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New Hepatitis C Drugs Cost Medicare Billions

Gilead’s Sovaldi and Harvoni lead the cost parade

Medicare spent $4.5 billion last year on new, pricey medications that cure hepatitis C — more than 15 times what it spent the year before on older treatments for the disease, according to previously undisclosed federal data reported in the Washington Post.

The extraordinary outlays for these breakthrough drugs, which can cost $1,000 a day or more, will be borne largely by federal taxpayers, who pay for most of Medicare’s prescription-drug program. But the expenditures will also mean higher deductibles and maximum out-of-pocket costs for many of the program’s 39 million seniors and disabled enrollees, who pay a smaller share of its cost, experts and federal officials said.

The spending dwarfs the approximately $286 million that the program, known as Part D, spent on earlier-generation hepatitis C drugs in 2013, according to Sean Cavanaugh, director of Medicare and deputy administrator at the Centers for Medicare and Medicaid Services (CMS).

The most-discussed of the new drugs, Sovaldi (sofosbuvir, Gilead Sciences), which costs $84,000 for a 12-week course of treatment, accounted for more than $3 billion of the spending. Spending on another drug, Harvoni (ledipasvir/sofosbuvir, Gilead), has already hit $670 million even though it came on the market in October. Bills for a third drug, Olysio (simeprevir, Janssen), often taken in conjunction with Sovaldi, reached $821 million.

Medicare also spent $157 million on older hepatitis C drugs in 2014, bringing the total spending for the category to more than $4.7 billion.

The spending surge is unlike anything Part D has seen, according to the Post. The 9-year-old program has benefited in recent years from a slowdown in prescription drug costs as several blockbusters, including the cholesterol-lowering drug Lipitor (atorvastatin, Pfizer) and the blood thinner Plavix (clopidogrel, Bristol-Myers Squib), lost patent protection and have faced competition from generics.

The new hepatitis C drugs, along with other expensive specialty medications in the pipeline, threaten to drastically increase Part D’s costs. The federal government spent $65 billion on the program in 2013, according to the Medicare Payment Advisory Commission. That figure doesn’t include monthly premiums paid by patients.

An analysis published last year on the website of the ­health-policy journal Health Affairs suggested that 350,000 Medicare beneficiaries have hepatitis C, although many don’t know it.

It generally takes the government more than a year to compile data on drug spending, but CMS provided the data on hepatitis C drugs to ProPublica in response to a Freedom of Information Act request and follow-up inquiries.

In preliminary data, Medicare’s costs for the drugs, at least in 2014, appear to be far higher than those incurred by state Medicaid programs for the poor, which collectively spent $1.2 billion on the drugs in the first 9 months of the year.

Many Medicaid programs, as well as private insurance companies, took a more restrictive approach toward the drugs than Medicare did, often requiring that patients have advanced liver disease to be eligible to receive the pills.

Medicare has a more permissive standard, requiring the insurance companies that administer Part D on its behalf to cover medically necessary drugs for any indication approved by the FDA or recommended in clinical guidelines.

Source: Washington Post; March 30, 2015.

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