemophilia patients. Landon's father, Shane Morris, says that makes his family a hot commodity.
SHANE MORRIS: The drug companies almost in a way really want to cater to you to get you on their product.
GOLD: And the companies aren't shy about reaching out.
S. MORRIS: Basically, you know, the companies put on these dinners or these gatherings - right? - to kind of promote their product.
J. MORRIS: We just went to a dinner almost two weeks ago for a new drug.
S. MORRIS: It's convincing in some respects. But, you know, really, when it gets down to the bottom line, they all do the same thing.
GOLD: Companies embed themselves in the tightknit hemophilia community. They employ patients and their family members. They hold potlucks and holiday parties. But one thing they don't seem to compete on is price. All of the drug prices from all of the companies remain stubbornly high. I wanted to understand why, so I called Bayer Pharmaceuticals, which makes the drug that Landon takes. Bayer's Steve Garger gave me a tour of their factory in Berkeley, Calif.
STEVE GARGER: So this is the first part of the factor VIII manufacturing process.
GOLD: He points out the steel tanks of baby hamster kidney cells, engineered to produce human clotting protein.
GARGER: A single vial of cell bank is thawed, and the cells are expanded.
GOLD: This is very delicate stuff. We had to put on three layers of sterile suits just to come in. It's expensive to make and to develop and market, says Kevin O'Leary, who's in charge of Bayer's pricing and contracting. So if you add up all those expenses plus some extra for profit, is that why these drugs cost so much? O'Leary says no.
KEVIN O'LEARY: You can't add up the cold storage plus this plus that plus that and come up with a price for the product because that's not the way we price it.
GOLD: So how does Bayer price it? O'Leary says it's based on the value they think their innovation brings to the market, especially compared to other drugs already out there. But with so many similar products, shouldn't costs go down - nope. O'Leary says that's because insurance companies have so far been willing to cover all the options regardless of cost.
O'LEARY: So lowering the price is not something that would result in greater market share.
GOLD: In other words, since insurers pay for the drugs no matter the price, companies like Bayer really have no incentive to lower them. Unlike what you may have learned in Economics 101, competition doesn't always lower prices.
JERRY AVORN: The price of any drug in the U.S. is whatever the market will bear, as seen by the manufacturer.
GOLD: That's Jerry Avorn, a professor at Harvard Medical School who studies costs. He says for the most part, insurers haven't been willing to push back on the cost of hemophilia drugs.
AVORN: The insurers don't want to end up on the front page of the newspaper saying, little Timmy bled to death because his drug wasn't covered.
GOLD: And since hemophilia is so rare, no one insurance company has enough patients who take the drugs to risk the fallout. Here's Avorn again.
AVORN: It's a magical formula - you know, a lifesaving drug, child at risk of bleeding to death. You know, it kind of casts anybody who looks at costs into the role of some evil Scrooge-like person. But we got to get over that.
GOLD: Avorn says these questions should matter to all of us since insurers pass those costs along in the form of higher premiums for everyone.
J. MORRIS: You got to go play.
GOLD: Back in Yuba City, Jessica Morris watches as Landon plays in the park with his brothers.
J. MORRIS: How much would you be willing to pay to have your child lead a normal life?
GOLD: She knows they're lucky to have insurance that covers almost all of Landon's $120,000 in care each year, but she sometimes wonders what would happen if they lost their coverage.
J. MORRIS: I don't think that there's anything I wouldn't pay so that he could run around the park and ride his bikes and tackle his brothers. I don't think that there's anything we wouldn't pay or sacrifice for him.
GOLD: It's a problem she prays they'll never have to face. I'm Jenny Gold in Yuba City, Calif.
SHAPIRO: And Jenny Gold is with Kaiser Health News.