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Government Impact of Hep C Drug Price Tag

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If Medicare must absorb the bulk of Sovaldi’s cost, what long term effect will Hepatitis C treatment have on this federally funded program?
Government Impact of Hep C Drug Price Tag

Gilead Sciences Inc. has developed Sovaldi, an FDA-approved, once-daily pill that has dramatically improved the odds of beating Hepatitis C. Although millions of people could likely benefit from Sovaldi, Gilead has priced this medication above and beyond what most would consider to be a reasonable fee. Gilead insists that Sovaldi’s cost is justified, but the stress it will put on America’s struggling healthcare system is yet to be realized.

Millions of dollars and many years of research and development are spent by pharmaceutical companies to find the best cure for what ails us. When it comes to finding more effective and safer treatments for Hepatitis C, the race has heated up considerably over the past decade. From a business perspective, it seems reasonable to apply the law of supply-and-demand to a valuable product. Unfortunately, this economic principle puts those who must pay for a potentially life-saving medicine at the mercy of the winning pharmaceutical company.

Approved by the FDA in December of 2013, Sovaldi appears to be extremely effective against Hepatitis C. The prior standard-of-care was a combination of Incivek, interferon and ribavirin that had a cure rate of 75 to 80 percent for treatment-naive patients in 24 weeks – but with some severe, toxic side effects. By replacing Incivek with Sovaldi, the cure rate jumped up to 90 percent, was accomplished in just 12 weeks, and has virtually no side effects.

Obviously, the demand for Sovaldi is high, and Gilead is meeting that demand with an asking price of $1,000 per pill. For a standard 12 weeks of treatment, that equals $84,000 for one drug of a three drug treatment regimen. If everyone in the U.S. with Hepatitis C were treated with Sovaldi at its list price, it would cost an estimated $227 billion. For comparison sake, approximately $260 billion is spent in America each year for all drugs.

There are several circumstances that make the high cost of Sovaldi a significant burden to the federal government:

  • An estimated 75 percent of adults with Hepatitis C are baby boomers, meaning they were born between 1945 and 1965.
  • Excluding several instances that can allow people to qualify earlier, American adults are eligible for Medicare when they turn 65 years old.
  • For the past four years, many of the oldest baby boomers are covered by Medicare.
  • As more baby boomers are diagnosed with Hepatitis C, Medicare is likely to be processing an increasing number of Hepatitis C treatment claims.
  • Sovaldi is covered by privately-administered Medicare Part D (the Medicare Prescription Drug Plan) for patients over 65 years old.
  • As more baby boomers with Hepatitis C turn 65 years old, Medicare will be the primary program contending with Sovaldi’s cost.

The system-wide costs associated with the estimated 4.1 million Americans infected with Hepatitis C are staggering. Even if negotiated to half the current price, treating every Hepatitis C patient in the U.S. with Sovaldi would cost the system about $172 billion. The Hepatitis C community is grateful for Gilead’s amazing once-a-day pill. However, the American healthcare system might not be prepared to deal with the fiscal reality resulting from Sovaldi’s high price tag.

http://www.bloomberg.com/news/2014-03-05/hepatitis-c-drug-price-limiting-state-medicaid-approvals.html, Hepatitis C Drug Price Limiting State Medicaid Approvals, Retrieved March 30, 2014, Bloomberg L.P., 2014.

http://www.forbes.com/sites/natesadeghi/2014/03/27/breaking-the-bank-the-innovation-cost-paradox-of-us-healthcare/, Sovaldi and the Cost-Innovation Paradox, Nathan Sadeghi-Nejad, Retrieved March 30, 2014, Forbes.com, 2014.

http://www.reuters.com/article/2014/03/21/us-hepatitis-egypt-gilead-sciences-idUSBREA2K1VF20140321, Gilead offers Egypt new hepatitis C drug at 99 percent discount, M. Fick, B. Hirschler, Retrieved March 30, 2014, Thomson Reuters, 2014.

http://www.sciencedaily.com/releases/2013/04/130426211102.htm, Attention Baby Boomers: Get Screened for Hepatitis C, Retrieved March 30, 2014, ScienceDaily, 2014.

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