The Payer Perspective on Sovaldi
Sovaldi, the $84,000 Hepatitis C drug developed by Gilead Sciences, has sparked controversy while marching toward worldwide sales set to exceed $11 billion in 2014. The blockbuster drug’s price is the main sticking point in the debate: critics argue that the cost is unsustainable and will cause payers to restrict treatment for the estimated 3.2 million patients in the United States who live with Hepatitis C, some of whom will develop liver complications.
|Imran Cronk is a junior at the University of Pennsylvania, majoring in Health & Societies; He is a student intern at LDI.|
Gilead has responded by emphasizing the improvement over the current standard of care – the treatment cures the disease in most patients and has a shorter course than other therapies on the market – and the long-term savings to the health care system from preventing end-stage liver disease and liver transplants.
'Severe financial risk'
What are the payers saying? Medicaid Health Plans of America has stated: “This unanticipated cost could put health plans at severe financial risk […] This will potentially compromise the ability of health plans to provide access to other life-saving services and medications.”
Said Karen Ignani, president and CEO of America’s Health Insurance Plans, “If [Sovaldi] is prologue to future pricing decisions, we are talking about blank-check pricing that is simply not sustainable.”
High-priced specialty drugs are not a new phenomenon (see here, for example), so why has Sovaldi drawn so much attention? One reason is the anticipated impact on the public Medicaid budget – the program covers a higher proportion of patients with Hepatitis C than other health plans do. Another reason is concern about patient warehousing, where physicians advise patients to hold off on treatment for a disease until an effective therapy emerges. Now that Sovaldi has hit the market, will pent-up demand overwhelm the health care system’s ability to finance treatment for everyone who needs it?
Potential payer strategies
A webinar on September 24th from life sciences research and consulting firm Evidera outlined current and potential payer strategies to prepare for the impact of Sovaldi and its yet-more-expensive successors. Some are employing administrative barriers such as prior authorization requirements and limiting prescriptive power to certain specialists, some are raising co-payments for patients, others are delaying reimbursements, and Medicaid and the Veterans Administration have negotiated discounts.
These tactics are short-term solutions at best, however. Evidera explored strategies from outside the U.S. that could be considered. Governments in Europe and Canada have placed national restrictions on Sovaldi based on efficacy in specific sub-populations and genotypes rather than allowing local payers and providers to implement restrictions. Sovaldi is also priced at a lower point in Europe and Canada.
What other strategies might payers consider? With a new crop of Hepatitis C therapies currently winding through the FDA approval process, payers might agree to give preferred status and lower administrative barriers to the new treatments in order to improve uptake and pressure Gilead to lower its price. Plans that exercise a high degree of control over treatment decisions might return to the closed formularies that were popular with managed care in the 1990s. This would restrict access to Sovaldi for all but the most qualified treatment candidates.
Break through in budget impact
Health plans have faced challenges with high-price drugs in the past, usually with rare cancers and diseases that affect a small population. Sovaldi represents a breakthrough both in patient benefit and in long-term potential budget impact due to the high number of patients with Hepatitis C. Payers have a menu of options in front of them: some have worked and others have yet to be tried. No matter how the drama continues, the sustained national attention has intensified the discussion over access and innovation in the life sciences.