Medicaid Spending Could Soar After New Ruling on Hepatitis Drugs
Policy + Politics

Medicaid Spending Could Soar After New Ruling on Hepatitis Drugs

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In a ruling with potentially huge adverse financial implications for state Medicaid programs across the country, a federal judge in Seattle held late last week that Washington state’s Medicaid system must end a year-old policy allowing only patients with the most severe cases of hepatitis C infections access to new but very expensive treatments.

As many as three fifths of state Medicaid programs in the past year have imposed tough restrictions on millions of low-income patients and veterans seeking reimbursement for treatment of the often-deadly disease.

Related: Budget-Strapped States Are Rationing Hepatitis-C Drug Treatment

Gilead Sciences, which manufacturers the two leading biologic medications, Sovaldi and Harvoni, boasts of cure rates as high as 95 percent, compared to 40 percent for older treatments. However, the drugs can cost between $83,000 and $95,000 for a full course of treatment. That has made it prohibitively expensive for Washington and other states to grant carte blanch coverage to hepatitis C patients.

However, U.S. District Court Judge John C. Coughenour last Friday granted a preliminary injunction forcing the state Health Care Authority to scrap a 2015 Medicaid policy that restricted access to the drugs based on a fibrosis score, which measures the extent of life-threatening liver scarring.

Coughenour’s order came in response to a class-action lawsuit filed in February on behalf of two clients of Washington’s Medicaid program known as Washington Apple Health and nearly 28,000 other Medicaid enrollees suffering from various states of hepatitis C, as first reported by The Seattle Times

The two patients were a 53-year-old Seattle woman and a 47-year-old Lakewood, Washington, man who were prescribed Harvoni but were denied Medicaid coverage because of its excessive cost.

The federal judge ruled the state agency’s efforts at rationing coverage of the wonder drugs were inconsistent with state and federal Medicaid requirements that drugs be made available based on medical need – and not cost.

Related: Is Medicaid Denying a Life-Saving Cure Based on Cost?

It is unclear how soon the judge’s ruling would take effect and whether the state will appeal the ruling. The judge ordered all parties to report back within 60 days.

However, if the ruling were allowed to stand, it would have a devastating impact on Washington state’s Medicaid prescription drug program, and would create an important precedent for similar rulings throughout the country.

In a letter to the U.S. Senate last fall, Washington state Medicaid director MaryAnne Lindeblad estimated that having to pay for hepatitis C treatment for all Medicaid patients seeking it would triple the agency’s current $1 billion drug budget.

Thirty-three states spent more than $1 billion a year to treat the disease with Sovaldi and Harvoni, according to data released last December by Sens. Charles Grassley (R-IA) and Ron Wyden (D-OR), as The Fiscal Times previously reported.

Related: Wonder Drugs Blow a $1 Billion Hole in VA’s Budget

Even at that remarkably high level, those funds were only enough to treat 2.4 percent of Medicaid patients who were infected with hepatitis C.

The federal court ruling marked an important victory for patient rights advocates – while raising the specter of astronomical new costs for other Medicaid programs, as well as the Department of Veterans Affairs, the federal prison system and other government entities that are required to provide health care coverage to millions of people. 

Medicaid officials throughout the country were alarmed by the court ruling and were studying the decision’s larger implications for their budgets.

Even some health care advocates were concerned about the ruling, noting that a court order lifting all restrictions on access to the costly Hepatitis-C drugs could mean sharp corresponding cutbacks in reimbursements for many other life-saving drugs.

“The decision purports to guarantee everyone with Hep-C coverage for drugs that cost almost $100,000 per patient,” John Rother, president and CEO of the National Coalition on Health Care, said in an interview on Tuesday. “Over three million Americans carry the Hep-C virus, many with no or minor symptoms.”

Related: Cash-Strapped VA May Start Rationing Some Treatments

“If we want to treat them all, we need to drastically lower the price of the drugs,” he said. “Otherwise there is simply not enough money in our healthcare budgets to pay for this. Drugs that are unaffordable are an empty promise. The court decision thus highlights the need to address increasingly unsustainable drug prices.”

Rother said that a state Medicaid program needs leverage to negotiate on prices if it cannot limit utilization to those who need it most.  “Otherwise it is powerless to prevent price-gouging,” he added.