A Senate hearing on Wednesday into the staggering cost of specialty drugs to treat the deadly Hepatitis C virus has once again raised the question of how far the government should go to try to beat down pharmaceutical costs without discouraging research and development or creating drug shortages.
The case in point is familiar: Sovaldi and Harvoni, the new miracle drugs made by Gilead Sciences, cost between $84,000 and $94,500 for a 12-week regimen. The drugs are far ahead of other drug treatments and procedures in saving lives, but the math works out to be a startling $1,000 per pill for Sovaldi and $1,125 per pill for Harvoni.
Related: The $1,000 Pill That Could Cripple the VA’s Budget
WHY THIS MATTERS
Gilead claims $1,000 a pill is a fair price for the money they spent developing the pill. They also claim that the government’s marginal pricing plan would inhibit future research and development of specialty drugs, which in this case, prevents costly surgical liver transplants. But the specialty drug industry is coming under mounting criticism for price gouging – and it may be just a matter of time before it reaches an accommodation with the government and consumer advocates.
Although the Department of Veterans Affairs – the largest provider of care for those with chronic Hepatitis C infections – receive a 40-percent bulk rate discount, the drugs are still blowing a hole in the agency’s budget and threaten to add $1.3 billion to VA hospitals’ operating costs over the next two years. Sen. Bernie Sanders (I-VT), chair of the Veterans Affairs Committee, is pushing to bring down the cost, but Gilead for now is fending off pressure – and company officials said they were too busy to testify yesterday.
“We cannot leave VA providers in the position where they are forced to choose which veterans get treated for their HCV [Hepatitis C virus] and which do not because of cost,” Sanders said in his statement. “Companies like Gilead are gouging the American consumer and the American taxpayer and ignoring any sort of moral obligation to help very sick people access life-saving medications.”
Gilead later issued a statement noting its HCV therapies “represent a significant advance in the treatment of HCV.” Harvoni, approved by the U.S. Food and Drug Administration on October 10, 2014, delivers cure rates of 94 to 99 percent and reduces treatment time to just eight weeks. Patients take just one tablet a day.
“We believe the price of Harvoni and Sovaldi reflect the value of the medicine,” said Michele Rest, public affairs director for the company. “Unlike long-term or indefinite treatments for other chronic diseases, Harvoni and Sovaldi offer a cure at a price that will reduce Hepatitis C treatment costs in the short-term and deliver significant health care savings to the health care system over the long-term.”
Related: Insurers Scrutinize Drug Costs After $84,000 Sovaldi Surprise
However, John Rother, president and CEO of the National Coalition on Health Care, launched a campaign last May to highlight the mounting cost of specialty drugs. Rother and his group of business leaders and health care providers have urged pharmaceutical officials to reduce the cost of breakthrough therapies while continuing to cover companies’ research costs and compensate them for innovations.
“Prices at that [high] level threaten access to care and result in much higher out-of-pocket costs, higher premiums, and higher taxes,” Rother said yesterday. “There needs to be a better approach to pricing that recognizes value and balances the interests of innovator drug companies with the interests of society and our health care system.”
The VA’s looming budget crisis comes as the agency attempts to rebound from the scandalous and negligent treatment of dozens of veterans. VA health care facilities spent $370 million on Sovaldi last year and will see those costs more than triple in two years. But the high drug costs have greater implications for millions of other Americans who suffer from chronic infections that can destroy the liver and require expensive transplants or result in death.
Neither private nor public payers – nor the health care system – can afford to provide an $84,000-per-patient treatment to every person with HCV, Robert Weissman, president of Public Citizen, a consumer advocacy group, said yesterday. So public and private payers are moving towards rationing of the drugs, he said – in effect making life-and-death decisions about who will receive treatment and who won’t.
Related: Senate Zeroes In on Inflated Hepatitis C Drug Cost
Some 3.2 million Americans suffer from Hepatitis C, according to the Centers for Disease Control. If all of them received treatment with Sovaldi, it would cost $268.8 billion. For the VA alone, assuming a discounted price of $50,000 per patient, the cost of treating the 170,000 veterans diagnosed with Hepatitis C would be $8.5 billion.
Ultimately, government intervention will be necessary to address the pricing problems, according to Weissman, to avoid “both unjustified drain on the pocketbooks and treasuries of consumers and private and government insurers, and needless rationing of this apparently important medicine.”
The government has clashed with the pharmaceutical industry before, dating back to 2002 and the government’s concern about the price of stockpiled anthrax vaccine after the anthrax attacks. Sanders in 2012 introduced legislation to reform the drug patent system to try to bring down the cost of expensive treatments for AIDS.
Related: Get Ready for a Surge in Costly Specialty Drugs
Weissman’s proposal is for a government licensing or acquisition arrangement for generic producers to manufacture and profitably sell Sovaldi at prices “that are two orders of magnitude cheaper than the Gilead price.” Another approach would involve what Weissman called a “non-voluntary acquisition of a right to use Gilead’s patents.”
“With marginal pricing, the drug can be made available to everyone who is clinically indicated to receive it, while Gilead can be provided some fair compensation,” he explained.
Federal law gives the government and its contractors the right to appropriate patented inventions while providing reasonable compensation to the patent holder. The Defense Department and its contractors, for example, have repeatedly used this provision. But while the Department of Health and Human Services considered using the provision during the anthrax scare, the precedent has never been extended to the pharmaceutical industry.
Sanders didn’t take a position on Weissman’s proposal. And the idea is certain to draw strong condemnation from the pharmaceutical industry and a new Republican-dominated Congress more interested in slashing government red tape than adding to it.
Gilead has said in a policy position paper, “The recognition and protection of intellectual property by governments is the foundation of innovation across all industries. This is especially true in the development of new medicines. Without patent protection, pharmaceutical companies could not secure or generate the up-front capital required from their investors to ensure continued research and development of new medicines that address unmet patient needs.”
PhRMA, the pharmaceutical industry trade group, contends the stepped-up attacks on drug pricing are coming when society should be focused on how on how science and technology can usher in new treatments and cures for devastating diseases.
Robert Zirkelbach, senior vice president for communications at PhRMA, said yesterday that Weissman’s proposal “would have the same effect as government price controls, as it would inhibit the development of new treatments and potential cures against the most costly and challenging diseases."
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