High Price of Specialty Drugs Prompts Backlash

For hepatitis C patients, new drugs introduced in the past two years offer a cure that’s miraculous when compared with former treatments for the potentially fatal virus.

Instead of taking a long course of drugs with miserable side effects, patients can be cured in a matter of weeks. The drugs could change the lives of millions of people – at a price.

One of the drugs, Sovaldi, cost $1,000 a pill when it went on the market in the United States in late 2013. Another drug called Harvoni, made by the same manufacturer, had a list price of $1,125 per pill when it debuted last fall. A typical 12-week course of treatment with Harvoni would cost $94,500 at that price.

The cost of these new hepatitis drugs has inflamed debate about whether pharmaceutical companies are charging outlandish amounts to treat life-threatening diseases and has prompted legislative efforts this year to rein in drug costs.

“It was sort of a spark on a pile of dynamite,” said Emalie Huriaux, director of state and federal affairs for Project Inform, a San Francisco-based group that advocates for patients with hepatitis C and HIV/AIDS.

Medical advances are expected to produce a series of blockbuster drugs in the coming years to treat cancer, Alzheimer’s disease and other severe and commonplace afflictions. Patient advocates worry that drugmakers will charge sky-high prices for each new drug while their patents exclude competitors.

“It’s not just Sovaldi. It’s all the ones that come after,” said Anthony Wright, executive director of the patient advocacy group Health Access California. “Sovaldi set a new price point for the next wave of drugs.”

An unusual coalition of patient advocates and health plans, groups often at odds, are calling for greater transparency in drug pricing. They want to know why the drugs cost so much in the United States when in other parts of the world – including Europe, Canada and Egypt – Sovaldi and Harvoni are sold for a fraction of the price.

“We feel like there hasn’t been a lot of explanation why drugs are priced at this rate,” said Nicole Kasabian Evans, vice president for communications at the California Association of Health Plans. “There are about 12 blockbuster drugs set to launch this year, and we think it’s important to peel back the onion and get a better understanding of why drugs are priced this way.”

Medicines to treat rare conditions, called “orphan drugs,” for years have been priced high to recoup the expense of developing a drug for a relatively small number of patients. But until Sovaldi, it was unheard of for a drug aimed at a commonplace disease to cost so much, critics said.

The U.S. Centers for Disease Control and Prevention estimates that 3.2 million people in the United States have a chronic hepatitis C infection that can lead to cirrhosis or liver cancer. The World Health Organization estimates there are 130 million to 150 million people worldwide with chronic hepatitis C, and that 350,000 to 500,000 people die from liver damage and related conditions each year.

Multiply the price of the new hepatitis C drugs by the number of potential patients, and you get an idea of the costs to patients, health insurers and government programs such as Medi-Cal. The issue would be compounded if other new drugs are priced similarly.

The investigative news organization ProPublica recently reported that the federal Medicare program spent $4.5 billion last year on new treatments for hepatitis, including $3 billion on Sovaldi and $670 million on Harvoni. That was 15 times more than Medicare spent the year before on older treatments for hepatitis C, according to the report.

In California, Gov. Jerry Brown added $300 million to his proposed budget for the coming fiscal year to cover additional costs of new hepatitis C treatments and created a task force to examine the impact of high-cost specialty drugs.

Quick cure, high price

Sovaldi and Harvoni are made by Gilead Sciences, a company headquartered south of San Francisco in Foster City. In February, Gilead reported that its global “hepatitis C revenue” totaled $3.8 billion for the last three months of 2014. In an earnings conference call, Gilead Executive Vice President Paul Carter said $3.2 billion of that revenue came from the United States.

“To date, approximately 140,000 patients have started (hepatitis C) therapy on a Gilead product in the United States,” Carter said.

Gilead spokeswoman Cara Miller declined an interview request. In an emailed statement, she said the drugs’ prices are justified by their effectiveness in curing hepatitis C, reducing future treatment costs.

“Unlike long-term or indefinite treatments for other chronic diseases, Sovaldi and Harvoni offer a cure with as little as eight weeks of treatment for many patients taking Harvoni,” the statement said. “We believe the price of Sovaldi and Harvoni reflect the value of these medicines.”

The company has been under pressure to lower prices. In December, the U.S. Food and Drug Administration approved a competitor’s drug that has proven effective at curing hepatitis C and also came with a price tag of about $1,000 a pill.

Gilead has been negotiating lower prices with government programs and private health insurers. In February, the company told investors it expected to provide average discounts of 46 percent on Harvoni and Sovaldi in 2015.

“We are working to enable access to our (hepatitis C) treatments for as many patients as possible, and we continue to work with public and private payers to facilitate broad patient access in the context of a competitive marketplace,” Miller said in the statement.

Gilead also offers treatment at little or no cost to uninsured or underinsured patients through its Support Path program.

Tammy Lovelace of Sacramento said she tried for a year with the help of her health care provider to get Sovaldi or Harvoni through her insurance company but was denied repeatedly. Recently, Gilead gave her Harvoni for free through its Support Path program, she said.

Lovelace just started taking Harvoni and hopes to be cured of hepatitis C in a few months. She said the disease makes her feel sick and lethargic, and she sometimes sleeps up to 20 hours a day.

Lovelace said she was infected as an intravenous heroin user but has been clean for three years. Though grateful for the possibility of a cure, she said she found it hard to understand the immense price of the drugs.

“Who in their right mind would be an intravenous drug user and have $80,000?” she said. “I just want a better quality of life. I didn’t get clean to die of hep C.”

Demands for disclosure

Both the California Association of Health Plans and Health Access California are backing a bill introduced this year by Assemblyman David Chiu, D-San Francisco, that would require drugmakers to disclose the costs and profits of any drug or course of treatment that costs more than $10,000 per year. Assembly Bill 463 is awaiting a hearing by the lower house’s Health Committee.

“The industry has told us the highest drug prices are driven by costs,” Chiu said. “If that’s the case, then we’re simply asking for information to help policymakers understand.”

Another bill by Assemblyman Rich Gordon, D-Menlo Park, addresses the issue of how the costs of expensive treatments are split between patients and health plans. Some plans placed all treatments for HIV and hepatitis C into a category that requires patients to pay up to 20 percent of the drug’s cost rather than a copay of $10 or $20.

Patients can quickly shell out thousands of dollars before insurance starts to cover a drug’s full cost. Some say the cost sharing discriminates against those with conditions such as hepatitis C, HIV/AIDS and multiple sclerosis by charging more for life-saving treatments.

Insurance companies used to deny coverage or charge high premiums to patients with chronic conditions that were pricey to treat. The federal Affordable Care Act prohibited health plans from discriminating against enrollees with pre-existing conditions.

“There is evidence, however, that insurers are resorting to other tactics to dissuade high-cost patients from enrolling,” researchers Douglas Jacobs and Benjamin Sommers, with the Harvard School of Public Health, wrote in an article published in the New England Journal of Medicine in January.

Earlier this year, Kaiser Permanente reversed its decision to place many HIV drugs in its highest-cost tier of specialty medications. Other health plans persist in the practice.

Gordon’s AB 339 would require health plans to cover medically necessary drugs and to limit cost sharing so that patients wouldn’t be deterred from seeking treatment.

“Our goal with AB 339 is to promote access to essential lifesaving medications for Californians who need them,” Gordon said in a news release. “Cost should not be an obstacle.”

Health Access California sponsored the legislation, but the California Association of Health Plans is not supporting it because it would transfer costs from patients back to insurers. The bill is scheduled to be heard by the Assembly Health Committee on April 28.

“We’re giving a false sense to consumers that we’re lowering drug costs when in reality we’re just shifting costs,” said Kasabian Evans, of the California Association of Health Plans. “We need to have a bigger discussion of how we can ensure health care remains affordable.”

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