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High-Priced Drug Could Be Deal Changer

An effective, high-priced drug has governments, health insurers, consumers and ultimately taxpayers between a rock and a hard place. It could be a harbinger of things to come — including more medical breakthroughs and new policies to help pay for them.

The success of Sovaldi is good news for people with hepatitis C and stockholders of Gilead Sciences, the Foster City-based biopharmaceutical company that makes the drug. But the cost — $1,000 per pill, $84,000 for a full course of treatment — could be a deal breaker. Or perhaps a deal changer.

So far, the deal in this country has been that drug makers can charge whatever the market will bear. Sovaldi may be a canary in the coal mine of drug policy. Government officials, insurance companies and consumers in many countries are grappling with the problem.

“This is not just an issue for California or even a national issue, this is a worldwide issue,” said Charles Bacchi, executive vice president of the California Association of Health Plans. “What Gilead is doing is stretching the outer limits of what we’ve seen before.”

The same 12-week course of Sovaldi that costs $84,000 in California costs $900 in Egypt. Gilead offered to supply the drug at a 99% discount in Egypt, which has the highest prevalence rate of hepatitis C in the world.

“We believe Sovaldi could have a major impact on public health in Egypt by significantly increasing the number of people who can be cured of hepatitis C,” Gregg Alton, Gilead manager of corporate and medical affairs told Reuters.

More than 150 million people worldwide are chronically infected with the liver-destroying disease, according to the World Health Organization. In the United States, an estimated three million people have the disease.

Gilead officials did not respond to requests for comment for this story.

Sovaldi and other high-priced drugs such as Lucentis, an eye medication made by Genentech that can cost as much as $2,000 per dose, are part of an expected wave of breakthroughs in new, expensive pharmaceutical treatments for a variety of diseases and chronic conditions.

Patents and FDA exclusivity regulations usually grant new drugs the right to be on the market anywhere from three to 20 years before generic competition can enter. High-priced drugs might cause reconsideration of that time frame, according to some stakeholders.

Government Officials, Advocates, Insurers Mulling

Gov. Jerry Brown’s (D) budget proposal for California includes money to pay for drugs in what appears to be a fairly wide-open formulary for Medi-Cal, California’s Medicaid program. According to Department of Health Care Services officials, “any FDA-approved drugs are required to be covered by Medicaid programs.”

DHCS officials added, however, “We are currently evaluating our Medi-Cal policy on utilization and the issues raised by managed care plans.”

For the estimated three million people who gained Medi-Cal coverage through the Affordable Care Act expansion of the program, the federal government pays 100% of the tab for the first three years and 90% thereafter. But for the almost eight million Californians already covered by Medi-Cal, expenses are shared 50-50 between federal and state government agencies.

California’s drug-buying responsibilities go beyond Medi-Cal. The state also purchases drugs through the prison system, CalPERS and other health programs.

A couple of bills in the California Legislature deal with the issue:

  • AB 1917, by Assembly member Rich Gordon (D-Menlo Park), would limit out-of-pocket costs on prescription drugs for insured patients and require commercial insurers to cover hepatitis C screenings. Opponents, including insurers, say coverage mandates for expensive drugs could bankrupt the private insurer system.
  • AB 1814, by Assembly member Marie Waldron (R-Escondido), would, to the extent permitted by federal law, require Medi-Cal to cover prescribed drugs and require Medi-Cal managed care plans to pay for them. Estimated cost to the state for this bill is $10 million.

The California Chronic Care Coalition is sponsoring a stakeholders specialty medication meeting May 29 in Sacramento.

“We have invited over 100 stakeholders and policymakers with different points of view to engage in thoughtful discussions about the specialty medication crisis — access, affordability, quality and adherence,” said Jerry Jeffe, public policy director for the coalition.

The coalition is one of 23 organizations that signed a letter to Insurance Commissioner Dave Jones contending that insurers’ practice of placing some high-costs drugs such as Sovaldi into specialty tiers violates the Unruh Civil Rights Act.

Costs for some prescription drugs have fallen in recent years but prices for some specialty drugs — including drugs used to treat cancer, arthritis, hepatitis C and multiple sclerosis — have risen significantly, according to a new report from the IMS Institute for Healthcare Informatics.

Increased out-of-pocket costs to consumers for some drugs can be attributed in part to a form of pricing used by insurers known as “specialty tier” pricing. Instead of paying the standard copayment, consumers whose prescriptions fall into specialty tiers are sometimes required to pay a percentage of the total cost. Specialty tier pricing can cost patients with chronic conditions thousands of dollars per month.

Bacchi said insurers need help.

“One of the main reasons this drug is such a concern is that not only do private insurers have to pay for it in the private market, at the same time community  insurers are having to pay for this and so is the federal government and so are each of the states in Medicaid programs. Premiums are going to go up and that’s also an issue for taxpayers,” Bacchi said.

“Medi-Cal managed care plans need immediate relief and a long-term strategy that broadly addresses the rising use and cost of specialty drugs,” Bacchi said.

Bacchi stopped short of calling for regulatory relief.

“Price controls in the medical world generally aren’t a good idea,” Bacchi said. “You want to have market forces do the job.”

National Call for Help

Nationally, safety-net insurers are calling for help. In a letter to CMS Director Cindy Mann, Margaret Murray, CEO of the Association of Community Affiliated Plans, wrote:

“ACAP plans are mission-driven organizations; it is hardly customary for safety net health plans to request rate relief midstream. However, in this case, the risk is well beyond the reasonable risk level that a health plan should be expected to bear using its reserves. We are concerned that without federal and state action to address this situation our member health plans will not be able to survive this unfunded financial strain. The resulting elimination of safety net health plans from the market will impede access to health care services for all Medicaid members.”

ACAP represents 57 safety net, mission-driven health plans that serve more than 10 million publicly-insured Americans in 24 states.

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