(Reuters) - U.S. health insurers are seeking help from state health officials to foot the bill for a new generation of hepatitis C treatments that could cost the nation $200 billion or more in the next five years.
Several insurers, including Molina Healthcare, which administer health plans for California’s Medicaid program for the poor are asking states to step in and pay for Gilead Sciences Inc’s Sovaldi, a drug that costs $84,000 per patient. The wrangling has reopened a national debate on how much the United States can afford to spend on the newest, costliest medications.
California, home to more than 9 million of the 62 million people who receive Medicaid benefits nationally, said it is still considering policies on how to reimburse for these new drugs. It is looking both at Sovaldi and a combination of the drug with Olysio from Johnson & Johnson.
Gilead and some health experts argue that the high price represents a worthwhile tradeoff, since the new treatments for the first time can cure nearly all patients who adhere to the 12-week course of drugs. That can help millions of Americans avoid repeated treatment with other therapies, as well as the more serious consequences of liver disease.
“Government systems ... will bear the long-term medical costs of liver cancer, liver failure and transplant, and therefore are the systems that will benefit most from the availability of new therapies for (hepatitis C),” Gregg Alton, executive vice president of corporate and medical affairs at Gilead, said in a statement.
At the same time, state and federally funded Medicaid programs have been straining under a slow economic recovery, repeated budget cuts and rising public-sector costs.
“The challenge is providing the most appropriate treatment for medical members that is also fiscally sound,” said Tony Cava, a spokesman with the California Department of Healthcare Services in Sacramento. Cava said in a phone interview that the department received requests to separate, or carve out, the medication from several insurers’ plans. Instead, patients would be reimbursed directly by the state for any drug costs.
As many as 3.2 million U.S. patients have hepatitis C. It can take 20 to 30 years for the virus to develop into more serious health problems such as cirrhosis or liver cancer and is the main cause of liver transplants.
Sovaldi was approved in December by the U.S. Food and Drug Administration. AbbVie Inc and Bristol-Myers Squibb Co have developed oral treatments for hepatitis C with cure rates in excess of 90 percent. They are expected on the market over the next year, while Merck & Co and Vertex Pharmaceuticals are also working on new therapies.
Sovaldi’s price tag has made headlines, but the actual cost can be higher in many cases. Some patients must take the drug for longer than 12 weeks or require a combination of other drugs for it to be most effective.
Many doctors are requesting a $150,000 combination of Sovaldi (sofosbuvir) and Olysio (simeprevir). The FDA is expected to decide later this year on a Gilead combination drug that will have a similar effect.
Camilla Graham, co-director of the viral hepatitis center at Beth Israel Deaconess Medical Center at Harvard Medical School, fears that insurers will restrict the treatments.
“There is probably some price point where we as a society say we can afford to treat everyone with hepatitis C, like currently we say everyone needs to be treated with HIV,” she said in a phone interview.
Graham estimates that treating two-thirds of U.S. hepatitis C patients at about $100,000 each would cost the country $200 billion. Doctors expect the disease to peak in 2019 or 2020.
Insurers that manage Medicaid plans, including HealthNet Inc, WellPoint Inc and Aetna Inc, say they are talking to the state-based agencies about how to manage these costs. The fear is that the true number of people infected with the virus is not known, making it hard to gauge whether they will lose money by covering the new drug costs.
Molina is based in California and has nearly 2 million Medicaid members nationwide. It has asked for carve-outs, or direct government reimbursements outside of its contracts in all of its 11 states, which also include Texas and Florida.
“The drug was approved in December and it was not factored into our rates for 2014. We are going back to the states and saying, ‘How do you want us to handle this?’” said Chief Executive J. Mario Molina in a phone interview.
Medicaid programs nationwide are so far holding off on deciding. They are more likely to allow insurers to renegotiate contracts or build in additional payments based on the risk profiles of Medicaid recipients than turn to carve-outs, Matt Salo, executive director of the National Association of Medicaid directors said in a phone interview.
“We are sensitive to the potential that this is a meteor falling out of the sky and devastating a business model (for insurers) ... but I don’t think we are there yet,” Salo said.
WellPoint spokeswoman Jill Becher said in a statement that the Sovaldi approval was not included when it negotiated its Medicaid contracts or set rates in its commercial business. The company is covering the Sovaldi and Olysio combination for members with advanced liver disease.
Aetna is paying claims now on Sovaldi and said it will adjust guidelines as the other new drugs come onto the market. It is negotiating Medicaid coverage of the drug on a state-by-state basis.
Ed Pezalla, Aetna’s national medical director of pharmaceutical policy, said in a phone interview that insurers are facing a deluge of hepatitis C patients as screening efforts for the disease ramp up, while people already diagnosed had been waiting for an easier-to-tolerate treatment.
Richard Esnard, a 73-year old retired policeman who lives in Rockland County, New York, is part of the early wave of patients who waited for Sovaldi after having failed to be cured in a clinical trial several years ago.
“After the clinical trial ended, there was a long period of time for me to recuperate and then in the interim these drugs became approved,” Esnard said in a phone interview. He has a $15 co-pay for each of the three drugs he takes in combination: Sovaldi, Olysio and older drug ribavarin. The rest is covered by his primary and secondary Medicare plans as treatment for his advanced liver disease. “I’m lucky in that way,” he said.
U.S. health officials have recommended that all baby boomers born between 1945 and 1965 be screened for the virus, estimating that more than 2 million of them may be infected.
Reporting by Caroline Humer; Editing by Michele Gershberg and Jonathan Oatis