In the latest salvo fired over the cost of hepatitis C treatments, a new report projects that the cost of these drugs – including the Sovaldi medication sold byGilead Sciences GILD +0.74% – will increase 2015 federal spending by Medicare Part D between $2.9 billion to $5.8 billion.
This would work out to an increase of 6% to 11% in spending by the federal health care program, or roughly $100 to $200 for each Medicare Part D beneficiary a year, according to the Milliman consulting firm, which performed the analysis for the Pharmaceutical Care Management Association, which represents pharmacy benefits managers.
The firm also estimates that the cost of hepatitis C drugs will increase total annual individual Medicare Part D premiums by $481 million, to $965 million in 2015, and maintains this is equivalent to a rise of 4.3% to 8.6% over beneficiary premiums, or another $17 to $33 per beneficiary per year.
“The study shows taxpayers will bear the lion’s share of the increased drug costs for Medicare Part D beneficiaries taking hepatitis C drugs,” says Mark Merritt, PCMA chief executive and president, in a statement. The trade group, by the way, says the added costs correspond to a use rate of 15% to 30% for new hepatitis C drugs among infected beneficiaries.
[UPDATE: This contrasts with a report from the Center for Medicare & Medicaid Services that forecasts premiums are not expected to rise more than $1 next year.]
Pharmacy benefits managers – notably, Express Scripts, which is the largest PBM in the U.S. – have been particularly outspoken in complaining about the cost for Sovaldi and forthcoming treatments that Wall Street expects may be priced similarly.
Sovaldi costs $84,000 for a 12-week treatment, or $1,000 a day, which insurers and state Medicaid programs worry will bust budgets, even though the medication has shown to cure nine out of 10 cases. Last month, for instance, the Illinois Medicaid program instituted tight restrictions to lower costs.
Despite the success in combating a disease that can eventually result in liver failure, which is a costly malady to treat, the emergence of these new drugs is causing national consternation. There are an estimated 3.2 million people in the U.S. with hepatitis C and screening has been recommended to identify still others who do not display symptoms.
As a result, treatment with expensive drugs may start for a large number of people in a short amount of time. This contrasts with a much longer stretch needed to combat such diseases as AIDS. Instead of spreading the cost over years, hepatitis C treatments bunch up the costs in the very near term.
Not surprisingly, the pricing has become a political issue. Last month, two U.S. senators, one of whom heads the Senate Finance Committee, wrote Gilead to ask for detailed financial information about the $11 billion deal in which the drug maker acquired Sovaldi and its subsequent pricing forecasts.
Seeking to make political hay, the National Coalition on Health Care, a diversion collection of companies, unions, professional medical societies, insurers and religious groups, more recently released a poll showing 82% of consumers surveyed believe the Sovaldi pricing is unacceptable.
Just the same, others argue that such concerns are shortsighted, because long-term societal health care costs will drop. A recent estimate by PricewaterhouseCoopers suggests that, for private insurers, the impact of new hepatitis C drugs on medical costs will decline several years from now.
The Milliman study, by the way, did not include the effect of the drug therapy on other medical costs. In other words, the forecasts do not reflect long-term savings society may reap from using the drugs. Instead, the study focuses on the here-and-now costs to government programs and beneficiaries.
We asked Gilead for comment and will update you accordingly.