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November 25, 2019
Reforming States Group State Health Policy Leadership Medicaid
Back to News and Updates
By Sarah Klein and Martha Hostetter
New medications have revolutionized the treatment of hepatitis C, a serious and sometimes deadly virus that disproportionately affects vulnerable populations, including people who are incarcerated, the homeless, and intravenous drug users.
These direct-acting antivirals came at steep price when they arrived on the market in late 2013, costing as much as $84,000 for a 12-week supply. The release of generic equivalents has ratcheted down the price somewhat — to $30,000 or less per person in some places — but even then, the drugs take a significant toll on states’ Medicaid, corrections, and other budgets and crowd out other important services. As a cost control measure, some states turned to rationing the new hepatitis C drugs by limiting access to those patients with irreversible liver damage.
After a spate of lawsuits from patients who argued they were denied lifesaving medication and censure from the Centers for Medicaid and Medicare Services (CMS) for failing to provide treatment, some states have begun looking for alternate ways of purchasing the new antivirals for vulnerable and high-risk populations. This summer, Louisiana and Washington became the first two states to reach agreements with pharmaceutical companies allowing them to purchase an unlimited quantity of the antivirals at a deep discount — making it possible to cure the vast majority of hepatitis cases within a matter of years.
Under their agreements, both states will pay dramatically reduced rates for the drugs up to a designated cap, beyond which additional doses will be either free (as in Louisiana) or cost pennies on the dollar (as in Washington State). In return, the pharmaceutical companies gain a guaranteed market and preferential status.
The deals have been compared to the Netflix subscription model, which provides customers with unlimited access to content for a set monthly fee. The comparison is problematic because the states are not paying a lump sum for an undefined amount of medication. That practice would violate Medicaid’s “best price” rule, which requires drug manufacturers to give Medicaid the best price they offer to any other purchaser. Instead, the states are paying a specified amount for purchases before and after the cap, making the purchase point known.
Louisiana’s goal is to eliminate 80% of hepatitis C cases within five years without spending more each year than it did in fiscal year 2019, when it paid $60 million to treat fewer than 1,500 people. Louisiana is providing the drug to Medicaid beneficiaries and uninsured incarcerated people; the state estimates 39,000 Medicaid beneficiaries and prisoners are infected with the virus.
To accomplish this goal, the state solicited proposals from the three manufacturers of direct-acting antivirals — AbbVie, Asegua Therapeutics (a subsidiary of Gilead Sciences), and Merck. Rebekah Gee, MD, MPH, Louisiana’s secretary of health, said the state ultimately selected Asegua’s drug to be the one on its preferred drug list because of the company’s willingness to provide an unlimited supply to Medicaid beneficiaries and those in jails and prisons. “The competitors were not willing to do that on the timetable we had envisioned, nor were they willing to treat individuals who are incarcerated, so the other proposals were a no-go for us,” she says. (Treatment for those who are released from prison during therapy is usually covered through Medicaid.)
Without a bulk purchasing model, the state estimated it would cost $760 million to treat Medicaid beneficiaries and prisoners, more than what it spends on primary and secondary education, corrections, and veterans’ services combined.
To reach its target of treating 31,000 people within five years, Louisiana has begun universal screenings in prisons and launched an outreach campaign to educate people about the risk factors for infection, the importance of screening, and the availability of curative treatment. Since the contract began July 15, at least 600 people have been treated. The response so far has been heartening, Gee says. “We’ve had many emails from patients and providers saying they have been waiting for years for this and how grateful they are.” When Asegua’s drug isn’t indicated for a particular patient, other similar medications are available through a simplified prior authorization process.
Washington State, meanwhile, has contracted with AbbVie under an arrangement that will move the state closer to achieving its goal of eliminating chronic cases of hepatitis C by 2030. The number of chronic hepatitis C cases in the state, estimated at 59,100 at the start of 2018, increased 60% from 2009 to 2017, in part due to intravenous drug use. “We knew we needed to do something to stem the tide,” says Sue Birch, RN, MBA, director of the Washington State Health Care Authority.
As in Louisiana, leaders in Washington encouraged the manufacturers to compete against one another on price; AbbVie’s drug was selected to be on the state’s preferred list because the company offered the best price and because they were willing to partner with the state on efforts to encourage screening and treatment.
Over the four years of the contract, Washington State will not pay AbbVie more each year than it did over the previous two years ($230 million) but will be able to treat significantly more people among those covered by the state – about 51% of the total infected population. Washington’s program covers state employees as well as Medicaid beneficiaries and incarcerated people. Priority populations include jail detainees and prisoners in the corrections system (the state estimates between 11% and 15% are infected with the virus); people living with H.I.V., who have higher rates of hepatitis C infection; and racial and ethnic groups including African Americans, Native Americans, and Alaska Natives, who are more likely to be infected.
The state’s campaign, Hep C Free Washington, is being coordinated by a committee that includes leadership from state agencies, community-based organizations, federally qualified health centers, academic institutions, and others who are exploring ways of leveraging existing programs, including substance abuse treatment centers, to expand screening and encourage people who screen positive to get treatment.
AbbVie has also been partnering with the state on educational and screening campaigns to find people who have not yet been treated and overcome barriers to care, particularly stigma. “They already have robust messaging and communications materials we can customize, so we are not starting from scratch,” says Amy Blondin, the health care authority’s chief communications officer.
AbbVie’s mobile bus will be dispatched across the state, offering screenings with results in just 30 minutes. In addition, the state plans to leverage its nursing workforce to reinforce the importance of screening for a disease that is largely asymptomatic until its advanced stages. The state has also removed prior authorization requirements for the drug, so providers do not need to go through a cumbersome process to prescribe it.
Both states say expanding health system capacity to treat hepatitis will be critical to success. “Training and supporting primary care providers, substance use treatment providers, physician extenders, and pharmacists, as well as creating a specialty referral system for complicated and treatment failure cases, will be key to reaching infected individuals and ensuring their successful treatment initiation, retention in care, and follow-up,” says Kimberly Hood, hepatitis C elimination manager for the Office of Public Health at Louisiana’s Department of Health.
Reinventing payment structures for pharmaceutical purchasing in heavily regulated environments is no small task. Leaders in Louisiana and Washington State say their progress has depended on collaboration among all sectors, including the pharmaceutical industry. During Louisiana’s planning stages, the Oregon-based Center for Evidence-Based Policy (CEbP) helped state leaders test the validity of their proposed model and the National Academy for State Health Policy and National Governors Association provided other technical assistance. Washington State received a grant from the Arnold Foundation, which allowed it to work with CEbP.
Engage the Feds Early and Often
Both states stressed the importance of keeping CMS and others in federal government informed of their plans, as such purchase agreements require CMS approval and possibly Medicaid state plan amendments or the use of a value-based purchasing template. Louisiana took a bipartisan approach — uniting a Democratic governor who viewed hepatitis C as a public health crisis and unnecessary driver of medical costs and a Republican senator who as an hepatologist had seen firsthand the impacts of the epidemic and barriers Louisianans faced in finding treatment. The Trump Administration was also supportive and instrumental to the effort’s success. “We didn’t want to get too far down the road and find they were not supportive of the mechanisms we were proposing,” Gee says.
Federal support is needed to broker shared savings agreements between states and CMS, which may encourage other states to follow Washington and Louisiana’s lead. Louisiana has initiated discussions with the Center for Medicare and Medicaid Innovation on a pilot to track the savings associated with early detection and treatment of chronic hepatitis C.
Find the Right Target
While these kinds of purchasing agreements may work for other drugs, such agreements may only be achievable where there is a defined market of patients — for example, children with cancer or insulin-dependent diabetics — and low manufacturing costs, a condition that would rule out biologics or cell or gene therapies. Competition among manufacturers is also necessary. “Before there was competition in this space you really couldn’t get traction on this idea,” Gee says. Even with it, this was a heavy lift, she says. “It’s important not to get discouraged. I was told no at least a dozen times in a variety of settings and if I had just given up this would not have happened.”
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