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/