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Study Predicts Huge Toll Of Hepatitis C Drugs On California Budget

California taxpayers could be on the hook for billions of dollars to treat hepatitis C patients in various state-funded programs, according to a report released Tuesday by an insurers’ trade group.

The analysis commissioned by the California Association of Health Plans estimates that paying for the patients’ high-priced hepatitis C medications in prisons and state hospitals, or through Medi-Cal and other state programs, could range from $512 million to $5.1 billion. The wide-ranging estimates depend on how many patients are treated and how much the drugs are discounted by manufacturers.

Charles Bacchi, president and CEO of the association, said the report underscores what is to come in the near future when more costly prescription drugs are approved. The high costs aren’t sustainable for health plans, consumers or taxpayers, Bacchi said.

“With a slew of new high-priced drugs set to hit the market this year … this report really shows how that number can be multiplied,” Bacchi said. “It could be a huge hit to the taxpayers.”

The new hepatitis C medications are a vast improvement over previous treatments and can cure patients. But their staggering cost has prompted a national debate about their outsized bite into health care budgets. The estimated costs have led to policy changes, hearings, lawsuits and ethical debates about who should receive the treatments.

An estimated 3.2 million people nationwide have hepatitis C, a virus that is the leading cause of cirrhosis and liver cancer.

Gilead Sciences Inc., which won approval for the drug Sovaldi in 2013, has been criticized for charging about $1,000 for each pill – or about $84,000 for the 12-week treatment. Another of its drugs, Harvoni, costs more.

Gilead has said the prices are fair because the drugs are highly effective and can prevent future medical costs to treat liver disease or provide transplants.

One study last year by the nonprofit Institute for Clinical & Economic Review found that if half of hepatitis C-infected Californians received the new medications, annual drug costs could rise by $22 billion.

“These cures are not free, “ said Steven Pearson, president of the Boston-based institute.

Health officials in most Medicaid programs around the country are prioritizing who receives the hepatitis C medication, according to a study published Tuesday in the Annals of Internal Medicine. The high costs are “forcing many payers to ration this lifesaving treatment,” the study said.

California’s Department of Health Care Services issued a new policy, effective Wednesday, which sets new guidelines on which patients can receive state-funded hepatitis C treatment. The department estimates that between 3,000 to 4,000 Medi-Cal members will seek treatment next year and says that decisions about who gets the new medications will be based upon medical necessity rather than cost.

California’s budget, which was signed last week, allotted $228 million in additional funds for specialty drugs to treat hepatitis C patients in the state hospitals and prisons and on state programs such as Medi-Cal. Covered California, the state’s health care marketplace, recently approved a cap on specialty drugs that would limit most consumers to paying $250 per month per prescription.

The state has convened a working group to review the state’s policies and expenditures on high-cost drugs, including those used to treat hepatitis C.

Hepatitis C medications have triggered more discussion about drug development, pricing and use than any drugs in recent history, and the debate is far from over, Pearson said.

“A lot of new expensive drugs are on the horizon,” Pearson said, referring to treatments for various conditions. “Drug costs could go up significantly and have a major impact on the budgets.”

Two costly medications — one for high cholesterol and one for heart disease — are expected to get FDA approval later this summer. Cancer drugs in the pipeline could have similarly high price tags.

The hepatitis C research was done by The Taylor Feldman Group for the health plan association, which seeks to raise awareness of the cost to taxpayers, health plans and consumers, Bacchi said. He noted that private health plans handle the vast majority of Medi-Cal patients through managed care.

Emalie Huriaux, director of federal and state programs for Project Inform, a patient advocacy group based in San Francisco, was skeptical of the findings.

The report is “based on a lot of assumptions that can’t be verified,” she said.

She said insurers and pharmaceutical companies are “throwing rocks at each other” rather than coming up with solutions to the high prices.  The report, she said, is another example of that.

Huriaux said something has to be done to lower costs, reduce restrictions and improve access for consumers, many of whom have lived with the hepatitis C virus for decades yet have been told they aren’t sick enough to get the medications.

“It comes down to how much should you pay for a cure?” she said. “Giving people access shouldn’t bankrupt the public systems and it shouldn’t break individual’s bank accounts.”

Blue Shield of California Foundation helps fund KHN coverage in California.

Related Topics

California Cost and Quality Health Industry Medicaid