[Ip-health] New York Times: The Upshot-$1, 000 Hepatitis Pill Shows Why Fixing Health Costs Is So Hard

Thiru Balasubramaniam thiru at keionline.org
Sun Aug 3 23:16:15 PDT 2014


<SNIP>

In a rare bipartisan collaboration, Senators Ron Wyden, Democrat of Oregon,
who is chairman of the Finance Committee, and Charles E. Grassley,
Republican of Iowa, a committee member, have started a joint investigation
<http://www.finance.senate.gov/imo/media/doc/Wyden-Grassley%20Document%20Request%20to%20Gilead%207-11-141.pdf>,
asking the drug company to answer questions about how it determined
Sovaldi’s price. They unearthed documents showing that the pharmaceutical
company Pharmasset, which originally developed the drug and was acquired by
Gilead in 2011, had planned to sell it for $36,000 per course of treatment.

--


http://www.nytimes.com/2014/08/03/upshot/is-a-1000-pill-really-too-much.html

THE NEW HEALTH CARE$1,000 Hepatitis Pill Shows Why Fixing Health Costs Is
So HardCritics Raise Concerns About Sovaldi

AUG. 2, 2014





Margot Sanger-Katz

A new drug for the liver disease
<http://health.nytimes.com/health/guides/disease/liver-disease/overview.html?inline=nyt-classifier>
 hepatitis C
<http://health.nytimes.com/health/guides/disease/hepatitis-c/overview.html?inline=nyt-classifier>
is
scaring people. Not because the drug is dangerous — it’s generally heralded
as a genuine medical breakthrough — but because it costs $1,000 a pill and
about $84,000 for a typical person’s total treatment.

A Washington advocacy effort has sprung up overnight, largely devoted to
objecting to the cost of this one medication, Sovaldi. Members of Congress
have started a joint investigation into how its maker, Gilead Sciences
<http://topics.nytimes.com/top/news/business/companies/gilead_sciences_inc/index.html?inline=nyt-org>,
settled on its price.

“Clearly, $1,000 a pill strikes people as completely unreasonable,” said
John Rother, president of the National Coalition on Health Care
<http://nchc.org/>, an advocacy group that has been raising an outcry about
the drug’s price as “unsustainable.” Gilead <http://www.gilead.com/> “stepped
in it when they decided to go for that cost per pill, because people can’t
imagine why that could be justified.”

But maybe we are looking at the costs of Sovaldi in the wrong way. One
reason it is causing such angst among insurers and state Medicaid
<http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicaid/index.html?inline=nyt-classifier>
officials
is that treatment costs are coming all at once.
First of all, there is pent-up demand. There are a lot of people with
hepatitis C — an estimated 3.2 million in the United States — many of whom
have been waiting for a good treatment. Second, unlike drugs for most
chronic diseases, like diabetes
<http://health.nytimes.com/health/guides/disease/diabetes/overview.html?inline=nyt-classifier>
 or H.I.V.
<http://health.nytimes.com/health/guides/disease/aids/overview.html?inline=nyt-classifier>/AIDS,
for which treatment continues over many years, Sovaldi can cure most
patients’ hepatitis
<http://health.nytimes.com/health/guides/disease/hepatitis/overview.html?inline=nyt-classifier>
 in just a few weeks, with the bill soon to follow. The lifetime cost of
treating someone with an H.I.V. infection is around $380,000,
according toestimates
from the federal Centers for Disease Control and Prevention
<http://www.cdc.gov/hiv/prevention/ongoing/costeffectiveness/>, but the
annual bill is much smaller.

Think about AIDS treatment as paying a mortgage. Sovaldi is like buying a
house with cash.

The United States health insurance
<http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/index.html?inline=nyt-classifier>
system
works better for costs that are spread out and predictable. People change
insurance frequently, discouraging insurers from making a big investment
now that might pay off later. That does not mean that our health care
system is not expensive — it is — but we are more used to costs that pile
up slowly over time. Expensive one-time treatments like Sovaldi can be a
shock to the system.

Hepatitis C slowly destroys the liver. Over decades, many infected people
will end up with liver damage and complications, including joint pain
<http://health.nytimes.com/health/guides/symptoms/joint-pain/overview.html?inline=nyt-classifier>
and
kidney disease, while a smaller number will get cirrhosis
<http://health.nytimes.com/health/guides/disease/cirrhosis/overview.html?inline=nyt-classifier>
 or liver cancer
<http://health.nytimes.com/health/guides/disease/hepatocellular-carcinoma/overview.html?inline=nyt-classifier>,
and a tiny fraction will end up needing liver transplants. People used to
get the virus from blood transfusions; now, it is contracted mostly by
intravenous drug users who share needles.

Until now, doctors would mostly treat hepatitis C patients’ symptoms. Some
drugs attacked the virus itself, but they did not work very well. And most
had side effects, including fever
<http://health.nytimes.com/health/guides/symptoms/fever/overview.html?inline=nyt-classifier>,
depression and anemia
<http://health.nytimes.com/health/guides/disease/anemia/overview.html?inline=nyt-classifier>,
that about half the patients were not healthy enough to tolerate.

Those drugs were also expensive — the most effective drug cocktail before
Sovaldi cost about $70,000 — but because few patients chose them, the price
tag did not cause a big reaction. Sovaldi is different. Patients want this
drug, with its high success rate and smaller list of side effects. That
means a big financial shock to the health care system all at once.

“With a product like Sovaldi, it’s a new price to the system,” said Gregg
H. Alton, Gilead’s executive vice president for corporate and medical
affairs. He said the company priced the drug to be competitive with
existing therapies, adding, “It’s a new cost they weren’t paying for
before.”

The accounting firm PricewaterhouseCoopers estimated that this single drug
could bump up employer insurance premiums by half a percentage point next
year. Researchers at the Kaiser Family Foundation <http://kff.org/>, a
health care research group, estimate that it could increase premiums for
Medicare
<http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicare/index.html?inline=nyt-classifier>’s
drug benefit program by 3 to 8 percent next year, even if only a fraction
of eligible seniors were to seek the treatment.

Insurer-sponsored studies are estimating even higher costs. Express
Scripts, a company that manages drug benefits for insurers, prepared a
worst-case situation
<http://lab.express-scripts.com/insights/specialty-medications/state-governments-may-spend-$55-billion-on-hepatitis-c-medications>:
It said that states alone could be on the hook for up to $55 billion if
every Medicaid patient or state prisoner with the disease was treated.

“We think a perfect storm is arising out there,” said Dr. Steve Miller, a
senior vice president and the chief medical officer at Express Scripts, who
helped prepare its estimates.

The drug, which came on the market last year, has been a bona fide
blockbuster for Gilead, which earned $3.48 billion in sales of Sovaldi in
the last quarter alone. That puts it ahead of nearly every new drug
introduction in history and in striking distance of the record for annual
drug sales: the $12.9 billion for Pfizer’s Lipitor
<http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/lipitor_drug/index.html?inline=nyt-classifier>
in
2006.

America’s Health Insurance Plans <http://www.ahip.org/>, the health
insurance industry group, has been intensely focused on the drug’s price. A
new advocacy group, theCampaign for Sustainable Rx Pricing
<http://capsules.kaiserhealthnews.org/wp-content/uploads/2014/05/CSRXP-Press-Release-Final-for-Launch.pdf>,
begun by the National Coalition on Health Care with significant funding
from the insurance industry, is sponsoring events and meeting with members
of Congress to complain about Sovaldi’s pricing.

In a rare bipartisan collaboration, Senators Ron Wyden, Democrat of Oregon,
who is chairman of the Finance Committee, and Charles E. Grassley,
Republican of Iowa, a committee member, have started a joint investigation
<http://www.finance.senate.gov/imo/media/doc/Wyden-Grassley%20Document%20Request%20to%20Gilead%207-11-141.pdf>,
asking the drug company to answer questions about how it determined
Sovaldi’s price. They unearthed documents showing that the pharmaceutical
company Pharmasset, which originally developed the drug and was acquired by
Gilead in 2011, had planned to sell it for $36,000 per course of treatment.

By law, state Medicaid programs, which insure poor and disabled residents,
are legally required to cover any drugs that are approved by the Food and
Drug Administration. Medicaid gets a mandatory discount of at least 23
percent on drugs. But many states, terrified about the budgetary impact of
Sovaldi, are testing strategies to limit access. Oregon, which has a
special legal waiver from the usual rules, has said it would give it only
to Medicaid beneficiaries with advanced liver disease. Illinois announced
<http://www.chicagobusiness.com/article/20140729/NEWS03/140729819> similar
restrictions last week.

Research on the cost-effectiveness of Sovaldi is still in the early stages,
but it appears that use of the drug has the potential to actually save
money over the long run. Data from the C.D.C.
<http://www.cdc.gov/hepatitis/c/cfaq.htm> suggest that more than 60 percent
of people with hepatitis C will end up with chronic liver disease — and as
many as 20 percent will end up with cirrhosis. Treating those diseases is
costly. A liver transplant
<http://health.nytimes.com/health/guides/surgery/liver-transplant/overview.html?inline=nyt-classifier>,
the most expensive option for the small group of patients with end-stage
disease, costs nearly $600,000.
Because the drug cures around 90 percent of patients who take it, public
health researchers believe it has the potential to reduce the spread of the
disease <http://onlinelibrary.wiley.com/doi/10.1002/hep.26431/abstract> to
others, eliminating the future costs of treating their disease and any
complications.

But in America’s health care financing system, people tend to change
commercial insurance whenever they change jobs, lose Medicaid coverage when
financial circumstances change, or leave the commercial market altogether
when they become eligible for Medicare at age 65. That means one company
will be stuck footing the big bill, and another will probably reap the
benefits of a healthy liver 20 years later.

“If it is cost-effective from a societal standpoint, it is not necessarily
going to be cost-effective from a health plan standpoint,” said Dan
Mendelson, chief executive of Avalere Health, a health care consulting
company. “I think some of the friction here results because the societal
value is not reflected in the health plan operations.”

State Medicaid programs are particularly sensitive to annual cost
increases. Medicaid coverage is paid for, in part, out of state budgets,
which have to be balanced every year. A disproportionate number of infected
people rely on it for insurance, because the population most at risk —
intravenous drug users — tends to be poor.

Matt Salo, executive director of the National Association of Medicaid
Directors <http://medicaiddirectors.org/>, which represents state Medicaid
officials, said his members have been floored by estimates that the drug
could drive up costs by 10 or 15 percent. They worry about the short-term
budgetary strain, and about the longer-term political consequences.

“From a realistic perspective, when a Medicaid budget skyrockets like that,
you aren’t going to hear from the U.S. taxpayer, ‘Thank goodness, Medicaid
was here to solve this public health crisis,’ ” Mr. Salo said. “They’re
going to say, ‘It’s another runaway government program.’ ”

But for all the panic, the crisis may soon wane. New, effective drugs are
about to enter the market to compete with Sovaldi, offering other options
with high cure rates and low side effects. And a more competitive market is
likely to drive down the drug’s price, once payers can choose to cover only
the drug that is the best deal.

The pent-up demand of patients who have been waiting for a cure will work
itself out over the next few years. The PricewaterhouseCoopers estimates
show big costs for treating hepatitis C over the next two years, then a
sharp decline as the untreated population dwindles.



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