The kiss in the song from classic movie Casablanca is, at its essence, the seal of approval on a relationship. The kiss is meant to symbolize shared reward (love, potentially) and risk (two souls who share a common set of values but now have new lives) built with other people. The recognizable phrase provides a frame for distilling the rewards (opportunities) and risks in true health care innovation.
Innovative health care solutions, such as new value-based benefit designs or emerging treatment for complex chronic diseases, often deliver tremendous value, but they take time (usually 2-3 years), do not deliver consistent benefits across populations (based upon severity of disease) or reduce total costs consistently (based on geographic influences, for example). Generics are often described as an equal substitute for branded drugs, but this is not always the case. Commercials advertise drugs that purport to make quality of life better (the contract for care), but then the rapid-fire “potential adverse effects” statement overtakes the “superiority message,” in effect reducing the value of the contract.
So when Gilead launched a new drug, Sovaldi, that promised a cure for Hepatitis C (cure = contractual promise, or “kiss”), the market place was excited. Then the spell was broken as obvious risk, the US$84,000 price tag, was revealed.
Gilead has a huge opportunity here. It can become the true innovator that it claims to be. It can be the value-driven company that calls for aligning the risks and rewards so that all the parties involved achieve reasonable outcomes.
Curing the highly infectious HepC is a lofty goal for care innovation. Gilead’s new drug purports to cure HepC within 12 weeks (for certain patients) at the cost of $1000/per day in the US. The FDA approved the drug and it launched in January 2014. CMS agreed to fund it for Medicare patients with the right profile, which tends to open the door for legitimacy to coverage in the commercial marketplace.
The debate over the price of specialty drugs is intensifying and could well be the next major healthcare issue to dominate the national, even international, agenda. In a nutshell, how will society pay for breakthrough scientific innovation?
Specialty drugs, complex therapies used to treat severe illnesses such as cancer, multiple sclerosis and Hepatitis C, are coming in with price tags that have purchasers sounding alarm bells. At $1,000 per pill, the newest Hep C medication runs about $86,000 for a course of treatment. Two major insurers have publicly cited the price of this single new drug as contributing to next year’s rise in premiums.
In fact, analysis by our team at PwC’s Health Research Institute shows that this one new therapy will impact overall U.S. health costs by .5% this year and .2% next year. Considering the nation’s total healthcare budget is $2.8 trillion, that is a remarkable budgetary impact for one product.
But the story doesn’t end there. Drug costs represent just 15% of total health spending, compared to nearly one-third spent on inpatient care. Short-term budget spikes could become long-term savers from both a cost and health standpoint. For the most severe patients, the price of Hep C medication – that is nearly 90% effective – is three to six times less than treating a lifetime of cirrhosis ($270,000) or providing a liver transplant ($580,000.) Patients essentially “cured” of Hepatitis C can go on to have productive, long lives.
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.