Big news in Louisiana

Great news in Louisiana. A new pricing model was approved about two weeks ago for the Hepatitis-C anti-virals. The state will be engaging a single manufacturer for a no marginal cost subscription model of the Hep-C cures for two large populations at need. The state Secretary of Health explains some more in the Health Affairs blog:

Here’s how a subscription-based payment model works: At its foundation, it is an agreement between the state and a pharmaceutical manufacturer in which the state commits to contracting with a pharmaceutical manufacturer and spending a capped amount on that manufacturer’s hepatitis C medication, in exchange for universal access to the drug for a particular population. In effect, Louisiana would gain access to needed medications, while the selected drug manufacturer would be guaranteed a set level of revenue. The medications would then be used to treat those infected in the state’s Medicaid and incarcerated populations….

Over a five year period, the manufacturer will provide as many doses as the department of corrections and the state Medicaid program demands. One additional dose will cost nothing. Since there are a number of near substitutes for Hep-C cures, the state was able to get a bid price of less than $10,000 per cure. Compared to only six years ago, that is an incredible discount.

This program structure has a couple of important attributes. First and most directly, it will alleviate a lot of suffering directly. People who were at the bottom of the list to get access to these drugs will get access to the drugs. Secondly, a lot of future infections may be averted as people who would have passed the disease along will no longer be carrying the virus. It is a harm mitigation strategy as well as a curative strategy. Finally, it is a creative use of market forces to bring the cost of a cure down significantly.

This is worth watching.

11 replies
  1. 1
    wvng says:

    A deep red state doing something decent. Good news indeed.

  2. 2
    Another Scott says:

    Good news.

    I think it would be nice if this type of arrangement became the default going forward.

    “The Reasonable Health Care Pricing Act of 2020” – or something. Put every drug and treatment that costs, say, over 5% of the annual gross family income in that bin. It will reduce the pressure on companies to spend millions on fancy TV ads (“Ask your doctor about new Platinum Plated Aspirin-P!!11”), also too.

    Mr. Company will be able to make his investment on effective treatments back, but it won’t be taken out of the hide of people suffering from the disease, etc.


  3. 3
    Azelie says:

    As a resident of the state, a headline like that is inexpected. But we have a decent governor who mostly hires good people and luckily the two candidates that had the best chance of beating him decided not to run. It’s a deep red state and a less well-known republican might still be able to beat him but at least there’s hope that we’ll have another term of a governor who’s trying to govern (on another topic, our budget is actually in surplus and the governor wants to use it to raise teacher salaries but a republican legislator on the committee that accepts or rejects fiscal estimations won’t recognize that there’s a surplus, and that committee’s decision has to be unanimous).

  4. 4
    Mousebumples says:

    I work for a PBM in the prior authorization department, and we have a Medicaid client with a similar setup, though I’m not sure on the reimbursement side. Only 1 HCV product is on formulary, subject to meeting prior authorization criteria. This setup makes a ton of sense. Thanks for the explanation!

  5. 5
    Barbara says:

    @Mousebumples: 3-2-1 Here come the patient advocacy groups, often funded by manufacturers, protesting the need for consumer and physician choice in choosing drugs. Or maybe not when it comes to a Medicaid population. Seriously, there must be some way that a person who really needs one of the other two can get it or it’s an issue under best price laws. However, I doubt this would be accepted for Medicare Part B or D without a serious fight, similar to what is happening now for PA in Part B and ratcheting back Part D protected class drugs.

    It’s not that I think this arrangement is a bad idea — it’s a good idea — but people have to realize that fragmentation in financing is going to lead to this kind of fragmented effort to lower the cost of drugs, but usually for specific populations.

  6. 6
    polyorchnid octopunch says:

    It’s amazing how monopsony’s incentives push towards public health measures. When you’re the entire population’s insurance company, spending the money on early prevention pays off tremendous dividends. One, less money is spent in the long term, reducing health care’s drag on the economy, and two, people are healthier and live longer.

  7. 7
    jonas says:

    Goes to show that even a deep red southern state with a good Dem governor can do something smart once in a while. Louisiana is still digging itself out of the economic hole Bobby Jindal left it in, but stuff like this is a good sign. Thanks, for sharing, David.

  8. 8
    Joe Falco says:

    Good on Louisiana for leading the way. Now if it can claw back the tax exemptions it grants the gas industry and use the money to fund more healthcare measures, things can really start to make a turn.

  9. 9
    Barbara says:

    @Joe Falco: I know, really, does Louisiana think the oil and gas industry is going to move gas reserves to another state?

  10. 10
    rikyrah says:

    Thanks for bringing us this news, Mayhew.

  11. 11
    JKC says:

    Interesting. Since the agreement is with Gilead, I assume the drugs in question are Harvoni and Epclusa.

Comments are closed.