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Louisiana adopts ‘Netflix’ model to pay for hepatitis C drugs

Louisiana will use the 'Netflix' model, with the goal of treating 10,000 people with hepatitis C in its Medicaid and prison population by 2020. (Drug Pricing Lab - Memorial Sloan Kettering Cancer Center)

Louisiana officials announced Thursday that their state would become the first to move forward with a new way to pay for expensive hepatitis C treatments, which could dramatically increase the number of people who can be cured of the liver-damaging disease and provide a model for others struggling to afford the medications.

Instead of paying for each prescription individually, Louisiana Gov. John Bel Edwards (D) said the state would essentially pay a subscription fee to a drug company, an alternative payment arrangement that has become known as the “Netflix model.” The state would then get unlimited access to the drug, similar to how consumers pay a monthly fee to stream unlimited television shows and movies.

“I’ve had conversations with a number of governors to make sure they’re aware of what we’re doing — and if and when we’re successful, we’re going to have something worthy of emulation and replication around the country,” Edwards said.

The development of a new generation of cures for hepatitis C starting in 2013 offered a rare public health opportunity to eradicate a virus. But after the first medicine launched with an $84,000 price tag, the drugs became a flash point in the contentious debate over high drug prices. State governments and health insurers have had to make hard decisions about how to balance access to highly effective treatments against other spending priorities — in the midst of an opioid crisis that has helped fuel the spread of the disease among intravenous drug users.

Edwards’s announcement came with a solicitation for drug companies to submit bids for the contract, in the hope of having one in place by July.

The state’s goal is to treat 10,000 people with hepatitis C by 2020 — about a quarter of its infected population on Medicaid and in prison — instead of the slow trickle of about 1,000 people it treated last year at a cost of $35 million. That amount does not include undisclosed rebates.

Louisiana, which previously examined an even more aggressive move to try to force drug prices lower, has already been testing interest in the idea through a request for information. Health secretary Rebekah Gee said that in conversations with three drugmakers, all have been supportive. Gilead Sciences, the maker of several hepatitis C treatments, sent comments to the state last year indicating it was “eager to consider a subscription payment model.” AbbVie, maker of a competing treatment, expressed general support for the state’s effort to eliminate the disease.

Gee said that the goal is to enter into an agreement with a subscription fee that does not exceed the amount the state spent in 2018.

An analysis published in the Journal of the American Medical Association in November proposed the Netflix model, in which the annual subscription fee could be based on the amount that would have been budgeted to treat the disease for that year — meaning that pharmaceutical companies would not lose revenue and states could cap spending.

Peter B. Bach, a drug-pricing expert at Memorial Sloan Kettering Cancer Center who co-authored that analysis along with Sen. Bill Cassidy (R-La.) and Mark Trusheim at the MIT Sloan School of Management, said that it would be crucial for the contract to include incentives to the drug company to treat as many infected people as possible.

“The profit-maximizing price [for the drug company] is very rarely the one that maximizes public health," Bach said. “And we’ve seen this very acutely with hepatitis C.”

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