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New Hepatitis C Drug Is Center Stage in Legislative Debate Over Mandates

Legislators considering a bill (AB 1917) to set an annual out-of-pocket limit on prescription drug costs for insured Californians drew a hot response from insurers during an Assembly Committee on Health hearing last month.

“Somehow the debate over drugs in this Legislature has focused exclusively on insurance coverage,” said Nick Louizos, director of legislative affairs for the California Association of Health Plans. “If we want to have a real discussion about the high cost of drugs, then we think the makers of those drugs should be sitting here with us.”

Louizos then singled out one specific drug company and one specific product.

“Sovaldi, made by Gilead Sciences, costs $1,000 per pill. Let me repeat that. That’s $1,000 per pill,” Louizos said.

“That’s $84,000 per treatment cycle,” he added, “making it unsustainable for it to be covered both in commercial markets and in Medi-Cal managed care.”

Coverage  Mandates Spark Discussion of Costs

With health care reform center stage in politics and the state Legislature more intimately involved in health care issues, insurers fear that a wave of coverage mandates could swamp the industry.

Sovaldi stands out as the poster child for untenable costs — not just because it’s inordinately expensive, but also because it seems to work. That drives up demand, as well as ratchets up the pressure to have insurers and Medi-Cal cover its use.

Sovaldi, a drug approved for use in December 2013, treats hepatitis C. It’s been touted in the media as a breakthrough, since hepatitis C has so few effective treatment options. It’s manufactured by Gilead Sciences, based in Foster City.

Although Gilead and its Sovaldi drug are not actively involved in legislation in Sacramento and the drug has only been on the market for half a year, Sovaldi was the topic of conversation at three different legislative hearings this month.

A bill by Assembly member Rich Gordon (D-Menlo Park) — the piece of legislation that generated pushback in the Assembly health committee — is aimed at limiting exorbitant out-of-pocket drug costs to commercially insured consumers. AB 1917 also includes a proposal to mandate coverage of screenings for hepatitis C.

SB 1303 by Sen. Norma Torres (D-Pomona) would require practitioners to offer patients hepatitis C screening tests and insurers to cover those tests. When she introduced the bill this month at the Senate Health Committee, she made it clear it was not a mandate for hepatitis treatment.

“This bill is about the testing and not the treatment,” Torres said.

But the potential treatment cost loomed large over the discussion.

“Normally … in a policy committee, we should deal with just the policy,” said Sen. Ed Hernandez (D-West Covina), chair of the Senate health panel. “But what makes this unique is that there is a drug that’s very effective, with a high incidence of cure rate. But it’s a single drug.”

Even though the Torres bill deals with screening and not treatment, he said, you can’t ignore what it will cost patients, insurers and the state to treat all of those newly diagnosed Californians.

“If we’re going to be mandating, and changing and altering the practice of medicine to have everyone take the test … it’s also incumbent on the Legislature to figure out the cost,” Hernandez said.

“What’s going to happen is, it’s going to affect our Medicaid population, it’s going to affect the small group and individual market, Covered California, obviously it will affect the Medicare population,” he said. “But there’s only one drug available. It’s Sovaldi. It’s a thousand dollars a pill, and there’s an $84,000 price tag for treatment. If you put that exponentially to the amount of patients, this is going to be a significant increase in cost to the general fund.”

Struggle Over Sovaldi

According to Patrick Johnston, president and CEO of the California Association of Health Plans, the promise of health reform and new drug treatments are tempered by the threat of rising costs.

“While the Affordable Care Act and Covered California are making coverage more accessible and affordable, a number of drug-related and other mandate bills will send us in the wrong direction by driving up the cost of health care,” he said.

“Look no further than the introduction of … Sovaldi,” he said, “which is turning into a budget-buster for state Medicaid programs and putting significant pressure on premium prices.”

The cost of the new hepatitis C drug shouldn’t make it a target, according to Michele Rest, the director of public affairs at Gilead Sciences.

“We believe the price of Sovaldi reflects the value of the medicine,” Rest said. “Sovaldi represents a significant therapeutic advance over other available therapies.”

When you look at the total price tag of other therapies that need to be administered over a longer period of time, the 12-week Sovaldi regimen actually compares in cost, she said.

“Gilead has established one of the most comprehensive patient assistance programs in the industry to help ensure cost is not a barrier to Sovaldi for patients in the U.S. with high co-pays or who lack adequate insurance,” Rest said.

Louizos said it’s time for legislators to focus on other factors that drive the rising cost of health care, including drug companies.

Drug companies “need to answer some basic questions,” Louizos said, “like why exactly do the products cost so much? Better yet, what factors into those costs and what are you doing to be more efficient?”

The answers do not always lie at the feet of health care insurers, he said. “We do believe the debate over … drug mandates lacks a component of shared responsibility, and thus suffers from some false balancing.”

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