New Hepatitis C Drug, Old Problems

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:

    • How can we best learn who benefits most from a new therapy when there is only limited information available about its efficacy and safety?
    • There really is only so much money to go around. With limited resources, how are costs and benefits of treatments to be balanced for individual patients, classes of patients, and populations as a whole? For instance, Hepatitis C has only a 5% mortality rate—until we have better efficacy information, should all patients be treated, regardless of costs?

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.

        1. Develop an evidence base. Proven efficacy is not proven superiority. Not all Hepatitis C patients will respond to the new drug in the same way, based on their genotype and the stage of their condition, among other reasons. This information is knowable over time and should be collected and made publicly available. Similar to the way they deal with experimental medical procedures, public payers can make approval for coverage of a particular drug conditional on the development of public information and analysis of what works best and for whom. Until that information about Sovaldi is better known and disseminated, public payers should err on the side of caution and consistency—which means granting approval under limited circumstances and with the compilation of publicly accessible results.
        2. Take into account cost and benefit when making coverage decisions. State Medicaid and corrections agencies are the custodians of public funds. Money spent on Hepatitis C treatment is money not available for other public uses—including education and infrastructure—and must be collected as taxes from citizens. Public officials must be encouraged to take the unpopular position that costs—as well as benefits—must be taken into account when making coverage decisions. If a decision is made to expand the amount of resources available, it should be done intentionally, collectively, and with priorities in mind. For the last 20 years, Oregon’s Medicaid program has been a national leader in publicizing and debating these tradeoffs in treatment costs and benefits. Perhaps not surprisingly, the Health Evidence Review Commission of the Oregon Health Authority has received a staff recommendation not to cover Sovaldi, which they will act on in the coming months.
        3. Realize that aspirations of disease eradication are premature. There has been much hopeful talk about the public health benefits of Sovaldi and its potential to eradicate Hepatitis C. This is aspirational but premature, and only benefits investors in treatment therapies. Hepatitis is a debilitating condition that preys on politically- and economically-marginalized people. But it does not trump all other disease. We have “eradicated” few diseases successfully and only then with vigilance and ample doses of primary and secondary prevention, as well as treatment. Hepatitis C patients are not immune to the disease once treated, and they can be re-infected if they continue illicit behaviors. Even if direct acting antivirals were universally effective—which has not been demonstrated—and the price was deemed acceptable, it is not easy to prevent transmission and re-infection of Hepatitis C. State leaders would do well to remind more optimistic colleagues of these points.
        4. This picture will evolve and new drugs will continue to change the cost/benefit calculus. The resources required by purchasers—including states—to analyze this evolving evidence are miniscule compared to the money spent on medical car
          e. Public officials should be supported in acquiring and sharing the capacity to make these life- and budget-affecting decisions, and held accountable for their impacts.

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.