> Then there's the fact that AbbVie and Merck are coming into the market soon with their own Hepatitis C drugs that also have 90% cure rates. It seems hard to believe that either of these companies will come in significantly below the price of Sovaldi, but that's what the insurance companies are hoping for.
Why? If you apply game theory, one of the three will try to defect and undercut the other two.
> Why? If you apply game theory, one of the three will try to defect and undercut the other two.
Because they're playing a repeating game. AbbVie and Merck are big pharma companies. They don't particularly want to get into a price war.
It would be different if a small biotech firm were coming in. They might not get a second shot at it for a long time, so they are much more likely to undercut on price.
Also, three is a low number. Defection is more likely when the number of players goes up.
Of course, they're not going to come in dollar-for-dollar identical to the pricing of Sovaldi and Harvoni. However, the insurance companies seem to be hoping for some really sharp drops in price, which are less likely.
Why? If you apply game theory, one of the three will try to defect and undercut the other two.