[Ip-health] We have a cure for hepatitis C. But the neediest can’t afford it. Louisiana wants to change that.

Kim Treanor kim.treanor at keionline.org
Wed Sep 27 08:50:44 PDT 2017


We have a cure for hepatitis C. But the neediest can’t afford it. Louisiana
wants to change that.
Joshua Sharfstein, Joy Lee, and Rena Conti in Vox on September 27, 2017

An innovative solution to the high cost of prescription drugs is emerging
in one of the unlikeliest places: Louisiana’s state government.

The Louisiana health secretary, Dr. Rebekah Gee, has called attention to
the plight of tens of thousands of state residents suffering from infection
with the hepatitis C virus who cannot afford lifesaving treatment. She also
is publicly considering the idea of asking the federal government to invoke
a century-old law to help them. Using this law, the government could
authorize a generic drug company to make a copy of an existing hepatitis C
medication more than a decade before patents are due to expire. The
pharmaceutical industry has strongly objected, arguing for unrestricted
power to set prices.

What happens next could answer the critical question of what comes first:
the pharmaceutical industry’s power over pricing or the public’s health.

Louisiana is among the states most affected by hepatitis C — but many
patients can’t afford treatment

Hepatitis C is the leading cause of death from infectious diseases in the
United States — responsible for more fatalities than HIV and tuberculosis
combined. This blood-borne infection slowly and painfully destroys the
liver and can lead to liver cancer and death. An estimated 73,000
Louisianans suffer from hepatitis C, placing Louisiana among the 10 most
affected states in the nation. There is no vaccine for hepatitis C, and for
years, the available drugs were toxic and often unsuccessful.

Beginning in 2014, several medications that cure hepatitis C within weeks
of therapy became available, revolutionizing care for infected individuals.

The catch was the price tag.

Initially sold at more than $80,000 per course of treatment, the drugs have
remained very expensive even as multiple products entered the market, with
discounted prices still in the range of $20,000. In Louisiana and elsewhere
around the country, most of the people suffering from hepatitis C have
health insurance covered by the state Medicaid program, are uninsured, or
are in state prison. As a result, much of the burden to pay for these
medicines falls on already strapped state governments. It is therefore no
surprise that most of those infected have not been treated, and the disease
may even be spreading faster than the cure.

The cruel result is that because of funding constraints, Louisiana’s
Medicaid program requires that a hepatitis C patient be suffering from
advanced liver disease to qualify for treatment. Delaying treatment can
force patients to live with fatigue, nausea, and pain every day, greatly
diminishing their quality of life. As they experience more liver scarring,
their risk for liver cancer increases as well. “The bottom line for me is
my patients are developing organ damage and I have to wait until they have
organ damage until I can access medication for hepatitis C,” Jason
Halperin, an infectious disease clinician in New Orleans, told the
Washington Post.

A reasonable estimate of the additional cost of providing treatment to all
in need in Louisiana exceeds $1 billion, roughly 50 times what Louisiana’s
Medicaid program currently spends each year for hepatitis C medications. It
will be a decade or more before any of the available treatments lose patent
protection and cheaper generics become available.

How Louisiana came up with an innovative approach to drug pricing
Frustrated that few people with hepatitis C in Louisiana had been treated,
Secretary Gee began exploring alternative strategies last April to lower
the cost of the medications. Pursuing a recommendation from a committee of
the National Academies of Sciences, Engineering, and Medicine, she asked
for input from legal, medical, and public health experts and from the
public on an unusual idea:

The federal government could hold a voluntary competition to purchase a
license for one of the existing medications at a heavily discounted price.
If the price is right, this could dramatically expand access to care;
however, it is quite possible no company would voluntarily agree to

Gee also asked for input about a more aggressive option: The Department of
Health and Human Services (HHS) could invoke 28 USC Section 1498 of the US
patent law, which would allow the government to authorize a company to
manufacture a low-cost copy of a hepatitis C treatment for specific
disadvantaged populations. The company could then receive approval from the
Food and Drug Administration for their copy as a generic drug, but could
only sell to the government while the patents remain in force. In turn, HHS
would provide “reasonable” compensation to the patent holder. Through
established case law, it is clear that this compensation could be far less
than market prices.

Many federal agencies take advantage of “government patent use” today to
purchase different types of products, and the federal government used it
regularly in the 1950s and ’60s to increase access and affordability for
pharmaceuticals. The HHS secretary in the Bush administration, Tommy
Thompson, threatened the use of Section 1498 during the anthrax attacks
after 9/11.

Dozens of Louisiana citizens, clinicians, and patients wrote to HHS in
support of these ideas.

The pharmaceutical industry responded with three flawed arguments

Not so for the pharmaceutical industry. In June, the pharmaceutical trade
organization PhRMA filed formal comments with the state of Louisiana on the
pricing of hepatitis C treatments. PhRMA chose not to respond to Gee’s
proposal, supported by the National Academies, that the federal government
could attempt to license a patent voluntarily from one of the
pharmaceutical companies. This was surprising, since under this option,
companies’ participation would be voluntary. What PhRMA decided to take a
stand on is revealing: It strongly objected to the use of Section 1498. In
doing so, the organization made several arguments that exposed the weakness
of its position.

First, PhRMA challenged the idea that Section 1498 can be utilized to lower
prices, claiming the government can only use a patent during a time of
shortage. However, this isn’t what happened in the 1950s and ’60s, when the
government routinely used this statute to achieve lower drug prices.
Indeed, in 1960, after the federal government purchased the antibiotic
tetracycline from a generic manufacturer at a deep discount, the
pharmaceutical industry trade group itself acknowledged in testimony before
Congress that the primary driving force for use of Section 1498 was to
allow access to “prices […] lower than those quoted by U.S. patent holders.”

Second, PhRMA argued that high prices for hepatitis C treatments are
justified because of averted costs, writing that “the cost of such drugs
must be evaluated in light of broader health care costs and savings.” This
argument, however, rests on cost-benefit analyses that focus on the costs
for patients with hepatitis C (which will be lower with treatment) but not
the net savings to the health care system (which are far from clear). For
example, curing hepatitis C will reduce the number of liver transplants for
patients suffering from the infection. However, as other patients will
receive these transplants, there may be no reduction in liver transplant
costs. From the standpoint of state’s budget, these costs are not averted.

How unlikely is it that states will find hundreds of millions or billions
of dollars to invest in hepatitis C treatment that may not produce
significant budgetary savings? Peter Bach of Sloan Kettering and Mark
Trusheim of MIT have noted that the market is highly skeptical; the value
of companies that manufacture hepatitis C treatments assumes that only a
small fraction of those in need will receive care at current prices.

Third, PhRMA invoked the need to support innovation, by assuring prices
high enough to cover the costs of successful and failed drug development.
One response to this argument is to point out that government research
funding supported the development of the hepatitis C treatments. Another is
to note that these companies have likely already recouped their investment
in the development of these treatments many times over or will do so in the
near future.

It is a fair point that indiscriminate use of government patent authority
would impact incentives for investing in innovation. But to be clear: This
is not what Louisiana is considering. The alternatives Secretary Gee has
put forward would only apply to populations without access to treatment
today. This would expand the base for hepatitis C treatments and, even at a
reduced price, would lead to a net increase in pharmaceutical revenue.

Big Pharma's demands and Louisiana's needs are miles apart. Which one will

Gee is pursuing expanded access that helps patients now, with more revenue
for companies to reward shareholders and invest in new generations of
medicines. In fact, this approach is already deployed by pharmaceutical
companies worldwide. Companies commonly license their products, including
treatments for hepatitis C, to be sold at lower prices in the developing
world. The same drug that cures a patient with hepatitis C in California
for $20,000 may be available for about 1 percent of the price in Egypt.

What is blocking such progress in the United States is the reluctance of
the industry to accept that large neglected populations also exist here —
in Medicaid programs, among the uninsured, and, most dramatically, in the
criminal justice system. A tiny number of more than 100,000 prisoners with
hepatitis C receive treatment, even though many are in detention long
enough for a full course of care.

This is a missed opportunity of the highest order in public health. An
expert committee at the National Academies of Science, Medicine, and
Engineering has projected that it is feasible to reduce the number of new
cases of hepatitis C by 90 percent by the year 2030, but only if there is
“prompt, large-scale treatment of hepatitis C.” The experts recognized that
“the price of these drugs is a major obstacle to unrestricted treatment,
especially for institutions of limited means such as the prison system and
state Medicaid offices.”

To date, PhRMA has put forward only two answers to this challenge: Either
states like Louisiana pay exorbitant prices to access the new drugs or they
watch as thousands of their citizens continue to suffer untreated. A writer
for the conservative Federalist urged Louisiana to spend big for cures,
arguing that “when Big Pharma wins, people win.” However, like most states,
Louisiana has an annual balanced budget requirement. Therefore, at market
prices, providing people better access to the new treatments would require
massive tax hikes or cutting budgets for roads and schools. It is obvious
that the demands of Big Pharma and the needs of Louisiana are miles apart;
which will prevail?

Gee and her counterparts in other states are deciding on next steps. This
has created space for pharmaceutical manufacturers to step forward and
offer a discounted price that makes addressing the hepatitis C crisis
possible. Doing so would mean recognizing that there is a “win-win”
opportunity in selling medications at lower prices for people who otherwise
would have no access. If companies fail to do so, states should press their
case that voluntary licensing of a hepatitis C medication — and, if that
fails, government patent use under Section 1498 — is the only option left
to protect the health of their citizens.


Kim Treanor
Knowledge Ecology International
kim.treanor at keionline.org
tel.: +1.202.332.2670

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