Medicare Spending on Hepatitis C Prescription Drugs Jumps in 2014

Medicare Part D spent about $4.5 billion in 2014 on new hepatitis C medications, compared with $286 million in 2013, ProPublica reports.

The findings are based on federal data provided by CMS in response to a ProPublica Freedom of Information Act request and additional inquiries by the publication (Ornstein, ProPublica, 3/29).

Background

New hepatitis C treatments, such as Gilead Sciences' Sovaldi and Harvoni, have high cure rates but have received criticism for their high cost. Harvoni and Sovaldi cost $94,500 and $84,000 per patient for a 12-week treatment, respectively (Lauer, California Healthline, 3/2) Some studies have shown that the drugs are cost-effective overall in the long-term based on improved quality of life for patients and future reductions in health costs. Meanwhile, other studies have found that the savings in future health costs only offset about 25% of the drugs' costs.

Medicare requires private insurers that administer Part D to reimburse for medically necessary treatments for all indications that are approved by FDA or recommended under clinical guidelines. The federal government under the Part D program is not allowed to negotiate reduced rates for drugs, although the private insurers are allowed to do so. According to an analysis published last year in Health Affairs, about 350,000 Medicare beneficiaries likely have hepatitis C, although many are unaware that they have the disease. In addition, the number of Medicare beneficiaries with hepatitis C is expected to increase in the coming years, according to ProPublica.

Meanwhile, many private insurers and Medicaid programs often only provide coverage for patients that have advanced liver disease, ProPublica reports. According to preliminary data for the first nine months of 2014, state Medicaid programs spent $1.2 billion on new hepatitis C treatments. However, anticipated legal challenges might require Medicaid programs to begin to cover the treatments for more patients, according to Medicaid experts.

Details of Spending

According to ProPublica, Medicare in 2014:

• Spent more than $3 billion on Sovaldi;
• Spent $821 million on Olysio, which is often taken by patients along with Sovaldi; and
• Spent $670 million on Harvoni, which was approved by FDA in October 2014.

Meanwhile, Medicare spent $157 million on older hepatitis C treatments.

Medicare Director and CMS Deputy Administrator Sean Cavanaugh said that early data indicate that 2015 spending levels on hepatitis C treatments are currently projected to meet or exceed 2014 levels. He said, "We're all waiting to see when it plateaus or when it possibly goes back down. When will that pent-up demand be sated?"

Potential Effects on Beneficiaries' Costs

Meanwhile, the increases in Medicare costs as the result of increased spending on hepatitis C treatments will result in many of Part D's approximately 39 million beneficiaries having higher out-of-pocket cost maximums and higher deductibles, according to federal officials.

According to ProPublica, the standard deductible in Part D is set to increase from $320 this year to $360 in 2016. Meanwhile, the out-of-pocket maximum -- after which point Medicare pays 80% of the cost, a supplemental insurer pays 15% of the cost and a beneficiary pays 5% of the cost -- is set to increase from $4,700 to $4,800 (ProPublica, 3/29).