This drug is conquering hepatitis C but, at $1,000 a pill and $84,000 per treatment, can we afford it? Health plans are already restricting access to the drug and the state prison system is not prescribing it at all
The diagnosis was a shock to Waxman, in part because she didn’t know much about the disease. Its name conjured up images of needles, drug use, and unprotected sex, but that didn’t make sense to her. “I had never lived what you would call a high-risk lifestyle,” she says.cheryl waxman was healthy all her life. The 57-year-old Charlestown resident caught colds from time to time, but nothing more serious. Then last year the colds became more frequent, followed by bouts of bronchitis and pneumonia. Her primary care doctor couldn’t figure out what was wrong, so he suggested a number of tests. One of those tests came back positive for the hepatitis C virus.
Hepatitis C is a virus that attacks the liver and often leads to liver failure or cancer. The virus spreads through contact with infected blood. Drug users who share needles and other paraphernalia are particularly prone, but any sort of blood exchange carries risks, from using an infected person’s razor or toothbrush to getting a tattoo or ear piercing with equipment not properly sanitized.
Drug users are the most susceptible to infection. Charles Faris, president and CEO of Worcester-based Spectrum Health Systems, which runs a number of residential drug treatment facilties and methadone clinics around the state, says the rocketing use of intravenous drugs has triggered a near-epidemic of hepatitis C cases. “Of the people we’re seeing that are coming into our facilities, north of 50 percent are testing positive for hepatitis C,” he says.
Aging baby boomers are the other major group carrying the virus. Health officials say roughly one of every 30 people between the ages of 49 and 69 are infected. They typically contracted the disease when they were much younger, before the HIV epidemic prompted medical officials to pay much closer attention to instrument sterilization and to screening blood for contagious diseases.
|Camilla Graham, codirector of the Viral Hepatitis Center at Beth Israel Deaconess
Medical Center, left, confers with Cheryl Waxman, who tested positive for hepatitis C.
“It doesn’t show itself, but in the meantime it’s destroying your liver,” says Waxman, who lost 70 percent of her liver function because of the disease. She believes she contracted the virus around the age of 20, but isn’t sure how. There are several possibilities, including giving blood in high school, getting her ears pierced, and having her wisdom teeth removed. “I was probably a victim of the times,” she says.
What saved her life is a wonder drug called Sovaldi that, used in conjunction with other medicines, eradicates the hepatitis C virus but comes with a price tag that is ravaging the budgets of insurance companies and government agencies. The company selling the drug is charging $1,000 a pill, or $84,000 for a typical, 12-week course of treatment and $168,000 for a harder-to-treat strain of the virus. In developing countries, such as Egypt and India, the company is charging a tiny fraction of that amount. There are many other drugs that cost more than Sovaldi, but they typically address fairly rare diseases. What’s unique about Sovaldi is that it’s a very expensive drug from which an enormous number of people can benefit.
The numbers are scary: hepatitis C affects an estimated 150 million people worldwide and 3 to 5 million in the United States. In Massachusetts, infectious disease specialists estimate as many as 200,000 people could have the virus. Treating just the Bay State residents who are infected could theoretically cost $17 billion, an amount equal to nearly half of the entire state budget.
Waxman knows the price is high, but she wants everyone to remember that Sovaldi saves lives. She has reduced liver function, but she’s able to lead a normal life as long as she follows a strict diet that includes no salt or alcohol. She knows that if her doctor hadn’t recommended a test for hepatitis C, her situation would be very different today. “I’m lucky to be alive, quite frankly,” she says.
Winners and losers
Sovaldi was developed by a New Jersey-based company called Pharmasset, which was bought by Gilead Sciences of California in 2011 for $11 billion. Some analysts thought the purchase price was way too high; Gilead was essentially betting a third of its value on a company with its most promising drug still in clinical trials. Some analysts told the New York Times that sales of Gilead’s hepatitis C drugs would have to reach $4 billion a year to make the deal profitable.
Sovaldi has not disappointed. The drug hit the market last December, and sales hit $2.3 billion in the first quarter, $3.5 billion in the second quarter, and are on pace to reach somewhere around $10 billion for the year, which would make Sovaldi one of the best-selling drugs ever. Companies that made previous hepatitis C drugs beat a hasty retreat. Vertex Pharmaceuticals of Boston, the maker of Incivek, announced its first layoff ever as Sovaldi came to market, letting 375 people go, 175 of them in Massachusetts.
Gilead says the price of Sovaldi is not out of line with the cost of earlier treatment regimes that had much lower success rates. The price is also based somewhat on a country’s ability to pay. As it ramps up sales around the world, Gilead is adjusting the drug’s price based on a country’s gross domestic product.
The company plans to sell Sovaldi for roughly 1 percent of the US price, or about $10 a pill, in developing countries such as India and Egypt where the incidence of hepatitis C is high. Gilead is also licensing the drug to generic drug manufacturers in India who are free to sell below that price.
In Massachusetts, state officials have remained strangely silent on Sovaldi and its price, other than to say they are conducting a cost impact review and are committed to providing the drug to people who need it. The state’s prison system, however, is not currently giving Sovaldi to inmates even though the incidence of hepatitis C inside prison walls is typically high, affecting an estimated 17 percent of prisoners.
Health insurers, particularly those who serve the state’s Medicaid patients, have been the most vocal about the cost implications of Sovaldi. Medicaid is the state’s health insurance program for the poor, a population that tends to be infected with the virus at a higher rate. The six health plans catering to Medicaid patients say their losses have been mounting, in part because they are not being reimbursed adequately by the state for the high cost of Sovaldi. BMC HealthNet, for example, says 152 of its patients took the drug during the first six months of the year, costing the plan $13.5 million that was not accounted for in rates. The six Medicaid plans estimate their Sovaldi losses will total $70 to $80 million this year. They say the 3.7 percent increase in rates approved by the state for the coming year is about half of the increase the plans needed to cover their costs.
Christopher “Kit” Gorton, the head of Medicaid/state-sponsored programs at Tufts Health Plan, says Sovaldi has hit his company particularly hard. He says Network Health, the Tufts plan that serves Medicaid patients, responded to the opiate addiction epidemic by instituting a number of programs to deal with drug abuse. The programs attracted drug abusers, who are more likely to have hepatitis C. As a result, Network Health’s Sovaldi costs have spiraled. Network Health is the third-largest insurance plan serving Medicaid patients, but its Sovaldi losses this year are the largest at $29 million.
John Fallon, senior vice president and chief physician executive for the state’s largest insurer, Blue Cross Blue Shield of Massachusetts, say the company’s costs for Solvadi represent 5 percent of the company’s $1.5 billion in pharmacy spending. He says Sovaldi is part of a larger, concerning trend: 1 percent of Blue Cross prescriptions are for high-cost specialty drugs, yet those drugs account for 20 percent of all pharmacy spending. And he says the percentage devoted to specialty drugs is growing quickly.
|Cheryl Waxman is a baby boomer who suspects she contracted hepatitis C
When he first saw the cost implications of Sovaldi, Gorton at Tufts says he called his staff together and asked them to analyze the problem from every angle to see if there was a way to keep costs down. One staffer ran the numbers and demonstrated that the health plan could save money by sending all of its hepatitis C patients on vacation to Egypt for a week to visit the pyramids and, while there, pick up a $900 prescription for Sovaldi. Gorton says the Egyptian vacation idea was never seriously considered because it would be illegal, but it brought home the immense cost of the drug.
Gorton says Sovaldi cannot be viewed as just another drug. “It’s true we’re an insurance program and we signed up for liability, but this isn’t about insurance,” he says. “Just like the damage from a hurricane, you need to figure out how to pay for it.”
What to do?
A section of this year’s Massachusetts budget requires every primary care doctor treating someone born between 1945 and 1965 to offer them a test for hepatitis C. Camilla Graham, co-director of the Viral Hepatitis Center at Beth Israel Deaconess Medical Center, says anyone who tests positive should be treated with Sovaldi.
“This is a very tricky business situation, but medically it’s very clear to all of us,” she says, noting that putting off treatment with Sovaldi can lead to liver cancer or failure and often end up costing more in the long run. “For reasons of humanity and to limit downstream costs, you want to treat people before this happens,” she says.
But most Massachusetts health plans have put in place medication guidelines that require patients to exhibit some liver damage before they can be treated with Sovaldi. The plans won’t say so publicly, but the goal is to contain costs while making sure those in most need of the drug receive it.
Graham says the guidelines may make sense, but only on a temporary basis. “These restrictions do capture the most urgent patients, which is tolerable on a short-term basis, but is not sustainable longer-term,” she says. “You can’t make someone wait until they develop such advanced fibrosis that they require life-long screening for liver cancer.”
Massachusetts health officials have not objected to the restrictions on Sovaldi prescriptions put in place by health plans serving Medicaid patients. Other states have been more outspoken. Oregon, for example, is limiting Sovaldi prescriptions to only those with later stages of liver damage who are drug free and have been compliant with earlier treatments. California, Florida, and Louisiana have also restricted Medicaid access. Texas is not covering Sovaldi prescriptions at all through its Medicaid program.
|Camilla Graham, co-director of the Viral Hepatitis Center at Beth Israel Deaconess
Medical Center, believes anyone between the ages of 40 and 60 should be tested
and, if positive, treated with Sovaldi.
Prison systems across the country, many of them fearing lawsuits by inmates denied access to Sovaldi, are beginning to prescribe the drug. Massachusetts prison officials declined comment, although a spokesman said the drug is currently not being prescribed. He said the matter is under study.
John Milligan, the president and CEO of Gilead, told financial analysts in September that he believes that a new drug under development, which will require treatment for eight instead of 12 weeks, may entice state Medicaid programs and insurers to lower the threshold for when to prescribe.
“If you wait too long, you may not be able to undo the damage, that’s what we’ve learned with HIV, that’s what we are seeing with the hepatitis C virus. You may not be able to undo all the damage that you have done, you may not be able to get as much benefit as you would have otherwise. So it makes perfect medical sense to try to treat earlier rather than later,” he said. “We forget that the hepatitis C virus is a terrible disease. What has been under-reported is the incidence of diseases and death associated with the hepatitis C virus. People die about 15 years earlier than average, they have much higher incidence of myocardial infarction, they have much higher incidence of diabetes, which is a major health cost driver these days.”
Insurance officials acknowledge that Sovaldi may be able to reduce health costs over the long run, but they say the savings often come years or even decades after the initial expenditure on the drug. By that time, many of the patients have moved on to other health plans or Medicare, and the cost of the initial drug outlays are never recouped.
Along with Gilead, several other pharmaceutical companies are readying new hepatitis C treatments that could hit the market later this year and next year. Graham says she hopes the competition will drive prices down, but insurance industry officials are skeptical. Some say they think prices may actually rise. They are urging state officials to get everyone around a table to develop a coordinated response to drugs such as Sovaldi that cost a lot and are also beneficial to a large group of patients.
“This is really a public health issue. We need a community standard,” says Deborah Enos, the president and CEO of Neighborhood Health Plan, a division of Partners Healthcare that serves Medicaid patients.Fallon at Blue Cross thinks the debate about Sovaldi needs to take place at the federal level and involve all stakeholders, including government at all levels, pharmaceutical companies, and insurers. “We think this is deserving of a public discussion of how society should deal with this,” he says.
Jack Sullivan contributed to this report.