New York Times
$1,000 Hepatitis Pill Shows Why Fixing Health Costs Is So Hard
Critics Raise Concerns About Sovaldi
AUG. 2, 2014
A new drug for the liver disease hepatitis C is scaring people. Not because the drug is dangerous — it’s generally heralded as a genuine medical breakthrough — but because it costs $1,000 a pill and about $84,000 for a typical person’s total treatment.
A Washington advocacy effort has sprung up overnight, largely devoted to objecting to the cost of this one medication, Sovaldi. Members of Congress have started a joint investigation into how its maker, Gilead Sciences, settled on its price.
“Clearly, $1,000 a pill strikes people as completely unreasonable,” said John Rother, president of the National Coalition on Health Care, an advocacy group that has been raising an outcry about the drug’s price as “unsustainable.” Gilead “stepped in it when they decided to go for that cost per pill, because people can’t imagine why that could be justified.”
But maybe we are looking at the costs of Sovaldi in the wrong way. One reason it is causing such angst among insurers and state Medicaid officials is that treatment costs are coming all at once.
First of all, there is pent-up demand. There are a lot of people with hepatitis C — an estimated 3.2 million in the United States — many of whom have been waiting for a good treatment. Second, unlike drugs for most chronic diseases, like diabetes or H.I.V./AIDS, for which treatment continues over many years, Sovaldi can cure most patients’ hepatitis in just a few weeks, with the bill soon to follow. The lifetime cost of treating someone with an H.I.V. infection is around $380,000, according to estimates from the federal Centers for Disease Control and Prevention, but the annual bill is much smaller.
Think about AIDS treatment as paying a mortgage. Sovaldi is like buying a house with cash.
The United States health insurance system works better for costs that are spread out and predictable. People change insurance frequently, discouraging insurers from making a big investment now that might pay off later. That does not mean that our health care system is not expensive — it is — but we are more used to costs that pile up slowly over time. Expensive one-time treatments like Sovaldi can be a shock to the system.
Hepatitis C slowly destroys the liver. Over decades, many infected people will end up with liver damage and complications, including joint pain and kidney disease, while a smaller number will get cirrhosis or liver cancer, and a tiny fraction will end up needing liver transplants. People used to get the virus from blood transfusions; now, it is contracted mostly by intravenous drug users who share needles.
Until now, doctors would mostly treat hepatitis C patients’ symptoms. Some drugs attacked the virus itself, but they did not work very well. And most had side effects, including fever, depression and anemia, that about half the patients were not healthy enough to tolerate.
Those drugs were also expensive — the most effective drug cocktail before Sovaldi cost about $70,000 — but because few patients chose them, the price tag did not cause a big reaction. Sovaldi is different. Patients want this drug, with its high success rate and smaller list of side effects. That means a big financial shock to the health care system all at once.
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“With a product like Sovaldi, it’s a new price to the system,” said Gregg H. Alton, Gilead’s executive vice president for corporate and medical affairs. He said the company priced the drug to be competitive with existing therapies, adding, “It’s a new cost they weren’t paying for before.”
The accounting firm PricewaterhouseCoopers estimated that this single drug could bump up the benefit cost for employer health insurance by half a percentage point next year. Researchers at the Kaiser Family Foundation, a health care research group, estimate that it could increase premiums for Medicare’s drug benefit program by 3 to 8 percent next year, even if only a fraction of eligible seniors were to seek the treatment.
Insurer-sponsored studies are estimating even higher costs. Express Scripts, a company that manages drug benefits for insurers, prepared a worst-case situation: It said that states alone could be on the hook for up to $55 billion if every Medicaid patient or state prisoner with the disease was treated.
“We think a perfect storm is arising out there,” said Dr. Steve Miller, a senior vice president and the chief medical officer at Express Scripts, who helped prepare its estimates.
