Blog: The View from Here

Sovaldi Redux – The States Muddle Through

Oct 16, 2014 | Christopher F. Koller, President

What kind of coverage decisions are states making about Sovaldi, the new Hepatitis C drug that costs $1,000 a pill or up to $168,000 a treatment? The drug presents new hope for patients, but grave risks to Medicaid and state corrections budgets, both of which must pay for care for a disproportionate number of people with Hepatitis C.

Drugs like Sovaldi—and there are more like it on the way—create the prospect of significant returns for investors at the expense of taxpayers and those who purchase insurance. The stakes are high. A rough estimate indicates that Sovaldi, if dispensed to all Medicaid enrollees and prisoners with Hepatitis C, could result in a 3% to 5% increase in total state government expenditures.

At the nub of the issue is how the value of drugs like these is determined. Should pharmaceutical companies be free to name their price while their drug is protected by patent? Or should public interest be taken into account?

Faced with the availability of Sovaldi, and patients and providers demanding coverage, state officials have had no time for such conceptual discussions. They are muddling through, making decisions based on the information available. The way they muddle, however, does provide insights for the future.

States make coverage decisions on the basis of price and evidence. On price— state Medicaid programs for the most part can’t shop and can’t negotiate. By federal law, Medicaid is entitled to a standard 23% discount on all FDA-approved prescription drugs and must allow access to that drug. Corrections agencies and Medicaid managed care organizations have some ability to negotiate.

These are distinctions without a difference however: for a unique drug under patent, negotiation options are limited. The list price, or “launch” price as hopeful investors breathlessly label it, rules, limited only by the aspirations and avariciousness of the manufacturer.

I’ve learned from our partners at the Center for Evidence-based Policy at the Oregon Health & Science University that the evidence picture for Sovaldi has gotten no clearer since this summer. In trials evaluating Sovaldi’s efficacy in highly selective, easy-to-treat populations, the drug showed response rates of 90% or better. In the one trial that looked at its efficacy among populations that are historically harder to treat, however, the response rates were similar to those of the VA when treating Hepatitis C patients using older treatments. In the only trial directly comparing Sovaldi with older treatments, the combined response rates for the two Hepatitis C genotypes included were identical overall though Sovaldi appeared more effective for genotype 2, while the older treatments were more successful treating genotype 3.

The primary advantage of Sovaldi is shorter treatment time and significantly reduced patient discomfort, although these same studies report that serious adverse effects were higher in the Sovaldi groups. It’s reasonable to think that more patients will complete Sovaldi’s simpler and more tolerable three-month course of treatment than a more complex and taxing six-month treatment course. However, any failure to complete therapy constitutes a very expensive lost investment by the payer.

The Center for Evidence-based Policy recently assessed state coverage policies for Solvaldi. Thirty-five states’ policies for non-managed care Medicaid enrollees were categorized as follows:

Policy Criteria for Sovaldi Number of States
No apparent restrictions on coverage 7
Once in a lifetime benefit? 6
Disease Severity Requirement? 22
Response-driven therapy (e.g. continuation of coverage depends on achieving early viral response) 9
“Coverage with Evidence:” End of Therapy Results Collection Required 3
Substance Abuse Treatment or Sobriety required 22
Specialist physician requirements Prescribe 10
Prescribe or consult 9

Given the uncertainties of Sovaldi’s efficacy, completion rates, and cost, state Medicaid agencies appear to be limiting access to the drug to the sickest patients. The policies show some variability: the lack of high-quality clinical evidence forces Medicaid agencies to experiment, improvise, and share. Several states require evidence collection as a condition of coverage, a promising development. Even with these limitations, states also reported significant numbers of patients failing to complete treatment.

Harvoni, the next generation of Sovaldi just released, does not clarify the situation. It has high reported efficacy but an even smaller body of evidence than Sovaldi. With a simpler therapeutic regimen, it presumably encourages higher completion rates, but Gilead has priced Harvoni equal to or greater than Sovaldi, except for patients who can get by with less. This makes economic sense for Gilead and its investors, but not for the public.

Let’s call the policy criteria identified here what they are—benefits triage. Many states are allocating scarce resources as best they can in the midst of uncertainty and duress. What are the implications for decision making about Sovaldi and other specialty drugs, and the people who might benefit from them?

  • Resources are limited. More money for Solvaldi means less money for mental health and substance abuse treatment that could prevent Hepatitis C, education, tax relief, or other public priorities. People setting benefits policy face the reality of resource constraints and make cost/benefit decisions every day.
  • Knowledge is still lacking. These drugs may be safe and effective, but there remains considerable uncertainty regarding the patients for whom they are best suited, their side effect profile, and their long-term response rates. Policies requiring evidence development as a condition of coverage, while challenging to administer, will probably continue to grow, particularly in the wake of the FDA’s expedited drug approval process.
  • Public payers triage. In the absence of convincing evidence and the industry’s
    refusal to lower prices, states can and will move to limit access to a subset of needy patients however they can define them. Efforts to coordinate this decision making across states and with sub-contractors make sense.
  • Price matters. States are looking for federal relief on the pricing of particular specialty drugs, especially those with patent protection, clear superiority to alternatives, widespread applicability, and significant benefits which accrue only over time. Relief might provide fewer patent protections, greater ability for Medicaid to negotiate drug pricing, as other state programs do, or an accepted public process for assessing the value of the drug, as is the case for vaccines.

Lower prices and better evidence will bring more access to drugs like Sovaldi. Those who take exception to the policies documented here, which limit access, can find common cause with the states in advocating for price relief and better clinical evidence.