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June 24, 2016
Christopher F. Koller
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With threats of lawsuits and pressure from government officials, some payers appear to be relaxing their coverage guidelines for expensive direct-acting antiviral drugs (DAAs), including drugs for Hepatitis C. The benefits that increased access to these drugs provide to patients with Hepatitis C— and to the drugs’ manufacturers and investors—will come at the expense of state budgets and, more importantly, broader discussions about matching demand for health care services to limited resources.
In the face of list prices in the range of $80,000 per patient, a high number of infected enrollees, and a disease in which many patients remain asymptomatic, most Medicaid agencies and their contracted managed care organizations initially limited access to the first DAA—Sovaldi—to more severely afflicted patients. They used standards supported by systematic reviews of the available evidence and tried to balance access and affordability in the real world of constrained state budgets.
The balance is hardly stable. New market entrants have resulted in price discounts of 30% to 40%, strengthening the argument for the value of competitive markets and creating pressure on payers—even at the still hefty cost of $55,000 per treatment before rebates—to broaden access. Different state Medicaid agencies have different access guidelines, which are not all equally supported by evidence. Faced with smaller expense impacts, many commercial and Medicare insurers have less restrictive coverage rules.
Things got shakier in November of last year when the Centers for Medicaid and Medicare Services (CMS) released a letter to Medicaid directors which stated that they were “concerned that some states are restricting access to DAA hepatitis C virus (HCV) drugs contrary to the statutory requirements in section 1927 of the (Social Security) Act by imposing conditions for coverage that may unreasonably restrict access to these drugs.” The letter went on to list specific practices of concern, including limits on who could prescribe DAAs, the extent of liver damage necessary to pay for the drugs, and the demonstrated drug abstinence of patients.
Accompanied by a memo to DAA manufacturers politely requesting they inform CMS of their ideas to help out Medicaid, CMS’s letter was a clear signal to Medicaid agencies that Washington’s idea of the right balance between affordability and access was significantly at odds with that of many states. The letter also made it clear that the agencies would receive no help from CMS in raising broader societal questions about drug pricing and how innovation is valued.
Emboldened by the letter, the prospect of eradicating Hepatitis C, and individual stories of care denied, consumer groups have taken aim at the policies of Medicaid agencies. In the last two months, in the face of threatened legal action, Medicaid officials in Delaware, Pennsylvania, and Florida have removed all categorical exclusions for coverage of DAAs. And with the prodding of NY Attorney General Eric Schneiderman, seven health plans in New York State voluntarily removed coverage exclusions. A month ago, a Washington judge ruled similar exclusions in its Medicaid program illegal. Legal action in Indiana against its Medicaid agency is pending.
In a blog post hailing the Delaware decision, Kevin Costello, Director of Litigation at the Center for Health Law and Policy Innovation at Harvard Law School, which has led much of the threatened litigation, declared, “This change is not only the right thing to do from a public health and legal point of view, but it also has been proven that this policy will be cost-effective for the state in the long run. And it goes without saying that the real potential of this cure is the eradication of HCV altogether, a goal that is furthered by early treatment of Medicaid beneficiaries that makes, in their case, further transmission of the virus impossible.”
I hope that any victories for increased patient access to potentially life-enhancing treatments are not at the expense of the societal questions raised by the DAA innovation.
The “long run” for the cost-effectiveness of universal coverage for DAA coverage cited by advocates like Mr. Costello is very long indeed. Ignoring the possibility of relapse of infection-inducing behavior, all costs are incurred by one agency in one state upfront, and the benefits accrue across many entities over many years. The ultimate cost-effectiveness of the treatment is hardly a foregone conclusion, with at least some analyses indicating universal treatment at current prices exceeds commonly accepted “willingness to pay.”
Policymakers similarly should not resort to overly simple formulations. In a blog post accompanying the CMS letter to Medicaid agencies, administrator Andy Slavitt optimistically stated, “We believe patients, manufacturers, providers, insurers, and government all share a common goal to foster a health care system that leads in innovation, delivers affordable, high quality medicines, and results in healthier people with access to the care they need.” While that goal may be common, goals of maximizing shareholder return and personal profit are not—and are often achieved at the expense of that grander vision.
Resources are limited—dollars spent on health care are dollars not available for other purposes. Rather than yield to popular pressure, find a way to pay for Hepatitis C drugs at current prices and wait nervously for the next innovation, or resort to simple and untested solutions (such as enhanced market competition or broad assurances of cost-effectiveness), we should take advantage of the DAA innovations to ask some hard questions about the way we incentivize and finance health care innovations, such as:
Seen in this larger framework, Medicaid officials and their agents looking for evidence and affordability, investors seeking returns for their capital, scientists pursuing life-enhancing innovations, and advocates ensuring access to those treatments are playing important but not authorial roles in a bigger story. It is up to those who construct the public laws, and we who elect those officials, to write that narrative.
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