Last week, a judge ordered Washington State Medicaid to pay for all Hep-C treatments that previously were being rationed to only patients with significant liver scarring due to costs.
U.S. District Court Judge John C. Coughenour granted a preliminary injunction Friday that forces the state Health Care Authority (HCA) to halt a 2015 policy that restricted access to the drugs based on a fibrosis score, a measure of liver scarring….
Harvoni is among the newest highly effective drugs that can halt the hepatitis C virus, posting a cure rate of at least 90 percent.
The injunction orders HCA to begin covering Harvoni “without regard to fibrosis score.”
There is an interesting article out of Penn that looks at high drug costs. Harvoni and the other Hep-C cures fall into a bucket where the long run benefits are significant:
Storyline 1: New, highly effective drugs that are extraordinarily expensive
Example: Sovaldi (Hepatitis C treatment)
Economics of the problem: Sovaldi (sofosbuvir) was released in December 2013 at the cost of $1,000 per pill, or $84,000 for a course of treatment. This is a shocking price, and scrutiny was entirely justified. But by conventional standards, even at that price, the drug is cost effective because it cures a disease that has severe health consequences and poor existing treatments.
Researchers often use a cost-effectiveness ratio (CER), defined as costs divided by benefits, to analyze the efficiency of various treatments. To properly judge a new treatment, they use an incremental CER, to compare the costs and benefits of the new treatment with the next best alternative. To standardize these analyses, they measure benefits as “quality-adjusted life years” (QALYs). Think of a QALY roughly as a “year of life in full health,” or the equivalent number of years in poor health you’d be willing to trade for that year of life in full health.
Although there is no official threshold in the U.S. for our willingness to pay for a new treatment, we typically consider upper bounds of $50,000-$200,000 per additional QALY to be cost-effective. One study estimated the incremental CER of Sofosbuvir as $54,000 per additional QALY, putting it firmly in the range of cost-effective treatments.
This same story line could come into play with the introduction of a new class of gene therapy treatments for rare, high cost and debilitating diseases that are due to hit the market in the next couple of years. There are three major questions for those types of therapies. The first is how much will the treatment actually cost, secondly, who will pay for the treatment, and finally how will the payment be structured to minimize negative incentives. This led to an interesting conversation on Twitter about what an “appropriate price” should be:
@walidgellad Cost aversion will by Pharma’s preferred threshold, not sure how to knock them off of it
— Richard Mayhew (@bjdickmayhew) May 31, 2016
The pharmaceutical companies will try to benchmark their pricing on costs averted. If a hemophilia treatment is able to avert an expected life time costs of $5 million dollars through lower prophylatic costs combined with no emergency bleed-outs, the initial bid for the treatment cost will be $4.9 million dollars. The new treatment would be cheaper over the long run than the current, next best alternative but that is still an Oh My God expense. Another valuation methodology would be the lifetime price of the next best alternative plus some more as there is utility gain. A little boy with hemophilia has to be extremely careful in their play but if there was a cure, they gain a lot of value in being able to ride their bike on a gravel path while only worrying about skinned knees, broken bones and concussions instead of a three month hospital stay to control a bleed. Another approach would be a regulated guaranteed profit margin (including any value of the Orphan Drug bonus) which would produce a lower net cost of a cure than current lifetime treatments.
There are a lot of pricing methodologies that produce wildly divergent price points. And each of those systems have some logic and consistency to some values that we as a society hold.
I am not a bio-ethicist, all I can do is tell you what some of the implications of a particular proposal will do. But we as a society need to have some discussion about what the appropriate price is for a cure of very rare but expensive diseases and then a discussion as to how we are going to pay for it.