Healthcare Business News
Karen Ignagni, America's Health Insurance Plans

Excessive drug costs could invite price caps: AHIP's Ignagni

By Paul Demko
Posted: May 21, 2014 - 6:45 pm ET

The steep cost of Sovaldi—Gilead Sciences' $1,000-per-pill treatment for hepatitis C—is prompting wide-ranging discussions about the cost of drugs and whether the government should take more steps to regulate the cost of potentially life-saving treatments.

“The Sovaldi example has brought us to a crossroads,” said Karen Ignagni, president and CEO of the trade industry group America's Health Insurance Plans, during a healthcare forum in Washington on Wednesday. “We need to sit together to begin talking about how we can attack this problem together before the government has to. … We cannot sustain six-figure therapies and we're at the beginning of that trend.”

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Ignagni's comments were made during the “Future of Medicine: A Conversation on Cost and Value” forum put on by the Atlantic magazine. But the discussion was dominated by the pioneering hepatitis C virus (HCV) drug that's vexing insurers, Medicaid and Medicare officials, and patients diagnosed with the chronic liver disease. Sovaldi has proven remarkably effective in combating the virus, with a reported cure rate of more than 80%, but a full 12-week course of treatment costs $84,000. That's causing insurers and public health officials to engage in difficult financial and ethical discussions about who should be entitled to access the drug.

Dr. Donald Jensen, director of the Center for Liver Diseases at the University of Chicago, noted that hepatitis C can be asymptomatic for years and that not everyone diagnosed with the disease will need immediate access to Sovaldi. “We're already making these triage decisions,” Jensen said.

In March, the CMS decided to cover HCV screening for all Medicare beneficiaries born between 1945 and 1965, which could create a significant financial burden for treating patients who test positive. According to Jensen, the average individual with the liver disease is 59 years old; 75% of them are part of the baby boom generation that's rapidly aging into Medicare.

Dr. Sharon Levine, associate executive director of the Permanente Medical Group, said that the insurer's costs for hepatitis C treatment have already doubled what was anticipated for all of 2014. But she also pointed out that the problem of skyrocketing specialty drug costs is much broader than Sovaldi.

“This isn't an attack on Gilead,” she said. “Gilead is just the dead canary in the coal mine at this point.”

Representatives of the pharmaceutical industry repeatedly pointed out during the forum that developing innovative drugs that provide life-saving treatments is extraordinarily expensive. John Castellani, president and CEO of Pharmaceutical Research and Manufacturers of America, the main trade industry group, said that it costs on average $1.2 billion and takes 10 to 12 years to get a drug to market. Castellani said that the FDA approval process for drugs has remained largely unchanged for four decades.

“We have to modernize the discovery process,” Castellani said. “We can only be as innovative as our regulator.”

Sara Radcliffe, executive vice president for health at the Biotechnology Industry Organization, another trade industry group, pointed out that drugs like Sovaldi will actually reduce costs in the long run by eliminating the need for expensive procedures like liver transplants. “It's a huge discussion in our industry,” Radcliffe said of pricing. “How do we create the products that those on the reimbursement side are going to pay for?”

The University of Chicago's Jensen pointed out that Sovaldi is being offered at much cheaper prices in other countries, Egypt and India in particular. “Will there be treatment tourism?” he asked. “I hope that doesn't happen.”

Caps on insurer profits because of ACA

Ignagni noted that health plans face caps on profits under the Patient Protection and Affordable Care Act. Insurers are required to spend at least 80% to 85% of premiums on medical care under the federal healthcare law. If they fail to do so they are required to refund payments to customers. Ignagni argued that pharmaceutical companies should take voluntary steps to ease pricing pressures to avoid governmental intervention.

“Manufacturers are charging whatever they can get away with,” Ignagni said. “We can't have a system that operates that way. We can't sustain it. It will go back to blowing up family budgets and blowing up Part D and blowing up the federal government. … It's a vicious circle here.”

But Ignagni also acknowledged that businesses are extremely queasy about having forthright, public discussions about how much they charge for their products. “Talking about price is often akin to calling fire in a crowded room,” she said. “No one wants to do it until they have to.”

Follow Paul Demko on Twitter: @MHpdemko

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