Is an $84,000 Hepatitis Drug Too Expensive?

The debate over drug prices is heating up as insurers clash with pharmaceutical companies over a wave of expensive new products.

A pharmacist pours Truvada pills back into the bottle at Jack's Pharmacy on November 23, 2010 in San Anselmo, California.
National Journal
Sam Baker
Add to Briefcase
See more stories about...
Sam Baker
May 29, 2014, 1 a.m.

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 »
CANNOT “IN GOOD CONSCIENCE” VOTE FOR BILL
McCain Won’t Support Graham-Cassidy Bill
2 hours ago
THE LATEST

In a statement Friday, Sen. John McCain wrote, "I cannot in good conscience vote for the Graham-Cassidy proposal. I believe we could do better working together, Republicans and Democrats, and have not yet really tried. Nor could I support it without knowing how much it will cost, how it will effect insurance premiums, and how many people will be helped or hurt by it. Without a full CBO score, which won't be available by the end of the month, we won't have reliable answers to any of those questions." His "no" vote makes it much less likely Republicans will repeal and replace Obamacare by Sept. 30.

Source:
NEW DIRECTIVES ISSUED
DeVos Officially Replaces Obama-era Sexual Assault Guidelines
3 hours ago
THE LATEST

As anticipated, the Department of Education today withdrew the controversial Obama-era "Dear Colleague" letter on campus sexual assault, replacing it with new interim guidance. Most notably, the new guidance permits colleges to use a “clear and convincing” standard of evidence, rather than the preponderance of evidence standard that the 2011 letter seemed to mandate. "The new guidance also states that colleges may facilitate informal resolutions, including mediation, if all parties agree to participate in that process."

Source:
EXPECTED TO TAKE EFFECT BY SUNDAY
Country-Specific Rules to Replace Travel Ban
4 hours ago
THE LATEST

"The Trump administration will unveil more tailored restrictions on travelers from certain countries as a replacement to the controversial travel ban, according to a senior administration official. The new restrictions will vary by country. They could include a ban on travel to the United States, or new restrictions on obtaining a visa for citizens of particular countries." They are expected to be unveiled by Sunday.

Source:
MORE TRANSPARENCY THAN FEC REQUIRES
Facebook Enhances Disclosure for Political Ads
5 hours ago
THE DETAILS

In a live-streamed address from Silicon Valley, Facebook founder Mark Zuckerberg announced a nine-point plan that the tech giant is rolling out over coming months to respond to "efforts by nation-states and private actors to use the social media platform to influence U.S. elections." Most importantly, the company will force all advertisers to disclose what ads they're running to all audiences. “When someone buys political ads on TV or other media, they’re required by law to disclose who paid for them,” Zuckerberg said. “But you still don’t know if you’re seeing the same messages as everyone else. So we’re going to bring Facebook to an even higher standard of transparency. Not only will you have to disclose which page paid for an ad, but we will also make it so you can visit an advertiser’s page and see the ads they’re currently running to any audience on Facebook.”

Source:
TRUMP ADMIN CRACKING DOWN ON LEAKS
Mandatory Training EPA Employees on Leaking
6 hours ago
THE DETAILS

As "part of a broader Trump administration order for anti-leaks training at all executive branch agencies," Environmental Protection Agency employees "are attending mandatory training sessions this week to reinforce their compliance with laws and rules against leaking classified or sensitive government information ... Relatively few EPA employees deal with classified files, but the new training also reinforces requirements to keep 'Controlled Unclassified Information' from unauthorized disclosure."

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login