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New Medications and Who Will Pay for Them (2014)

Jacques Chambers, CLU,
Benefits Consultant

Posted August 15, 2014

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If there was ever a Good News/Bad News Story, this is it, thanks to the miracle of modern medicine and plain, old corporate greed.

Up to the present, treatment for Hepatitis C was pretty much limited to a combination of pegylated interferon and ribavirin. The result usually causes painful, debilitating side effects such as flu-like symptoms, depression, and anemia for the six to twelve months of the treatment course. After all that, Genotype 1 patients had about a 45% chance of success with pegylated interferon and ribavirin. Genotype 2 or 3 patients had around 75% chance of success with the same combination–neither a great success rate.

There are now two new medications on the market, which can honestly be labeled “wonder” drugs. A twelve-to-twenty-four week course of treatment with Sovaldi (sofosbuvir) and/or Olysio (simeprevir) is successful in about 90% of the patients taking them, accompanied by little or no painful side effects.  

That was the good news. And now……

Gilead Sciences, the pharmaceutical manufacturer, has priced Sovaldi at $1,000 for each slim, yellow pill. A course of treatment is one pill daily for twelve weeks for a total retail cost of $84,000. A course of treatment on Olysio is $66,000 as priced by its maker, Janssen Pharmaceutical Companies. Treatment costs could reach $150,000 if both medications must be used.

The potential liability for all payers of medications has sent shock waves throughout the healthcare industry and government medical programs. Adding to the concern is that there are an estimated 3.2 million people in the United States infected with HCV, although that is just an estimate since up to 50% of those infected are not aware of their infection. Either way, HCV currently kills more people each year than does HIV.

If everyone who is infected with HCV were given the course of treatment with Sovaldi, the total cost would be about $227 billion. This is an alarming number given that each year only slightly more than $250 billion is spent on all medications prescribed in the United States. 

The patient group most heavily affected by HCV infection is the Baby Boomers, persons born between 1945 and 1965. There was a study recently done on the impact of offering these medications through Medicare Part D Prescription Drug Plans as this group ages and is becoming eligible for Medicare. Assuming 270,000 beneficiaries of Part D plans are HCV infected, federal spending on the Part D Program could double to over 5 ½ billion dollars annually.
It would also affect the premiums people pay for Part D coverage adding another $20 to $30 dollars per month per person. Congress, when it passed the Medicare Part D law, prohibited the insurers from attempting to negotiate discounts of the “regular” price as does the Department of Veteran’s Affairs, so people on Medicare will be forced to pay the higher premiums the insurance companies will have to charge in order to cover the new medications.

It appears there could be a similar impact on private health insurance. Private health insurance companies are particularly concerned. The manufacturer and the “Big Pharma” lobby insist that the $84,000 price tag on treatment is cost effective compared to treating a patient over the long term as the patient’s condition worsens and perhaps requires a liver transplant, which can cost over $500,000. However, these long-term savings will only benefit Medicare as this population reaches age 65, not the insurance companies who would be paying for the cure.

Hardest hit, however, will be the state Medicaid plans and the country’s prison population due to HCV’s most frequent mode of transmission. For example, Oregon has 5,600 people on Medicaid with HCV, but estimates about 13,000 are infected and do not know it. This is out of a total of 600,000 on Medicaid in Oregon. By their estimation, they could spend what they currently spend on all medications in Medicaid and still only help about 25% of the infected population. The National Association of Medicaid Directors speculates that Sovaldi alone could double every state’s Medicaid pharmacy budget if they were forced to provide it to every HCV infected member including those who are asymptomatic.

I would be remiss here if I didn’t mention that part of the reason HCV has infected so many people is that, like HIV before it, the method of transmission has caused the infection to be unjustly stigmatized by society. As a result there has been a general reluctance to discuss the disease and a lack of public education about HCV and its prevention.

Some insurance companies maintain they could go bankrupt if they were forced to provide the treatment to every HCV-infected, insured member without substantially increasing every insured person’s premiums. How valid that claim is can be questioned; however, Gilead’s price for Sovaldi is set very high, so in the absence of price reductions, health insurance rates will certainly increase.

The $1,000 daily pill for 84 days is the price of the medications in the United States. Why is the price set so high? It has been estimated that each pill costs about $130 to manufacture.

Even with the discounts being offered to many, there is a still substantial profit margin. The Veteran’s Administration has negotiated a 40% discount on the cost for veterans. The European Union negotiated a 50% discount in the European countries and the United Kingdom. Other countries have enacted laws that put a cap on what can be charged for medications.

Whether the retail price is lowered for the public in the future is still unknown. Gilead has resisted requests to explain their pricing structure. Turning up the pressure on them, the Senate Finance Committee has formally written to the manufacturer asking for a justification of Sovaldi’s price.

At present, the only alternative, which is being used by some Medicaid plans and is also being considered by some health insurance carriers, is to restrict the coverage of the medication. They are only covering it when the patient’s condition is becoming severe and the patient is or will soon be a candidate for a liver transplant.

Did someone say we don’t ration health care in this country?

 

 

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[Jacques Chambers, CLU, and his company, Chambers Benefits Consulting, have over 35 years of experience in health, life and disability insurance and Social Security disability benefits. For the past twelve years, he has been assisting people with their rights, problems, and other issues concerning benefits and disability. He can be reached at jacques@helpwithbenefits.com or through his website at: http://www.helpwithbenefits.com.]



Copyright, (August 2014) Hepatitis C Support Project / HCV Advocate www.hcvadvocate.org. All Rights Reserved. Reprint is granted and encouraged with credit to the Hepatitis C Support Project

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