Pricey hep C drugs plus thrifty payers equal thorny consequences for patients

Gilead's Sovaldi--Courtesy of Gilead

We've heard plenty from payers looking to limit access to Gilead Sciences' ($GILD) pricey new hepatitis C treatment Sovaldi. What's the downstream version of that story? Doctors frustrated by reimbursement rejections and patients denied access to a potential cure.

As Bloomberg reports, patients who were quick on the draw when Sovaldi was first approved in December tended to get approval from their insurance companies. But by March or April, doctors were seeing no after no. "[I]t had dawned on people how expensive these regimens were going to be and the doors closed," Oregon Clinic liver specialist Ken Flora told the news service.

Now, some payers are refusing to cover Sovaldi--and a companion med from Johnson & Johnson ($JNJ), Olysio--altogether. Texas, for instance, won't pay for either drug for its Medicaid patients, because it hasn't yet decided on criteria to determine which patients can qualify. One Texas doctor says 40 of his Medicaid patients can't get coverage--including a woman in the early stages of liver failure.

That's the sort of costly hep C complication that Sovaldi, Olysio, and prospective new treatments are designed to forestall. Gilead has defended the $84,000 price for a 12-week course of Sovaldi treatment, by comparing that figure to the cost of dealing with liver failure, liver cancer, liver transplants and other expensive consequences of hep C infection.

"It's not 12 weeks of benefit," EVP Gregg Alton tells Bloomberg. "It's a lifetime of benefit. That needs to be taken into account."

And some experts say that Gilead--and its fellow hep C drugmakers--are entitled to the billions in sales. Their success rewards innovation, and could inspire others to greater R&D spending, they say. If so, then Gilead's results should be extremely inspiring: The company is expected to post $3 billion in Sovaldi sales for the second quarter. And that's on top of $2.3 billion in Q1, its first quarter on the market.

But the sheer up-front cost of treating hep C with these expensive drugs is massive. By some estimates, that cost could be $400 billion, more than the cost of all other drug treatments in the U.S. combined. Footing the bill now to save money later isn't something that U.S. investors--accustomed to short-term, quarter-by-quarter thinking--are likely to get behind. Much less government programs like Medicaid, which are already underfunded in many states.

Which takes us back to the payers' lament. For-profit insurers would see their margins slashed--if not obliterated--by across-the-board treatment with full-price hep C meds. Cue their stocks' downward spiral. And according to a new commentary in JAMA, the insurers' solution could be raising premiums across the board--by up to $200 to $300 per insured American.

A broader solution to this rock-and-a-hard-place mess isn't clear. Earlier this week, CVS Caremark ($CVS) executives said as much in their JAMA commentary. The authors suggested insurers need to come up with new ways to limit spending on pricey specialty meds, including hep C treatments. Others point out that Sovaldi is priced much lower in markets where government gatekeepers can negotiate. It looks as if compromise--among everyone involved--is in order, but whether all might be willing to consider that sort of give-and-take remains to be seen.

- read the Bloomberg story