When CMS approved Solvadi, Gilead’s $84,000 drug for hepatitis C, the stakes were raised in drug price wars. Two opposing forces, one, a financial push toward lower costs came up against an opposing force of public sentiment. The FDA’s goal of getting 90% of patients moved from costly branded prescriptions to generics met with an an large outcry in social and traditional media for providing the best available care, rallying around the story of a patient. The wave of sentiment seems to have won over CMS.
Granted, CMS was likely considering the reversal in its policy on Solvadi, but it was the May 12th coverage by the Kaiser Family Foundation and NPR of the patient who was denied treatment, and the amplification across social media that turned the tide toward coverage.
Solvadi had not been approved by the patient’s prescription drug carrier, so physicians lobbied CMS for coverage of Solvadi and the life of the patient. Solvadi appears to cure liver cancer in 90% of the patients who take it as recommended. CMS agreed. As a single payer, they have the incentive to balance drug costs and benefits with other costs and benefits, and new therapies often win the fight for coverage.
Getting Covered: The decision to pay for drug combinations is often quicker than FDA approval of the drug combinations
Objective health policy observers such as KFF note that in the early days of successful antiviral drug treatment for HIV, payers allowed doctors to “mix and match” medications in “off-label” or unapproved combinations as they thought best. Medicare is often slow to approve the physician-driven cocktails, so getting CMS to adopt the strategy was a win for many very sick people in this country, as it sets a precedent for “exceptions.”
One doctor at Beth Israel Health System in Boston has a trial that has shown that combining Solvadi with another high-cost treatment, Olysio (by Janssen, cost $66,000 for a course of treatment) resulted in 90-100% cure rate.
The CMS statement in this case noted that that “the new policy will apply broadly to hepatitis C patients whose doctors prescribe the combined use of the two drugs because they meet certain criteria laid out in January by the Infectious Diseases Society of America and the American Association for the Study of Liver Diseases.” Those guidelines recommend the combined use of the two drugs in patients with advanced liver disease who have failed to be cured by earlier drug regimens – even though the FDA has not yet approved the combination—because Medicare guidelines say a patient must have access to a therapy if his or her condition warrants it.
The Road Toward Value-Driven Pharmaceuticals?
The need for these kinds of treatments shows no sign of ebbing with the influx of Baby Boomers into the Medicare ranks, as those born between 1946 and 1965 have the highest incidence of hepatitis C. The patient in the story, Mr. Bianco, had used street drugs in his youth but has been drug and alcohol free for 32 years. Approving the high-cost drugs to cure a menacing disease is a win for patients, but perhaps never before have questions of cost come more seriously into play. At $1000/day, and an expected increase in end-stage liver disease over the next 10 years in the Baby Boomer population, the drug costs will become staggering.
Specialty drug spending is expected to rise by 63% by 2016. Solvadi and some of the other new drugs present a pathway to the holy grail of US health care: a cure for cancer. Can we pay the costs that Solvadi and others coming in the pipeline will bring? On the other hand, perhaps we should negotiate a price and give the drug to everyone with hepatitis C so we can end this problem. Or maybe we need to fall somewhere in between.
Questions of price, quality and value of pharmaceuticals will greatly depend on where you sit among various constituencies and who pays and benefits, including: employers, hospitals, physician networks, patients, caregivers, and many more. How do the costs of other alternatives in care, in addition to the very real social and economic costs of not using a life-changing drug, compare to the price of the new expensive drugs themselves? To put it simply: is $84,000 a good deal, and for whom?
A Value-Based Business Model
Aligning incentives and determining costs for each stakeholder can be facilitated through a value-based care model for disease states. This will be most important as the US moves to the accountable care platforms. Let’s look at an example of how to create such a model for Hepatitis C.
The trajectory of the disease: the Hepatitis C virus (HCV) can be compared to Hepatitis B (HBV), since the virus is similarly spread (HCV is spread through sharing of intravenous needles, toothbrushes, razors, contaminated tattoo needles, sexual intercourse, and blood transfusions before 1992; HBV through blood-borne contamination). Quick stats:
- 4 million HCV patients v 1 million HBV
- 80% HCV patients develop serious liver disorders v 20% of HBV, from cirrhosis to hepatic cancer (HCC or liver cancer) to liver failure needing a transplant
- Lifetime costs of patients who develop liver cancer and/or proceed through to transplants is $9 billion for HBV and $360 billion for HCV
Purchaser costs, direct and indirect: HCV develops over time, but in some patients progresses faster than HBV, therefore the costs go up quicker. These costs can become quite large for employers offering health insurance, including governments as employers (think: police, schools, state-county-city employees) or health systems and academia (often the largest employers in a city).
Some real-world numbers for employer-sponsored insurance costs for the HCV patient:
- HCV with cirrhosis is $23,000 to $29,000 (Rx $3102 additional)
- HCV with hepatic cancer is 43,671, end-stage liver disease is $59,995 (Rx $145,000 additional)
- HCV with transplant is $93,609 (Rx $575,000 additional) [according to another source, transplant can be as much as $280,000 in the first year]
Factoring in the indirect costs of HCV is just as important to the purchaser/employer/plan sponsor, as these are replacement costs that hit the bottom line. Workers with HCV on average miss 5 more days per year than their non-HCV counterparts and they produce 17% fewer units per month.
The costs of workers who produce 20% fewer goods than their counterparts are a higher replacement or per unit cost to the company. This social implication of HCV is the risk of losing a job, which can lead to mortgage and income insecurity, both of which have poor influence in chronic condition outcomes.
Direct and indirect costs in the family. Depression in the HCV patient goes up more than non-HCV patients, and this carries over into the family. It would be interesting to survey spouses to see what the levels of stress and anxiety are, but we already know that, generally, caregivers experience depression, high blood pressure, and other chronic conditions at an increase of 20% or more than the non-caregiving population.
HCV family members can be predicted to experience higher medical costs along with the patient, and someone needs to pay for this care. The impact to the family security and health system revenue create another opportunity for total health.
Value-Based Decisions for Whom?
The long-term societal benefits and losses that are at stake affect the payer, the purchaser, the providers and the patients/families.
If the high-cost intervention is valuable at some point in the trajectory of the condition, when should the cure be provided, and at what cost? HCV is a widespread chronic condition that does not immediately lead to a death sentence, but HCV is highly transmissible. It takes 5 to 25 years for cirrhosis and/or liver cancer to develop. The drugs to manage the virus have complications, leading to levels of non-adherence (technically a waste of dollars for those drugs that were taken without full compliance).
The adherence, absence and lower productivity rates are not so different from other chronic care conditions such as asthma, diabetes, chronic back pain, and more.
But once the cirrhosis or liver cancer develop, the costs go up 5 to 10 times the earlier costs, mostly from inpatient and outpatient days (impacting missed work) and drug costs. Traditional medicine for the next 5-10 years can be expected to cumulatively cost $500,000 or more.
Liver failure and transplantation costs can quickly exceed hundreds of thousands of dollars for patient care, mostly attributable to inpatient/outpatient services and anti-viral medications.
Options for Choosing or Not Choosing the Treatment
John Castellani, CEO of the trade group PhRMA has noted: “It is penny wise and pound foolish to focus solely on the price of a new medicine while completely ignoring the value it provides to patients and the health care system broadly. Curing Hepatitis C not only dramatically improves patients’ lives, but has the potential to save the U.S. health care system as much as $9 billion per year by preventing expensive hospitalizations and avoiding thousands of liver transplants that routinely cost over $500,000 each.”
From the patient perspective, the trajectory of the disease is measurable. The questions of affordability will be based on formulary coverage, deductible levels and copays.
Governments, insurance companies and health systems, if they are to pay for the high-cost highly-effective treatments, must create a revenue stream to fund the increase expense.
We need a value-based approach to the acquisition costs of this and other high-priced /curative drugs:
- We could possibly time the use of the treatment with the assumption that it could pay for itself in just a couple of years.
- We could create a new class of drugs of this magnitude and assign it to subsidies or control from a government level.
- We could put it into the health care market and let the dynamics of free-market enterprise work.
- We would have to, in any scenario, consider a price differential for more vulnerable US patients, just as there is a tremendous price differential for poorer countries (who buy Solvadi as low as $2000 per year per patient).
- We could create a value-based tiering and cost-sharing structure that would extend over several years, paying for the outcome of better engagement, adherence and sustainable cure.
What Is the Right Price for a Cancer Cure?
Is $84,000 for a drug that can hold off $55,000 per year for 10-25 years, or that can hold off $280,000 to $500,000 in one year after paying for the earlier treatments, too much money?
If we build models using socio-economic data to uncover long term relationships between health, costs and prices over time, we’ll be able weigh the societal and individual costs and maximize benefits over costs over the long term. In short, we will be able to create contracts that hold the stakeholders accountable for adherence, health improvement, and lower total costs.
When science prepares a solution we notice. It is heartbreaking to show the solution to those whose lives can improve because of it, and then place the solution just beyond affordability, create hurdles for acquisition, or back away because the enormity of trial is to heavy–that’s a denial of hope. We flew rockets to the moon and found the stars, and hope was our fuel.
We can create value in a cancer cure if we put faces on those diagnosed and consider the impact of making their lives better rather than focusing solely on the per unit costs. Those who are ready can certainly join our efforts—we welcome your input and brainpower, and we might just save the life of a scientist with a cure for another costly disease.
 C. Everett Koop Institute, Dartmouth College. http://www.epidemic.org/thefacts/theepidemic/USHealthCareCosts/
 AJMC. http://www.ncbi.nlm.nih.gov/pubmed/22106459; Hepatology. http://www.ncbi.nlm.nih.gov/pubmed/20683943
Nice post. I learn something totally new and challenging
on blogs I stumbleupon everyday. It’s always exciting to read through content from other authors
and practice a little something from their sites.
This guy is a spammer. Trust me.
Agree, Matt. That’s why it’s imperative that accountability runs through the whole system. It won’t be easy. Each of us has to play our part, request alternatives and info from our providers and health plans. It’s also why I wrote the sequel to this post: https://thehealthcareblog.com/blog/2014/08/06/writing-the-value-based-contract/ in which I detail how a meaningful, accountable contract can be set up for purchasing the drug, managing the drug and measuring outcomes–and patients must be part of this effort, too.
It’s sad that cancer is already a big business even though there is no cure for it. There are tons of conspiracy believers talking about all kinds of cures… But when they get it, they are the first ones asking for chemotherapy.
It’s amazing in favor of me to have a website, which is valuable in favor of
my experience. thanks admin
Very good article. I am facing some of these issues as well..
Hi Cyndy Nayer, Great info on Cancer Cure. I’ve started becoming proficient myself in Cancer Cure and have actually been selling video tutorials to earn some additional revenue. It’s pretty easy to do and I thought you might be interested so check it out when you get a chance, it’s free to sign up http://www.viddy-up.com/
Cyndy’s response to Vik included “There is also no argument that pricing is done by astute advisors who consider patenting, formularies, and more” This is something that is not known. We have no idea what the pricing/costing calculations are.
I stated in my first post “While it is good that the discussion has started, it unfortunately seems headed in the wrong directions”. I should have pointed out the conflicts in the basic premises of the article which can be seen in the title and paragraph titles, for example, the title of the article is “What is the Value of a Cancer Cure?” but the article does not discuss the ‘value” instead it discusses various costs of HCV and HBV etc. This is followed up by the title of the last paragraph “What Is the Right Price for a Cancer Cure?”
The article seems to be more a rationalizing of the price of the drug, rather than a questioning of that price. This is the wrong direction.
The thought that the price should be based on, as Vik puts it, ““hey, it’s the US market, let’s charge as much as we can because in the rest of the developed world, we can’t.” is in effect price gouging. It seems no different from a gas station which has the last available gas after a hurricane, being able to raise his price ad infinitum. We do not allow this sort of disaster pricing, except in the case of these drugs.
Generally, I see value as “benefit divided by price”.
Of course, the idea is that price should reflect value, but in health care it’s really difficult, because there are so many players involved that value is not reflected in price for any one party. The price is what someone will pay.That’s why we’re posing the question. Each player in health care bears some of the cost, but receives different amounts of benefit over short and long term. The more players, the more complex it gets.
Still, we can do a better job of teasing out who pays for what benefit based on the entire trajectory of care over the long term, and we should start looking at care and treatments more in this way.
I don’t see that as a rationalization, just a reality. I’ll just add that we need a lot more transparency of information, of side effects, of costs, of benefits. Transparency has a way of letting value and price get aligned.
Bill Gardner says it really well, and I think brings this full circle into the domain of behavior economics, which is the direction this really needs to head. He’s discussing in terms of predictive analytics as applied to health care, as opposed to the kind of analysis we’ve done above, but it’s a similar means to an end, and still applies:
“…choice architecture: who is making what decision, for what end, and are they doing it transparently? They make a critical recommendation about who designs the choice architecture:
[predictive analytic] developers [should] implement governance structures that include patients and other stakeholders starting in the earliest phases of development.”
The question is: Do we really not want patients have access to this drug?, Do we want the patient to have to make a choice based on near-term costs? It’s a similar question as to whether we really want to restrict access to primary care. The costs only get steeper.
This is an interesting discussion. I think some clarification is needed though. Sovaldi may cure a large number of patients with hepatitis C. But Sovaldi does not cure hepatocellular carcinoma (liver cancer). By curing hepatitis C, Sovaldi may reduce the risk of developing liver cancer.
Agreed, apologies for any lack of clarity on this.
While it is good that the discussion has started, it unfortunately seems headed in the wrong directions. The issues of Patents and R&D costs should not be part of the equation simply because we do not know enough about the development of the drug nor the true amount spent on R&D.
There are also the issues raised by Vik Khanna :
We need to address pricing, and you have to admit, we know nothing about what it cost to develop and produce. There are still questions about the cost of what we now have.
We need to know more about how it affects the quality of life and how much it really extends life. We have had many drugs in the last few decades which turned out to have serious side effects, were to some worse than the disease and there have been many which eventually turned out to be no more effective than the old drug that it replaced.
I think that we need to first look at what we have and understand the shortcomings. Then we can decide if we even need Solvadi.
George, the info you seek on side effects, etc are in the public domain. We know little about what hospitals and providers charge, what the actual admin costs for benefits are, or how much it costs to create an app for health, yet we pay for all of these.
The real questions are health equity, health quality and life impact. We know the impact of HepC, including liver cancer and transplantation. We have addressed the QOL and pricing issues in the post: “We can create value in a cancer cure if we put faces on those diagnosed and consider the impact of making their lives better rather than focusing solely on the per unit costs.”
What’s in the public domain about side effects is only what’s on the FDA-approved label and in published studies. What’s not in the public domain are the thousands of drug interactions that can occur leading to adverse drug effects post-market approval, for which there is wholly inadequate transparency and reporting, and, of course the outright manipulation of side effects information by manufacturers. Nah, that never happens.
Brad, above, is absolutely right that the manufacturer has priced in a manner that follows the flow of the disease and aligns it with their patent expiration timing.
Finally, having spent a great deal of time in the patient advocacy universe, to “put faces on those diagnosed” is code, in my view, for how to use anecdotal patient vignettes to drive coverage and reimbursement when either public or private payers resist or create hurdles to access. That’s a far cry from, for example, telling manufacturers that if they want to sell a product in the US, their trials must include measurement of HRQOL with a valid instrument, so that at the point of decision making, patients can review that data with a physician and make an informed judgment about whether or not to opt for a particular treatment.
The clinical research is in the public domain and a lot of it contains the side effects. There is no argument that all of the details of research and outcomes is not published. There is also no argument that pricing is done by astute advisors who consider patenting, formularies, and more.
The manufacturers do know that some of us, such you and me, and Leonard and Al, among many others, have been very straightforward about needing to see HRQOL with valid instruments. In fact, you can see my published calls to action from 2010 at the DIA conference in DC here: http://www.cyndynayer.com/nayer-cer-and-vbbd-in-dia-global-forum/
and in another paper here http://www.clinicaltherapeutics.com/article/S0149-2918(09)00413-5/references
What it will take is a louder, synchronized and payment-reimbursement structure that is not based entirely on rebates but is, instead, inclusive of context for and by patients.
And yes, when people “know” someone who has been through this set of decisions, it does become real. It’s not anecdotal–it’s the change agency that causes a person in turmoil to see and model new behaviors–which you are really terrific in providing.
There is no “cure for cancer,” as there are probably about 200 different cancers, most of which are strongly age-related and many are heavily influenced by lifestyle factors. Hence, the same mix of adverse behaviors that increases risk for cardiovascular disease, increase risk for cancer.
Second, when we get a potential 90%-100% cure rate, I agree that there needs to be rapid diffusion of the drug into the marketplace, and I agree with Al that we should develop a rational pricing model, something that supercedes the current model which is, “hey, it’s the US market, let’s charge as much as we can because in the rest of the developed world, we can’t.”
Finally, I am flummoxed that conversations about value almost never talk about health-related quality of life. This is in large part because Mr. Castellani’s constituency more often than not does measure HRQOL in its trials. Consequently, while we hear the word “cure,” we don’t know anything about what’s life like after the cure. To claim that merely being alive is the be all and end all simply perpetuates the American head-in-the-sand attitude about death. Ask anyone living with a debillitating long-term illness such as depression, it is possible to view life as a less appealing alternative.
Even though we shouldn’t condition coverage and reimbursement on that data, it is information patients and families have a right to know. You can’t report what you don’t measure and industry won’t measure what it isn’t confident will make it look good and justify a premium price.
Hi , I just wanted to share some of my husbands journey while undergoing the new Sovaldi treatment for Hep C . When we first started researching this treatment there was no patient blogs o personalr comments regarding the persons feelings , reactions , etc to the treatment . My husband is currently on his 6th week of treatment of taking the Sovaldi , ribavarin and interferon and is doing really well . The first 3 weeks will be your hardest . His first treatment and second was the worst . Throwing up , fever , itching and redness around injection site , hives on his legs , chest and stomache , fatigue, cotton mouth , and lack of appetite . That sounds awful I know , but let me tell you after the side first 3 weeks you will be doing better and feeling better than you have in along time . Some of the beginning side effects are horrible but very well worth it . All of his first few side effects was when he took the interferon injection on fri night and lasted until monday . So your not going to feel like your dying the whole treatment andcthe new solvadi does help with most of the side effects and it does cut down your treatment length . Also last week was week 5 he went in to see his dr for bloodwork and it came back with no detectable viral load ! ! Which he will finish his original 3 month treatment plan to make sure his hep C viral load stays gone . Advice : on the first few weeks plan to rest on the weekend , take your injection on fri afternoon and rent movies , books abything to help you rest and gives your mind something to focus on My brother in law brought Muscle high protein powder frm GNC and that stuff helped tremendously with helping him get the protein and fuel for the times he felt like he could not eat or was not hungry . Also my sister in law brought us some gingerale and that helped calm his upset stomache and worked better than the dr prescribed Zofran did . My husband is taking anxiety meds due to the weekend interferon . Overall the side effects and weekend sickness is well worth it and your body will start leveling outvafter your 3rd week and the neds won t bother you as bad . Plus he still works we just had bc to cut off mondays when he first started so his work week then was tue thru friday and he would take the interferon treatment on fri night at 8pm . I wish we would have known about the protein muscle shakes , gingerale and stuff before hand it would have helped with his first 3 weeks . Keep hydrated drink lotsvof water , gatorade and when feeling sick gingerale . Even if your not hungry drink avhighbin protein muscle mass shake it will keep you from loosing weight and gives you energy so you won’t have the side effect of fatigue !
D–Thank you for this summary. In every speech, every workshop, every article, I bring a “face” to the issue we are discussing. You have added an enormous amount of real-world value and empathy to this discussion. Wishing you and your family good health and long, satisfying life.
Hi I’m living in Vancouver be I am 36 years old with a 9 year old daughter and my husband has just been diagnosed with secondary stage 4 liver cancer so I was hoping you could point me in the right direction to find more information about this drug that has 90% cure rate thank you
Shelly, please go to the Gilead Pharmaceuticals website. http://www.gilead.com/medicines But please be aware: the data says it cures liver cancer in 90% of Hepatitis C patients. I’ve not seen any info that says Solvadi cures all liver cancer. I would also check in with some of the online patient groups such as Patients Like Me and Treatment Diaries. I wish you and your family good health.
Cyndy – thank you for the mention and your passion for the patient and their family. We are honored to give them a place to share and be heard and to learn from those with similar experience. This is a great conversation…thank you!
This is an excellent, well-balanced treatment of this question, IMHO. Ironically, we all wish this kind of ethical dilemma came up more often, because it would mean more diseases were being cured. I don’t know how long it’s been since the last time an expensive but reliable cure for a common disease was developed, if indeed it has ever happened…and likely it won’t happen again for a long time.
Two other thoughts:
(1) Drug companies have FAR more incentive to control diseases than cure them, which is why new antibiotics rarely come to market. Not covering cures is one way to keep that perverse incentive going. That by itself is reason enough to cover this drug.
(2) The US could say that any time a course of treatment costs more than $X, the government gets a “most favored nations” price against other members of the G8.
Thank you, Al. We’ve been aligned thru most of our thinking, but I appreciate your words. The real question, and I believe I speak for Leonard, too, is that we need to have this open discussion. So, we are opening the doors here and will continue to drive the value-based focus in a real, health-focused, manner.
On your first point, I agree with a BUT. Patent expirations change the equation. Whereas we look at Rx use and the life of an individual, a pharma company sees max ROI over the course of exclusive selling. Gilead has looked at the number of undx’d and dx’d cases and knows they will see the crest of the epidemic within their patent window.