A service of the California Health Care Foundation

Can the ACA Solve Staggering Prescription Drug Prices?

Last December, FDA approved the hepatitis C treatment Sovaldi, giving it a coveted breakthrough therapy designation that allowed its maker, Gilead Sciences, to fast-track its approval.

Observers hailed the drug as a “game changer” because it combined a high cure rate with a 12-week regimen, far shorter than other treatments. For many of the estimated 3.2 million U.S. residents with chronic hepatitis C, relief from the disease’s highly elevated risk of long-term effects — such as liver damage, cirrhosis, liver failure, or liver cancer — was now just 84 days away. Noting that previous treatments lasted 24 to 48 weeks, had a lower cure rate and often came with serious side effects, such as anemia and depression, many individuals with hep C and providers celebrated the development.

Then they saw the price tag: $84,000, or $1,000 per pill. Cue the outrage.

Industry analysts argued that the cost was unreasonable. Lawmakers got involved, with Rep. Henry Waxman (D-Calif.) and two other Democrats and the Senate Finance Committee writing letters to Gilead’s CEO, asking him to explain the price. Meanwhile, high-profile payers — like Aetna, CVS Caremark and Express Scripts — balked at the price and questioned whether they would cover it.

The better part of a year later, the dialogue on the drug’s price continues, but stakeholders who want to see the price drop still have no concrete answer on how to do just that.

How Can the ACA Help?

At this point, you might be saying, “Wait just a minute, surely the Affordable Care Act can do something about the high cost of Sovaldi, right?” Fairly or unfairly, many U.S. residents view the ACA as a salve for all that ails the nation’s health care system.  So what does the ACA do to hold down what some would call exorbitant prices for prescription drugs?

Technically, nothing.

The ACA does have several provisions that seek to control costs, but none of them relate to prescription drug pricing. And while lawmakers for years have suggested that the federal government be allowed to negotiate prices on behalf of Medicare beneficiaries, no such provision made it into the ACA.

Compromising Affordability?

In fact, the ACA might actually work to make certain drugs less affordable for some people. While all exchange plans must cover prescription drugs, insurers are permitted to use a tiered system of coverage. The highest tier — for “specialty medicines,” which typically are costly, brand-name drugs — can feature comparatively large copayments and, in some cases, a separate deductible. As a result, consumers can be required to pay 100% of a drug’s cost until the deductible is met, and those deductibles can vary by thousands of dollars.

A number of patient advocacy groups already are alleging that insurers are giving wide berth to the letter of the law and discriminating against people with chronic illnesses by forcing them to pay more out of pocket for their treatments. The National Health Law Program, the AIDS Institute and other patient advocacy groups have filed a discrimination claim with HHS, and the department is in the process of developing a response.

America’s Health Insurance Plans has responded to the claims, noting that consumers have the option to pick the plan best suited to them. Insurers have pointed to the high cost of new specialty drugs and say they are merely trying to control costs. The drug that they point to as an example of out-of-control prescription drug prices? Yep, Sovaldi.

Just What the ACA Ordered

Ironically, a treatment like Sovaldi might just be exactly what the ACA had in mind.

Remember those cost-control provisions in the the law? A major one is facilitating preventive care, in the hopes that investing in care now will hold down long-term costs for major illnesses. While the five-figure price tag for one round of Sovaldi is eye-popping to some, many observers note that it pales in comparison to the cost of treating the long-term effects of hepatitis C.

As University of Southern California’s Schaeffer Center for Health Policy and Economics Executive Director Dana Goldman told Vox.com, “Would I rather be spending $600,000 for a liver transplant and living a restricted life afterwards, or would I rather pay $80,000 up front and guarantee I never have to go through that?”

Around the Nation

Here’s a look at several other stories making news on the road to reform.

Losing its power: Are Republicans backing away from using the ACA as a criticism against Democratic opponents? It appears so, according to Bloomberg‘s Heidi Przybyla. The Washington Post‘s “Morning Plum” evaluates Przybyla’s claim.

An ACA alternative: Avik Roy, a senior fellow at the Manhattan Institute for Policy Research and a former health care policy adviser to Mitt Romney, recently introduced his own plan to replace the ACA. He describes the plan in a post on his Forbes blog, “The Apothecary.” Writing at the same blog, fellow Forbes contributor Yevgeniy Feyman evaluates the numbers on Roy’s plan.

What’s happening with CHIP?: Billy Wynne, a lawyer and founder and CEO of Healthcare Lighthouse, writing in a Health Affairs blog post examines the ACA’s effect on CHIP and what will happen to the program in the coming years. 

Categories: Health Care Costs, Road to Reform, The Health Law

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