Democracy Dies in Darkness

Economy

Louisiana considers radical step to counter high drug prices: Federal intervention

By Carolyn Y. Johnson

July 3, 2017 at 6:53 PM

by Carolyn Y. Johnson

BATON ROUGE — In this city on the east bank of the Mississippi River, Rebekah Gee, Louisiana's health secretary, presides over what she calls the "public-health-crisis cradle" of America. Poverty and poor health collide here to produce some of the nation's worst rates of obesity, premature birth and other maladies.

Those problems are deep-rooted and hard to solve. The easy one, at least in theory, is hepatitis C, a liver-damaging virus frequently contracted by injection-drug users that can cause cirrhosis and cancer.

A handful of powerful new medicines offer high cure rates and few side effects. But because the drugs also launched with staggering list prices­ — as much as $94,500 for a 12-week course of treatment — Louisiana and other states have decided to ration care to Medicaid patients, waiting for people to get severe liver damage before providing access to the medicine.

Now, Gee is considering a radical move to get treatment to the thousands of Louisiana residents who need it but are not sick enough to qualify — asking the federal government to step in to drive prices down, perhaps by overriding the patent protections drug companies hold over the medicines.

"This should be the low-hanging fruit," Gee said. "What frustrates me as a public policymaker is I can't solve public-health problems that should be the easy ones."

Related: [These researchers think they have a solution to the global crisis in drug prices]

Gee will decide over the coming months whether to move forward with the controversial strategy. Gee could ask the federal government to invoke a little-known law that allows it to employ companies' drug patents for the government's use. After essentially overriding the patents, the government could pay the companies as little as $1,000 for a 12-week course of treatment.

Pharmaceutical firms say they invest in risky research and development because of the rich reward that comes with success — a temporary monopoly on their inventions. Companies argue that any interference in this reward structure would dull the incentives for innovation, undermine the business model that supports the development of new drugs and endanger the next transformative medicine.

If Gee moves forward or is able to leverage the threat of intervention to wring deep concessions on price, it could be a powerful precedent.

"Secretary Gee is . . . directly challenging the power of a drug company to essentially determine who lives and dies by pricing products so high that she can't buy them for her population," said Sara Rosenbaum, a professor of health law and policy at George Washington University. "It puts the issue into a much clearer posture than just sitting around saying, 'We can't afford these drugs for poor people.' "

At the moment, that is Louisiana's stance. Despite receiving rebates to ameliorate the high list prices, the state says it can afford to pay for treatment for only the patients with significant liver damage, at high risk of progressing to cirrhosis and organ failure. Last year, that meant only 324 of the state's estimated 35,000 Medicaid or uninsured patients who are infected.

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Dominick Crocco, 31, contracted the virus from heroin use about six years ago. His liver is damaged — his doctor told him he was "lucky" initially, because tests showed his liver function was impaired enough that it met the state's strict criteria.

Medicaid refused to pay for his prescription, however, because parts of his liver were still not diseased enough.

"I'll get sick enough, eventually," Crocco said, wryly.

Crocco and Gee, in their own ways, are experiencing the confluence of medical progress, a health crisis that weighs heavily on the poor and the realities of the safety net. The new generation of hepatitis C treatments represents a promising public-health opportunity to wipe out a disease. But even with the emergence of powerful cures, the rates of hepatitis C increased nationally between 2010 and 2015, driven primarily by injection drug use fueled by the opioid epidemic. Because private insurance will often cover hepatitis C treatment, lower-income people on Medicaid are among those most affected by the price.

The plight in Louisiana shows how, in an era of limited public finances, the government is forced to decide whom it can afford to treat and whom it can't. Those tough decisions are certain to become more acute if the Senate health-care bill, which would reduce federal Medicaid spending, moves forward. Over time, states facing rising medical costs will have to raise more money through taxes or cut back on the program.

"When you look at some of the national discussion about drug prices, it's often presented in isolation: This is the price, and the drug is worth it," Gee said. "When I make decisions about drug coverage, I have to trade off those decisions with K-12 education, higher education, roads."

An 'impossible' price tag

As the medical director for Louisiana's Medicaid program, Gee — an obstetrician and gynecologist who moved here in 2009 — was involved in writing guidelines for the state's coverage of hepatitis C medications after the first of a new generation of drugs was approved in late 2013. The treatment carried an infamous $84,000 price tag.

"It was frankly impossible, from a budget standpoint," Gee recalled.

Related: [How an $84,000 drug got its price]

The criteria patients had to meet were strict. The virus must have wreaked damage, transforming a smooth, healthy liver into a leathery organ, mottled with nodules. The individual had to have a clean drug and alcohol screening.

Gee quickly found herself under fire. The issue was made even more stark when Louisiana Gov. John Bel Edwards (D) expanded Medicaid last July under the Affordable Care Act. That created the opportunity to cure even more people but exacerbated the financial challenge. Treating the state's Medicaid and uninsured would cost $764 million, according to an online calculator created by Peter Bach, director of the Center for Health Policy and Outcomes at the Memorial Sloan-Kettering Cancer Center.

Restrictions on access conflict with medical guidelines and infuriate physicians, who argue that patients with other diseases do not face similar barriers.

"The bottom line for me is my patients are developing organ damage and I have to wait until they have organ damage until I can access medication for hepatitis C," said Jason Halperin, an infectious-disease clinician at CrescentCare, a federally qualified health center in New Orleans.

Gee this year began to think about using a federal law that allows the government to override intellectual-property rights to get more-affordable medication.

At Gee's urging, Joshua Sharfstein, a professor of public health at Johns Hopkins University and a former Food and Drug Administration deputy commissioner, convened a meeting of health-policy specialists and economists. They advised that the state ask the federal government to intervene in a two-pronged approach: Gee should first ask the government to negotiate with a drug company and license a medication, in line with a recent recommendation by a committee from the National Academies.

At the same time, they advised Gee to pursue a harder-edged tactic, in case the voluntary approach did not work: Gee should ask the secretary of health and human services to invoke a century-old law that allows the government to use patents at a reasonable cost. The panel recommended a price as low as $1,000 per patient.

The law was used routinely in the 1950s and 1960s to make medicines available at lower prices. It was considered but not used during the anthrax attacks in 2001. It has been used by more than 10 government agencies or departments to lower the prices for patented inventions, including night-vision goggles for the Defense Department.

"The drug has been out for years, and we're failing to provide it to the majority of people who have this infection," Gee said. "We're failing at our mission to improve the public health, and so just doing what we're doing is not an option and we have to do better."

Corporate opposition

President Trump has used forceful language against high drug prices and threatened the industry with tough action to bring costs down. Still, health-policy experts predict that even if Gee asks the federal government to help, the odds are against a Republican administration making such a dramatic intervention in the private sector.

Department of Health and Human Services spokeswoman Alleigh Marré declined to comment.

By merely threatening the move, Louisiana could prompt the drug companies that produce hepatitis C treatments — which oppose intervention — to offer a better price.

Gilead, a company that has projected between $7.5 billion and $9 billion in sales for 2017 for its hepatitis C drugs, says federal intervention would threaten future progress.

In a statement, the company said the proposal "puts in jeopardy further medical innovation by undermining the patent system and de-incentivizing research and development." Gilead said that the state's predictions of the budget impact are unrealistic, based on the idea that the entire infected population could be screened, treated and connected to treatment in a year. Gilead offers states that do not restrict access to treatments deep discounts — less than $30,000 for a 12-week treatment.

Merck spokeswoman Pamela Eisele said the company had already introduced its treatment, Zepatier, at a significant discount to competitors — $54,600 for a 12-week course — and offers additional rebates.

Markeisha Marshall, a spokeswoman for AbbVie, said the $83,319 list price for that company's drug does not reflect discounts or rebates.

Gee said that she is not wedded to one approach and that she simply thinks the equity and access problems that are an outgrowth of high drug prices need to be tackled. After receiving the expert panel's recommendation, Gee put out the proposal for public comment and received 102, a majority of which were in favor of taking some action. She expects to make a decision soon about a strategy to try to eliminate hepatitis C in Louisiana.

Gee said that she has not been approached yet by any companies offering a better price.

The danger of waiting

Caught in the middle of debates about intellectual-property rights and innovation are patients, who see being cured of hepatitis C as crucial in getting their lives back on track. Even for those who are not in danger of liver failure or cancer in the short term, the virus can cause emotional duress and worries about infecting others.

June Oswald of New Orleans, who was denied access because there was not adequate damage to her liver, had been painstakingly rebuilding her relationships and life in a residential treatment center. Getting rid of the virus is an essential part of that journey for Oswald, a lawyer whose struggle with addiction has damaged her career and her family.

"I know I could spread it to others. I have a small child — I'm worried about sharing a toothbrush or having a cut in my house," Oswald said. "I'm worried about developing future liver damage."

In Baton Rouge, Crocco feels as if he is on a precipice, ready to begin a new life. After his prescription for a hepatitis C medication was rejected in January, he relapsed. To claw himself out, he moved two hours from his home and his old bad habits. He went through detox and rehab and now lives with 22 other men trying to stay sober.

Crocco has seen others relapse or come close; that has only motivated him more to stay clean. Amid days packed with addiction support meetings and three-hour therapy sessions, he has started doing electrical contracting work. The idea he could fix his liver, he said, has helped him stay clean.

"I'm literally willing to do whatever I've got to do to stay clean," Crocco said. "My relapse mechanism is remorse-, self-esteem-related. I have all these reminders that this is what I deserve, and hep C is one of those things. It's how you live, and this is who you are."


Carolyn Johnson is a reporter covering the business of health. She previously wrote about science at The Boston Globe.

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