How an $84,000 drug is sparking a new health-care debate

It's been about six months since the Food and Drug Administration approved an $84,000 breakthrough drug to treat hepatitis C. One record-breaking sales quarter later for Gilead Sciences' Sovaldi, and the health-care industry isn't any much closer to figuring out how to deal with the drug's hefty price tag as it warns of a larger problem ahead.

There's nothing new about the high price of specialty drugs. But the pipeline of high-cost specialty drugs is growing in a way that's spooking employers, insurers and consumers, and Sovaldi has emerged as a special case that's drawing attention to the issue.

There's a potentially huge population of people who could benefit from Sovaldi: anywhere between 2.2 million and 3.2 million people are infected with the chronic liver disease. The concerns about paying for the treatment, though, are stretching across the industry.

Patient advocates are worried about access to the revolutionary drug, which costs $1,000-per-day for a 12-week course of treatment. Medicaid programs for low-income people, who have higher rates of hepatitis C, are scrambling to figure out how to provide access to the drug without stressing their state budgets. Insurers are freaking out about how to pay for Sovaldi, prompting an escalating war of words between insurers and the drugmakers in recent weeks.

Amid the mounting angst over Sovaldi, the National Coalition on Health Care on Wednesday launched a new campaign to draw attention to the high cost of specialty drugs. The coalition — representing employers, consumers, health-care providers and some pharmaceutical groups — is calling for a "national dialogue" on how to make breakthrough therapies affordable, starting with the case of Sovaldi.

The national dialogue has already started — Sovaldi's price has received public attention like no other drug in recent memory. A possible solution, at least for now, is still vague.

"You could either have a company voluntarily [bring down the price], or you can have some kind of negotiations," said NCHC chief executive John Rother. "There's a lot of different ways to do it. I don't think we're advocating any one approach."

Sovaldi costs considerably less in other countries. The full treatment runs $57,000 in the United Kingdom and just $900 in Egypt — countries where the governments take a role in setting prescription drug prices. A 2004 Department of Commerce study, analyzing price controls in 11 countries part of the Organization for Economic Cooperation and Development, found those countries had drug prices between 18 percent and 67 percent less than what was offered in the United States.

Rother made clear yesterday that his group isn't advocating price controls here, nor are they calling on the Department of Health and Human Services or Congress to jump in. They're hoping to mount enough public pressure to force Gilead to lower the price.

That's not going to happen so easily, though. Gilead and the drug lobby have so far staunchly defended the price of the drug, arguing that the cure it provides and the resources spent developing the drug justifies the price tag.

"Curing Hepatitis C not only dramatically improves patients’ lives, but has the potential to save the U.S. health care system as much as $9 billion per year by preventing expensive hospitalizations and avoiding thousands of liver transplants that routinely cost over $500,000 each," said John Castellani, chief executive of the Pharmaceutical Research and Manufacturers of America in a Thursday statement.

One thing that could bring down Sovaldi's price is the pressure of competition. Several new hepatitis C treatments could hit the market as soon as this fall, but Rother said it's not clear yet how much they'll cost or if they'll be as effective as Sovaldi, which has a 90 percent cure rate.

Rother said his group sees Sovaldi as part of a larger debate on how to address the growing pipeline of specialty drugs. The new drugs likely won't have a potential patient population as large as Sovaldi's, but the pharmacy benefit manager Express Scripts is projecting that spending on specialty drugs will increase 63 percent by 2016.

The growing costs associated with specialty drugs are forcing insurers to get creative about how they pay for care. As the Wall Street Journal reported this week, WellPoint launched a new incentive program that could steer oncologists away from pricier cancer drugs. The potential drawback is that could limit doctors' ability to tailor treatments for individual patients.

Jason Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico.
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