The National Institute for Health and Care Excellence (NICE) has provisionally approved sofosbuvir (brand name Sovaldi) for the treatment of hepatitis C, a decision that has surprised some commentators given its high price. The drug’s price in the United States of $84k for a 12 week course would be £54.6k at the current exchange rate of $/£0.65. But Gilead has priced sofosbuvir at £34 983 for England, which is 36% less than the US price. This is the price used in the NICE appraisal.

Pharmaceutical companies have tended to charge a single global price, but it is based on the US market, which accounts for over half of all branded pharmaceutical sales. This might be termed the Apple strategy, in that an iPhone costs more or less the same in all countries. While this can ensure enormous profits, its application to effective drugs is often seen as unethical.

This was particularly evident with drugs for HIV in the 1990s. Lower income countries opted for cheaper generic versions, stimulating India’s generic drug industry. The World Trade Organisation was forced to allow for exceptions on pharmaceutical patents when a case could be made in terms of health. Nonetheless, many pharmaceutical companies continue to use global prices—sometimes with confidential price cuts in particular countries.

Global pricing poses affordability problems for poorer countries. Income is usually measured in terms of gross domestic product (GDP) per capita. This puts the US at $53 143 and the UK at $39 351 for 2013. The US’s GDP is 36% higher than the UK’s—the same as the price cut for sofosbuvir.

Gilead, which owns sofosbuvir, has an explicit policy of pricing: “In developing countries Gilead therapies are priced using a tiered system that takes account of ability to pay, as measured by gross national income per capita, and disease burden.” Gilead has offered a price of $900 in India, again based largely on India’s income per head of $1499.

The 36% price cut for England, based on income per head, was a key factor in NICE’s recommendation of sofosbuvir. It meant that for many (but not all) of the subgroups, sofosbuvir had an acceptable cost per quality adjusted life year (QALY). Of the 19 subgroups considered, sofosbuvir was recommended in nine, with the remainder rejected on the grounds of a high cost per QALY. Most patients with hepatitis C will therefore be eligible for treatment.

Price reductions linked to income per head, while welcome from a UK perspective, will rule out price cuts for those countries with relatively high levels of income. Australia’s income per head was $67 468 in 2013, Switzerland’s was $80 528, and Norway’s was $100 819. These countries may count themselves fortunate to pay the US price.

James Raftery is a health economist with several decades experience of the NHS. He is professor of Health Technology Assessment at Southampton University. A keen “NICE-watcher,” he has provided economic input to technical assessment reports for NICE, but has never been a member of any of its committees. The opinions expressed here are his personal views.

Competing interests: The author has no further interests to declare.