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Prices of new hepatitis C drugs are tough to swallow for insurers

Hepatitis C drugs Sovaldi and Olysio offer much better cure rates than other therapies, but they can cost up to $1,000 a pill, a potentially staggering cost to taxpayers and health plans.

March 09, 2014|By Chad Terhune and Eryn Brown
  • Gilead Sciences says its new hepatitis C therapy, Sovaldi, helps avoid the long-term medical expenses related to liver failure, cancer and transplants. Above, Gilead President John Milligan last month.
Gilead Sciences says its new hepatitis C therapy, Sovaldi, helps avoid… (Victor J. Blue, Bloomberg )

A pair of new drugs to treat hepatitis C offer a cure for millions of Americans afflicted with the disease — but at a potentially staggering cost to taxpayers and health plans.

Until now, therapies for hepatitis C helped only about half of patients and posed numerous side effects, such as flu-like symptoms, anemia or depression. In comparison, clinical trials of Sovaldi and Olysio have shown cure rates of 80% to 90% with far fewer complications.

That progress, though, comes at a price.

A 12-week course of Sovaldi can cost $84,000, or about $1,000 a pill, and some patients may require two courses. Treatment with Olysio runs more than $66,000. Using either one, many patients wouldn't require significant treatment again.

"It could be the right thing to do clinically, but at this price, can we afford it?" said Steven Pearson, president of the Institute for Clinical and Economic Review, a nonprofit group in Boston that analyzes the effectiveness and cost of new treatments. "It's a tough ethical and financial quandary."

In a new report, the institute estimates it would cost $6.3 billion to provide the two drugs to Californians with more advanced liver disease from hepatitis C. The annual cost could top $18 billion if half of all California patients with hepatitis C received the medications.

Drugs for some types of cancer, multiple sclerosis and rare illnesses can carry similar price tags. But few of those drugs would be prescribed so widely. And the increased costs for new drugs are often passed along to consumers in the form of higher health insurance premiums.

Left unchecked, some hepatitis C infections result in liver damage, liver cancer or death. Chronic hepatitis C infection affects about 3 million people in the U.S., and it's the leading cause of liver transplants in the nation.

On Monday, a panel of medical experts will meet in San Francisco to examine the use of Sovaldi and Olysio, which federal regulators approved late last year, and to recommend treatment guidelines.

The discussion will revolve around which patients are the best candidates for these medications and whether doctors should advise other patients to wait until their disease worsens, given the high prices.

Those types of restrictions trouble some patient advocates who favor full access. Of the two drugs, Sovaldi is viewed as a potential blockbuster along the lines of the cholesterol-fighting Lipitor.

Employers and health insurers warn that Sovaldi and Olysio are just the beginning of other expensive specialty drugs coming to market. They say that their rapid growth could undermine efforts to rein in medical spending.

The pharmaceutical companies behind the hepatitis C drugs defended their pricing by noting that the medicines represent a major advancement compared with current treatments. Gilead Sciences Inc. in Foster City, Calif., sells Sovaldi, and Olysio comes from Janssen Therapeutics, a unit of healthcare giant Johnson & Johnson.

Both companies said discounts and other financial assistance are available to government health programs and low-income patients.

Gilead said the new therapies also help avoid the long-term medical expenses related to liver failure, cancer and transplants. A liver transplant, for instance, can cost more than $500,000, not including a lifetime of follow-up care.

"Sovaldi is a short-term treatment that results in very high cure rates that can avoid future costs related to disease progression or treatment failure," said Gregg Alton, an executive vice president at Gilead.

Craig Stoltz, a spokesman for Janssen, said the price of Olysio "reflects its value."

Medi-Cal officials said they don't know yet how many patients may need the new drugs. More than 1,500 Medi-Cal patients are prescribed drugs for hepatitis C now.

"These new drugs are expensive," said Medi-Cal spokesman Norman Williams. "Medi-Cal is currently negotiating with the drug manufacturers for a state supplemental rebate."

California said no decision has been made on requests from Medi-Cal managed-care plans to carve out these drugs from already negotiated rates and reimburse insurers separately for them.

Molina Healthcare Inc., a major Medicaid managed-care plan in California and 10 other states, has asked health officials across the country for guidance on how to proceed with patients.

"I'm scratching my head why the American taxpayer is being asked to pay such an enormous price for this drug," said J. Mario Molina, the company's chief executive.

WellPoint Inc., the nation's second-largest health insurer, said it costs nearly 50% more, on average, to treat hepatitis C patients on its state Medicaid plans since the newer drugs were introduced.

"While new drug treatments for hepatitis C have shown to be highly effective, these drugs could have a serious impact on premiums," said Charles Bacchi, executive vice president at the California Assn. of Health Plans, an industry trade group.

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