Monthly Archives: May 2015

The High Cost of A Cure: The First Step in Rationing Care

Hepatitis C is one of the most common chronic infectious illnesses in the US today and affects nearly 3.2 million Americans. Complications of hepatitis C infection include liver cancer as well as cirrhosis.  Many patients with chronic hepatitis ultimately develop liver failure and will die without liver transplantation.  In the last year,  a new drug class has entered the market and is able to produce cure rates in excess of 90%.  These drugs–Sovaldi and Harvoni– are incredibly expensive and some treatment courses cost more than $1000 a day.  Typical treatment courses to achieve cure require 12 weeks of continuous treatment.  Drug maker Gilead reported that sales of Sovaldi exceeded 2.2 billion dollars in the first quarter of 2015. According to a report released by Express Scripts in 2014, spending on Hepatitis C therapy increased by 700% between 2013 and 2014.  In fact, only 1% of drugs accounted for 32% of spending over the same time period–much of this is due to the emergence of the new treatments for hepatitis.

When questioned about the cost of the drug, most pharmaceutical executives will claim that the cost is justified by the investment of time and money in research and development that led to the cure.  The cost to take a drug to market and obtain FDA approval is great but does it really justify the astronomical costs?

But aren’t they simply charging what the market will bear?

Gilead executive Gregg Alton argues that the pricing of their drug is based on what they think is a “fair price for the value that [we] are bringing into the healthcare system and to [the] patients”.  Will the price be lowered once investment is recouped?  Alton thinks this scenario is “very unlikely.”

What are the implications for Medicare?  Who will get the drug and who pays the bills?

The Washington Post reports that Medicare spending on hepatitis C therapy exceeded 14.5 billion dollars last year alone.  Nearly 350,000 Medicare beneficiaries have hepatitis C (and many are not even aware of their diagnosis) according to an analysis by Health Affairs published last year.  By law, medicare is prohibited from negotiating prices with pharmaceutical suppliers.  Taxpayers will bear the brunt of the cost–once a medicare recipient reaches 4700 dollars out of pocket, the government program’s “catastrophic” coverage will then pick up the bulk of the remaining tab. Ultimately, other medicare patients will have higher deductibles and continued “cost sharing” will result in higher costs for everyone.  My fear is that widespread rationing may be implemented and access to a life saving drug may be ultimately limited due to overwhelming costs.  Medicaid is already beginning to ration use in many states and the Senate Veterans Affairs committee has held hearings in the last year in order to question industry about the price point and to prepare to address how the national VA Hospital system will deal with the exorbitant costs of the therapy.

Here is my take–It all goes back to Reform…

Healthcare costs continue to rise–even with reform.  The Affordable Care Act is clearly short-sighted and laser focused on only certain aspects of healthcare costs.  The legislation has addressed limiting costs thru declining payments to doctors and healthcare systems.  Access to physicians, particular heatlhcare centers and certain treatments is tightly controlled and, in some cases, severely limited.  The ACA does nothing to address the other TWO major root causes of skyrocketing healthcare expeditures –cost of drugs/therapy as well as medical liability and lawsuits.  Until such time as the US adopts a national policy of tort reform (which is unlikely to happen given the power of the trial lawyer lobby in Congress) as well as price controls on expensive drugs such as the biologics for Hepatitis C, nothing will change.  Ultimately, the costs of these life saving drugs must be addressed.  If we continue in the current system, the money for these therapies will have to be carefully adjudicated.  The hints of rationing in healthcare are already here–medicaid and the VA system–a “model” for socialized medicine are already addressing ways in which they can adjudicate dollars to treat the most severe cases of Hepatitis C.  I expect that eventually we will see waiting lists for therapy and policies put in place to determine which patients will be eligible to receive higher priced drugs. Innovation is expensive and pharmaceutical companies and entrepreneurs should be rewarded for their investment and their risk–but, we must also balance the reward with what is reasonable and affordable for ALL patients seeking a cure for a potentially deadly disease.