Medicare Costs Associated with Controversial Hepatitis C Drug Examined

The costs of Medicare associated with Sovaldi (sofosbuvir), an emerging hepatitis C drug, will vary depending on how many people are given the treatment, a blog in Health Affairs found.

Gilead, the drug’s manufacturer, has put a price tag of $1,000 on the pill, totaling $84,000 for a 12-week treatment. As a result, the hefty cost of Sovaldi has been met with controversy.

While Medicare purchases medications at a 23.1% discount, state Medicaid officials has cautioned the cost of the treatment will be financially strenuous.

Furthermore, it is unclear how many people will utilize Sovaldi. According to the National Health and Nutrition Examination Survey (NHANES), 350,000 Medicare beneficiaries have hepatitis C, but only less than half know they have it.

“Because hepatitis C is most prevalent among baby boomers, the number of patients seeking treatment under Part D could rise unless they are cured before reaching the age of Medicare eligibility,” the authors noted.

Tricia Neuman, Jack Hoadley, and Juliette Cubanski, who authored the Health Affairs blog, offered 2 scenarios and estimated the possible costs of Sovaldi treatment under Medicare Part D.

In the first case put forth, the authors speculated 25,000 Medicare beneficiaries, or 10% of hepatitis C positive Part D enrollees, will be treated with the drug. For 25,000 patients, a 12-week Sovaldi treatment was estimated to increase costs by $2 billion, or a 3% increase in federal Part D outlays and Part D premiums in 2015.

For the second predicament offered, 75,000 Part D enrollees, equal to the number of individuals who know they have hepatitis C, would be given Sovaldi. In this scenario, the researchers estimated an additional increase of $6.5 billion, or an 8% rise in premiums and overlays under Part D Medicare, resulting in the largest increase in premiums since 2008.

While the authors mentioned private sponsors’ (who conduct negotiations for Part D) bargaining power regarding drug’s prices, the case of Sovaldi may be an anomaly. Since Solvadi is one of the only hepatitis C drugs available, Medicare lacks the leverage to drive down the price by seeking comparable medications. Based on this premise, they estimated Part D enrollees could pay up to $7,000 out of pocket for a 12-week prescription of Sovaldi.

To compound the issue, Medicare isn’t allowed to benefit from rebates given to Veterans’ Affairs (VA) and Medicaid. However, the public consensus has supported increased government intervention to drive down drug prices, the blog mentioned.

“For now, Medicare is slated to pay top dollar to provide an important treatment that will potentially save lives,” the writers concluded. “The question for policymakers is whether that is a sustainable policy for the longer term.”