An $84,000 hepatitis drug called Sovaldi is at the center of a new battle between pharmaceutical companies and insurers — but the fight is about much more than one drug.
Sovaldi costs $1,000 per day, or $84,000 for a full treatment, and cures 90 percent of hepatitis C patients who take it. Insurers say the drug is ridiculously overpriced; the pharmaceutical industry says it’s a steal.
But the debate here isn’t simply about one hepatitis drug. Sovaldi is more like a single skirmish that has reawakened a broader, deeper, and higher-stakes cold war over the cost of prescription drugs. Officials in both industries say that even if Sovaldi’s manufacturer, Gilead, slashed its prices, the newly intensified battle between insurers and pharma companies wouldn’t recede: Sovaldi is just the beginning.
Sovaldi is a lightning rod because insurers and consumer advocates are afraid it’s a sign of what’s to come. The drug pipeline is full of drugs like Sovaldi, and insurers say that flood of new, expensive products will cause health care spending to skyrocket.
“I think that this one drug is the canary in the coal mine. It’s one that is out front and one of the first ones we’re seeing, but there are a lot more down the pipeline,” said Brendan Buck, a spokesman for America’s Health Insurance Plans.
Until Sovaldi, the class of products known as “specialty drugs” was mainly tailored to relatively rare conditions. The drugs are complex, which makes them more expensive to produce, driving up the price for consumers. And because they treat rarer conditions, there were fewer potential customers — another factor driving up prices.
Specialty drugs have always been expensive. They account for roughly 25 percent of U.S. spending on prescription drugs, but just 1 percent of all prescriptions, according to a newly formed coalition lobbying for lower prices.
But Sovaldi set off a particular shock wave largely because it treats a more common ailment — some 3 million people have hepatitis C. They can’t all afford an $84,000 course of treatment, but still, critics argue, the drug’s large potential customer base means that a once-narrow slice of drug spending could explode.
“If this sets a pattern for other drugs then we’re really in deep trouble “¦ it’s the combination of the price and the volume,” said John Rother, who helped start the Coalition for Sustainable Rx Pricing. The new organization, which also includes AARP and other health care advocates, launched Wednesday.
The pharmaceutical industry says critics are missing the point. Yes, Sovaldi is expensive, it argues, but that’s because it works. Sovaldi cures about 90 percent of patients with a common form of hepatitis C within its 12-week course.
Spending $84,000 on a cure might seem expensive up front, but it’s a lot more efficient in the long run than paying for a string of less effective treatments, including hospitalizations that run the risk of complications, the drug industry says.
A report from Optum, a consulting subsidiary of United Healthcare, agrees. Even very expensive drugs can be cost-effective if they work well enough, Optum said in a report issued before Sovaldi’s price was released.
“It is certainly possible that the combination of higher cure rates and reduced side effects, combined with reduced treatment times, may mean even greater cost-effectiveness in the future,” Optum’s analysts wrote.
A pharmaceutical industry official said insurers’ effort to crack down on Sovaldi and other specialty drugs is short-sighted. The insurance industry is under tremendous pressure to keep premiums low, especially in the first few years of Obamacare enrollment, and it’s reacting to that pressure by steering health providers and consumers away from products that are more expensive in the short term, the official said — but is running the risk of foregoing longer-term savings.
The basic dynamics underneath this tension are nothing new: Pharmaceutical companies want insurers to cover their drugs, which helps them make money; insurers want to avoid shelling out tens of thousands of dollars for expensive treatments, which helps them make money.
But the Sovaldi dust-up has turned up the intensity, as insurers make an aggressive case that they’re not the ones to blame if rising health care costs drive up premiums.
“The reality is that the company in this case is asking for a blank check, and we can’t give anyone a blank check in the health care system “¦ because it will blow up family budgets, it will blow up state Medicaid budgets, it will blow up employer benefit costs, and it will wreak havoc on the federal debt,” AHIP President and CEO Karen Ignagni said at a recent event sponsored by The Atlantic.
What We're Following See More »
President Obama became a surprise topic of contention toward the end of the Democratic debate, as Hillary Clinton reminded viewers that Sanders had challenged the progressive bona fides of President Obama in 2011 and suggested that someone might challenge him from the left. “The kind of criticism that we’ve heard from Senator Sanders about our president I expect from Republicans, I do not expect from someone running for the Democratic nomination to succeed President Obama,” she said. “Madame Secretary, that is a low blow,” replied Sanders, before getting in another dig during his closing statement: “One of us ran against Barack Obama. I was not that candidate.”
It’s all about the 1% and Wall Street versus everyone else for Bernie Sanders—even when he’s talking about race relations. Like Hillary Clinton, he needs to appeal to African-American and Hispanic voters in coming states, but he insists on doing so through his lens of class warfare. When he got a question from the moderators about the plight of black America, he noted that during the great recession, African Americans “lost half their wealth,” and “instead of tax breaks for billionaires,” a Sanders presidency would deliver jobs for kids. On the very next question, he downplayed the role of race in inequality, saying, “It’s a racial issue, but it’s also a general economic issue.”
It’s been said in just about every news story since New Hampshire: the primaries are headed to states where Hillary Clinton will do well among minority voters. Leaving nothing to chance, she underscored that point in her opening statement in the Milwaukee debate tonight, saying more needs to be done to help “African Americans who face discrimination in the job market” and immigrant families. She also made an explicit reference to “equal pay for women’s work.” Those boxes she’s checking are no coincidence: if she wins women, blacks and Hispanics, she wins the nomination.
Under pressure from a judge, the State Department will release about 550 of Hillary Clinton’s emails—“roughly 14 percent of the 3,700 remaining Clinton emails—on Saturday, in the middle of the Presidents Day holiday weekend.” All of the emails were supposed to have been released last month. Related: State subpoenaed the Clinton Foundation last year, which brings the total number of current Clinton investigations to four, says the Daily Caller.