N.Y. grapples with cost of life-saving Hepatitis C drug
ALBANY—A new drug with a greater than 90-percent success rate for curing Hepatitis C is on the market, but the state may not be able to cover its cost for tens of thousands of people who don't have private insurance.
Sovaldi, manufactured by Gilead Sciences, was approved by the federal Food and Drug Administration in December 2013. It costs $1,000 per pill, and a 12-week standard course of treatment—one pill a day—costs $84,000.
Many of those who would be treated with the drug won’t be covered by private insurance. More than half the estimated 3.2 million people infected with Hepatitis C nationwide—including prisoners, veterans, the uninsured or Medicaid recipients—have their health coverage at least partially subsidized by taxpayers.
The potential expense is threatening to blow a hole in states' Medicaid budgets.
“Despite its clinical success, the extremely aggressive pricing of nearly $85,000 for a standard 12-week treatment is expected to add incredible cost pressure to already stressed federal programs,” Jeff Myers, president and C.E.O. of the Medicaid Health Plans of America, wrote in a letter on June 10 to the federal Office of Management and Budget.
The problem could be particularly acute for New York, which not only has the most expensive Medicaid program in the country ($54 billion a year) but also one of the largest Hepatitis C populations. State officials estimate as many as 200,000 people are infected statewide, 75 percent of whom don’t know they have the disease.
Hepatitis C, a contageous disease, infects the liver and is primarily spread through the blood, either by transfusions, infected medical equipment or intravenous drug use. The virus last for a relatively short time or remain in the body for years, causing long-term liver damage like cirrhosis or cancer.
Sovaldi represents a huge improvement over existing treatments for the disease, which have had marginal rates of success at eliminating the virus that causes Hepatitis C.
New York spends about $2,700 per Medicaid patient per year but health and insurance industry officials say adding in the cost of Sovaldi could overwhelm the state’s Medicaid budget, creating a hole in the state's annual Medicaid spending cap.
About 75,000, or roughly 1.2 percent, of New York’s Medicaid recipients have been diagnosed with chronic hepatitis C, according to the state health department. In addition, the state estimates another 30,000 Medicaid recipients have the disease but have not been diagnosed. That figure is based on estimates from the Centers for Disease Control and Prevention that 75 percent of people with the virus are unaware that they have it.
If the state Medicaid program paid the full price of Sovaldi for each recipient with the the disease, the total cost could be as high as $10.5 billion a year.
It's very unlikely the cost would be that high in a single year, however, because not every person with Hepatitis C would qualify for the drug and also because the state will probably negotiate with the drug's manufacturer for a lower rate on the drug's pricing, a health department official said.
Those negotiations might not yield much in the way of a discount. The federal government doesn't negotiate prices with drug manufacturers for Medicare and Medicaid, but individual states may try to cut a deal with Gilead, the manufacturer, for lower prices, said Matt Salo, executive director of the National Association of Medicaid Directors.
Gilead negotiated a reported 6 percent rebate on the drug's price with Florida's Medicaid program. But that means the price of a single course of treatment is still roughly $80,000 per person.
The costs are compounded by the fact Hepatitis C is a growing public health problem, especially in New York City, as Baby Boomers who used intravenous drugs in the 1960s and 1970s are only now beginning to show symptoms of the disease, such as end-stage liver problems.
An estimated 146,500 of the 200,000 New Yorkers who have chronic Hepatitis C are living in New York City. Among the 90,000 inmates who cycle in and out at Riker’s Island in a year, for example, about 9,000 have been diagnosed. The city health department believes between 9,000 and 13,500 more of inmates have the disease but have not been diagnosed.
Nearly two-thirds of New York City residents who are becoming newly infected are male and about 65 percent are black or Hispanic. The highest rates of infection are in the city’s poorest neighborhoods in the Bronx, like Hunts Point, Morrisania, and East Harlem, according to a 2013 report from the New York City Department of Health and Mental Hygiene. About 43 percent of newly-infected patients are intravenous drug users.
Insurers are expecting a wave of people seeking Sovaldi because of a new national effort and an ad campaign from the drug’s manufacturer urging people to get screened for Hepatitis C. The federal Centers for Medicare and Medicaid Services announced last week that it would cover the costs of Hepatitis C screening for Medicare recipients, a potential gateway to the federal government covering the costs of treatment in the Medicare program.
But while the drug is being called a miracle treatment, health care officials say people who take Sovaldi can get reinfected after they complete their treatment.
That means states are facing a moral dilemma. Should they cover the cost of the drug for anyone diagnosed with Hepatitis C, at any stage of the disease or should the drug be restricted to those who aren’t using drugs or alcohol? Can a patient who uses unsafe practices with needles receive an unlimited number of treatments or will treatments be capped?
While millions of Americans may be infected with the disease, "it's not at all clear that every one of those people should be getting treatment," said Salo, of the Medicaid directors association. "If you have no symptoms you don't need to get this treatment today."
By avoiding giving treatment to people who don't show symptoms of the disease, states like New York might be able to keep costs lower. But with a massive public service campaign underway at the federal level to urge people to get tested, states are confronting the problem of potentially refusing treatment for people who get tested and find out they have the disease.
"That’s the concern that most of our Medicaid directors have," Salo said.
"People will say, ‘You just told me to go get tested. I found out I’ve got Hepatitis C, and you’ve got a cure for it and you’re not going to give it to me.' They’re going to sue and then any assumption that we’re going to keep utilization low goes out the window. That's a very, very real concern," Salo said.
Brian Edlin, an associate professor of public health and medicine at Weill Cornell Medical College and a senior principal investigator at the Institute for Infectious Disease Research at the National Development and Research Institutes, said the drug’s manufacturer and the insurance companies should work harder to negotiate a deal on a lower price for the drug.
“The notion that these drugs are so expensive that they’re unaffordable is propaganda,” Edlin said. "It sounds like there’s a lot of jockeying going on between the government, the drug companies and the insurance companies. It sounds to me like they all need to start acting like adults.”
Some states are trying to avoid paying for the treatment altogether.
Last week, Oregon officials balked at covering the drug, which was estimated to cost the state’s Medicaid program $168 million a year. Oregon’s Medicaid program covers about 600,000 people. However, state officials say they will likely deny “routine coverage” of the drug to about 20,000 of those because the state has a waiver from the federal government that allows it to make decisions about coverage based on cost.
California and Florida are consdiering a "kick payment" system, where their health departments will develop a per-month payment rate for Hepatitis C treatments, and then pay plans each month for the individuals the plans are treating with the drug.
But New York state's approach to covering Sovaldi is a departure from the way other states are handling it so far. Medicaid director Jason Helgerson met with insurance industry officials earlier this month and asked them to come up with their own set of regulations for how they’d like to cover the drug.
A health department spokesperson said coverage for Sovaldi is on the New York State Medicaid formulary for fee-for-service Medicaid, and the majority of Medicaid Managed Care Plans will cover the drug with prior authorization.
A department spokesperson said the state has put together a Hepatitis C work group comprised of clinical experts, managed care plan medical directors, policy and fiscal analysts, representatives from health plan associations, and staff from the department’s Medicaid Office and AIDS Institute, to develop clinical criteria for usage of new Hepatitis C drugs and to explore the fiscal implications for Medicaid and Medicaid managed care plans.
Sources involved in the negotiations said insurance industry officials are considering rules for treatment that mimic the process doctors and insurers follow for allowing patients to get liver transplants—a high set of standards that would potentially cap the number of courses of treatment a patient can receive.
Patients could be subject to prior approval requirements and be unable to receive the drug until they have exhausted all other potential treatment options. And patients who are in rehabilitation for intravenous drug use may be prohibited from receiving the drug.
Several new drugs similar to Sovaldi could receive F.D.A. approval this fall. If that happens, insurers wouldn’t be able to use prior authorization to prevent people from relying on the expensive Hepatitis C treatments, said Matt Curtis, policy director at VOCAL-NY, an anti-poverty group that aids New Yorkers with HIV/AIDS, homelessness and related conditions.
Curtis said there’s a moral concern that if the drug is given out multiple times to people who abuse alcohol or intravenous drugs, it will have been "wasted on them.”
“We saw the same thing with the AIDS epidemic,” Curtis said. “And there’s always a subtext that a lot of doctors don’t want to treat people who use drugs.”
Edlin said any potential cap on the number of times a patient can use the treatment would be wrong.
“There’s no morality to that approach," he said. "People feel that if you use drugs we don’t really owe you anything, you don’t really deserve anything and we’re just going to write you off because you’re not a real human being.
"It’s really deadly for people with the disease. My view is they ( the insurance companies and the manufacturer) need to negotiate a price and agree on it and carry it out so that people who have this fatal disease can get cured of it. It’s not that hard to cure people anymore. There’s no reason why the financial interests of multibillion dollar organizations should stand in the way of people getting life-saving treatment.”