Medicare Spending on Hepatitis-C Drugs More than Doubled
Policy + Politics

Medicare Spending on Hepatitis-C Drugs More than Doubled


Federal officials have long fretted about the mounting cost of prescription drugs for Medicare and other government agencies – especially the newer pricey miracle drugs for the treatment of the Hepatitis-C virus, the potentially deadly liver disease that affects millions of Americans.

A recent annual report of the Medicare Board of Trustees documenting the alarming trends in spending on prescription drugs more than validates their concerns.

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

Prescription drugs accounted for $97 billion in Medicare spending on seniors in 2014, or nearly 16 percent of all Medicare expenditures that year. Spending on Hepatitis-C virus more than doubled in just five months from just $421 million in November 2014 – shortly after the first of the new drugs had entered the market – to $864 million in March 2015. Spending on the drugs tapered off to $793 million in mid-2015. But officials are bracing for another surge in spending as more and more patients seek the benefits of the new drugs.

Hepatitis-C affects at least 2.7 million people in this country and was responsible for more than 19,000 deaths in 2014, according to the Centers for Disease Control and Prevention. Health experts say the virus often develops slowly over a number of years and many may not realize they have it until they see the early signs of liver damage.

Hep-C Chart

An analysis of the trustees’ report by the Kaiser Family Foundation shows prescription drugs accounted for nearly $1 of every $5 that Medicare beneficiaries spent out of pocket on health care services in 2011. Looking to the future, spending by Medicare Part D – the principal agency underwriting the cost of prescription drugs for seniors – is projected to grow at a rate of 9.2 percent in the coming decade, compared to just 7.4 percent during the past 10 years.

There have been some encouraging signs in recent years of growing competition among major pharmaceutical companies that has the potential for curbing or even bringing down the cost of outrageously expensive drugs to treat victims of the Hepatitis-C virus.

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

California based Gilead Sciences was the first to enter the field beginning in December 2013 with two best-selling wonder drugs, Sovaldi and Harvoni. Those two drugs have generated tens of billions of dollars in worldwide profits thanks to shocking retail prices of $1,000 and $1,200 per pill – or between $83,000 and $95,000 for a full treatment.

Since 2014, the Food and Drug Administration has approved competing drugs with similar high cure rates from AbbVie Inc., Merck & Co., and Bristol-Myers Squibb Co. that has helped to rein in the costs of Sovaldi and Harvoni.

 And just recently, the FDA approved another Gilead Hepatitis-C drug with even greater effectiveness and versatility and yet noticeably less expensive than the company’s two other drugs. This one, called Epclusa, is a “combination pill” that can be used to treat patients, whether or not they have suffered liver damage. The company announced that Epclusa would cost $74,760 for a 12-week course of treatment, or roughly $890 per pill.

While that hardly qualifies as a bargain, the price is roughly 10 percent less than the retail cost of other rival drugs. And it is potentially good news for officials at Medicare, Medicaid, the Department of Veterans Affairs, the federal prison system and other government agencies providing health care to seniors, veterans, the poor and prisoners.

Related: New Plan to Cut Prescription Drug Costs Meets Stiff Opposition from Industry

The staggering cost of providing these state of the art drugs to combat the deadly Hepatitis-C virus has blown huge holes in government agencies budgets and has forced three fifths of state Medicaid programs to impose tough restrictions on millions of poor patients and veterans seeking reimbursement for the treatments. 

Many Democrats, including presumptive presidential nominee Hillary Clinton and Sen. Bernie Sanders of Vermont, are calling for federal action to curb the cost of prescription drugs and to permit Medicare to begin negotiating down the price of many of the more costly drugs – a practice currently barred by the Medicare Part D legislation.

Yet some officials say that enhanced competition among drug manufacturers could help remedy the problem. 

Total US Drug Spending