The Milbank Memorial Fund is an endowed operating foundation that publishes The Milbank Quarterly, commissions projects, and convenes state health policy decision makers on issues they identify as important to population health.
We focus on a number of topic areas identified by state health policy leaders as important to population health.
The Center for Evidence-based Policy at Oregon Health & Science University is a national leader in evidence-based decision making and policy design.
Keep up with news and updates from the Milbank Memorial Fund. Get the latest from thought leaders, including Christopher F. Koller, president of the Fund.
We publish The Milbank Quarterly, as well as reports, issues briefs, and case studies on topics important to population health.
Blog: The View from Here
Jul 1, 2014 | Christopher F. Koller, President
Every once in a while, an issue comes along that serves up so clearly the conflict between a societal desire to maximize medical care treatment choices and the reality of limited resources that people say, “Maybe this is the one that will provoke the hard conversations.” Enter Sovaldi for the treatment of Hepatitis C.
In the US, about 2.7 to 5.2 million people have Hepatitis C, a chronic disease that can take 20 to 30 years to progress, ultimately resulting in cirrhosis for 5% to 20% of patients and death for 1% to 5%. Sovaldi (sofosbuvir) is the first in a class of direct acting antivirals to be approved by the FDA as safe and effective for the treatment of Hepatitis C. There is, however, evidence assembled by the Center for Evidence-based Policy (CEbP) at Oregon Health & Science University that Sovaldi’s manufacturer, Gilead, submitted limited results from a small body of research to obtain approval from the FDA under a “breakthrough drug” approval track that places greater priority on bringing drugs to market than on demonstrating safety and efficacy.1
The kicker? Gilead, sufficiently convinced of the drug’s superiority to other treatments, has attached a price of over $80,000 for the twelve-week course of treatment, which is about $1,000 per pill (if you are keeping track). Gilead based this price on its own estimate of costs avoided over a 20- to 30-year period for each patient who used Sovaldi. (As one analyst pointed out, this pricing strategy is akin to paying a pothole filler not on costs and profit margins, but on an estimate of front-end tire alignments that won’t be needed in the next 30 years.)
Gilead was no doubt emboldened by treatment guidelines developed by the American Association for the Study of Liver Diseases (AASLD)/ Infectious Diseases Society of America (IDSA), which endorses the use of Sovaldi. Gilead had reason to be emboldened—the CEbP’s review notes that 15 of 21 panel members and four of the five panel chairs had a financial relationship with Gilead. Investors approved, sending Gilead’s stock up 65% in the past 12 months.
Here we see the brass law of health care economics: my revenue is your expense. In this case, most of that expense will accrue directly to taxpayers. Hepatitis C is often transmitted through intravenous drug use—and a disproportionate number of Hepatitis C patients are on Medicaid or in prison. Given the high incidence rate and pricing strategy, state officials report that Medicaid spending could increase as much as 50% as a result of Sovaldi alone.
And Solvaldi is the tip of the spear. New breakthrough drugs are in the pipeline for conditions such as high cholesterol and Alzheimer’s disease. Pricing strategies for these drugs based on 20-year returns—even if accurate—do not correspond with the reality of single-year budgeting.
Regardless of its pricing and how it came to market, there is evidence that Sovaldi will help some Hepatitis C patients more than other drugs have. And here is where the questions come in:
In June, the Milbank Memorial Fund hosted a meeting of researchers, commercial insurers, self-insured businesses, public payers, and consumer advocates to compare notes and identify and disseminate evidence on the issue. As one might expect, there was much concern about the costs and efficacy of Sovaldi and no definite answers. One point was clear. While Sovaldi’s pricing strategy is a concern for public and private payers alike and the pricing debate will rage on, Medicaid programs and their sister corrections agencies can use the reality of immediate public budget impacts to lead in several important areas.
It is difficult for public officials to raise these issues. The evidence on the comparative effectiveness of drugs in general—and Sovaldi in particular—is scanty and confusing. Pharmaceutical companies develop sophisticated marketing campaigns to maximize the impact and profitability of their products. Public officials who are able to assess the information and speak out do so at personal and political costs. They are likely to be accused of rationing care, standing in the way of medical innovation, taking costs into consideration, and saying “yes” to some people and “no” to others. And yet—that is exactly what must happen if we are to have a fair, evidence-driven health care system that acknowledges that resources are limited and, within these constraints, strives to improve the health of all populations.
1. Leof, A., Gerrity, M., Thielke, A., and King, V. 2014. Sofosbuvir for the treatment of hepatitis C and evaluation of the 2014 American Association for the Study of Liver Diseases treatment guidelines. Center for Evidence-based Policy, Oregon Health & Science University.
The Milbank Memorial Fund is an endowed operating foundation that works to improve the health of populations by connecting leaders and decision makers with the best available evidence and experience.
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