Hepatitis C Drug Price Limiting State Medicaid Approvals

The price of Gilead Sciences Inc. (GILD)’s $1,000-a-day hepatitis C pill is keeping state-run Medicaid programs from making it available to many of the people who are most likely to be infected with the disease.

People in Medicaid, the government health plan for the poor, are prime candidates for Gilead’s Sovaldi, which works better and carries fewer side effects than existing therapies. The $84,000 cost for the cure over 12 weeks, the most expensive medicine for the disease, has states from Pennsylvania to Colorado limiting its use to only the sickest patients, according to health officials and private insurers that manage care for Medicaid programs.

Hepatitis C, a virus infecting about 2.7 million in the U.S., is transmitted through blood, with those getting transfusions before 1992 and intravenous drug users most at risk. It can be symptomless for decades before it begins to scar the liver, leading to liver cancer in some cases, organ failure and the need for a transplant.

While cancer can hit anybody, poor minorities are more likely to be infected with hepatitis C, according to a study reported this month by the U.S. Centers for Disease Control and Prevention. The research found that patients with the disease were more likely to be black, less likely to finish high school than the average American and had an average annual income of less than $23,000.

“You’re talking about a condition that is going to be concentrated in low-income, minority patients,” said J. Mario Molina, chief executive officer of Molina Healthcare Inc. (MOH), which helps 11 states manage pharmacy benefits for 2.1 million Medicaid patients. “You’ve got socioeconomic class issues here that we don’t have with cancer.”

Screening Recommended

The CDC, based in Atlanta, recommends screening for everyone in the U.S. born from 1945 to 1965. Those on Medicaid, even if they’re found to be infected, face barriers to getting the latest and best medicines until their disease has already done damage.

“If you’ve got a patient who is advanced and has liver disease and is about to get a liver transplant, it makes sense to give treatment,” said Molina, whose company only approves the Gilead drug now in urgent cases. The question is “what do we do about everybody else?” he said.

If everyone in the U.S. with hepatitis C were treated with Sovaldi at its list price, it would cost $227 billion compared with the estimated $260 billion spent a year in the country for all drugs.

Cost Benefits

Gilead said the drug’s high cost pays for itself by avoiding future complications. “Older therapies were not sufficiently effective or tolerable to continue to be used as the standard of care,” said Gregg Alton, executive vice president of corporate and medical affairs for the Foster City, California-based company. “We will continue to work with payers to help them understand the scientific and medical evidence.”

Most other approved therapies for hepatitis C involve long courses of injections that boost the immune system, carry lower cure rates and produce side effects that can include nausea, anemia, insomnia and flu-like symptoms. That’s created a dilemma for states trying to balance rising health-care costs and the desire to get the best treatments to citizens.

While Victrelis, an older drug from Merck & Co., isn’t as effective, according to research, it’s priced at about $36,500 for 24 weeks of treatment, less than half the $84,000 listed cost of Sovaldi, according to Catamaran Corp. (CTRX), a Schaumburg, Illinois-based pharmacy benefits manager.

Pennsylvania covers about 100,000 patients through the state’s Medicaid program. It had two applications for Sovaldi as of last month, neither of which were approved by the state, said Terri Cathers, director of pharmacy for Pennsylvania’s Office of Medical Assistance Programs.

‘Sticker Shock’

“I’m not going to deny we were in sticker shock,” Cathers said by telephone. “If the drugs are going to give our patients the best therapy and get them to cure, we want to get them. But we want to be prudent about that.

‘‘I think that on a federal level, drug pricing needs to be addressed,’’ Cathers said.

The Centers for Medicare and Medicaid Services, which oversees Medicaid for the federal government, said it’s committed to working with states to make sure they have the best tools to get affordable drug prices.

Gilead, which says it may sell the drug in India for $2,000 for the 12-week regimen, tailors its price to the market. ‘‘Gilead’s global pricing model is based on a country’s ability to pay,” said Alton, the company executive.

Provider Concerns

In the U.S., Medicaid providers disagree with Gilead about whether they can afford the cost. “The federal government is going to have to step in and say there’s a concern about the public welfare, and we can’t allow companies to take advantage like this,” said Molina, who’s company is the fourth-biggest private Medicaid administrator. “Is what they’re charging really appropriate?”

WellPoint Inc. (WLP) manages claims for 4.4 million Medicaid patients in 19 states, and won’t approve a combination treatment of Sovaldi and another new drug -- Johnson & Johnson (JNJ)’s Olysio -- for anyone but patients with more advanced disease.

Sovaldi “is more costly but offers improved outcomes, particularly coupled with Olysio,” said Kristin Binns, a WellPoint spokeswoman. WellPoint plans to limit use of the two drugs together -- the most expensive therapy combination -- to just those with evidence of liver damage, Binns said.

Early Treatment

Gilead calls that a mistake. Using the drugs earlier produces better cures and results in fewer complications from the disease, Alton said in an e-mailed statement.

The new drug has arrived as the 2010 Patient Protection and Affordable Care Act, known as Obamacare, promises to add more than 12 million people to the Medicaid program in a nationwide expansion. At the same time, health-care costs for states continue to grow after doubling to 30 percent of state and local budgets from 1987 to 2012, according to a January report by the Pew Charitable Trusts.

State officials at Medicaid programs in Louisiana, California, Michigan and Florida said in interviews that they will only approve the use of Gilead’s Sovaldi on a case-by-case basis while they study how best to address the drug’s cost going forward.

In Colorado, officials advised doctors in a Feb. 19 letter that “new therapies for hepatitis C will not be approved” until the state finishes its review.

“Given the demand for the medication, the generally slow progression of the disease, and the rapidly changing landscape of the treatments available for hepatitis C, the department needs to do further evaluation and review to determine the the appropriate coverage criteria for Sovaldi,” officials wrote.

Doctor View

Doctors are also caught up in the debate over costs. Jonathan Fenkel, the director of Jefferson University Hospitals’ hepatitis C center in Philadelphia, has about 1,000 hepatitis C patients in his practice.

“I used to have an easy argument that treating hepatitis C was cheaper than paying for a liver transplant or liver cancer,” he said in a telephone interview. “But it’s getting a little closer.”

Some state policies may change over time.

In Pennsylvania, for example, the state’s pharmacy and therapeutics committee will meet in May to decide on a treatment policy for Sovaldi. Right now, the state pays a discounted price of about $70,000 for a course of Sovaldi and two other drugs given in combination, compared with $40,000 for an older regimen.

Cathers, the Pennsylvania Medicaid official, said she’s concerned that the high price of a drug like Sovaldi will have an effect that carries through in future years with other hepatitis C medicines.

“What are we going to have in the future when these new all-oral therapies come to market, are we going to see these escalate to $120,000?” Cathers said.

To contact the reporter on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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