Healthcare Business News

Reform Update: Pricey hepatitis C drugs strain Medicaid budgets

By Virgil Dickson
Posted: June 17, 2014 - 4:30 pm ET

State officials are scrambling to control the burden of Gilead's $1,000-a-pill hepatitis drug Sovaldi, particularly in states that have agreed to cap Medicaid spending under CMS waivers.

Oregon plans to invoke an unusual provision of its waiver to deny coverage in all but the most severe cases. Officials estimate it would cost the state $168 million over the next 12 months to buy the drug for every Oregonian believed to have the disease.

Of 600,000 people enrolled in the Oregon Health Plan, the state's Medicaid program, 5,600 have hepatitis C. An additional 13,000 beneficiaries may unknowingly have the disease, the state estimates.

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“By one calculation, if we took all the dollars we currently spend on pharmacy in Oregon in Medicaid and dedicated them solely to hep C, we would only be able to treat 25% of the currently diagnosed hep C population,” officials said in a report prepared to win support from the program's Health Evidence Review Commission. “If this is even close to true, the consequences are enormous.”

Under a Medicaid waiver approved by the CMS in 2012, Oregon agreed to cap the growth of Medicaid spending in exchange for $1.9 billion in funding to pursue an ambitious overhaul. Exceeding the caps carries significant financial consequences.

Other states, including New York and Rhode Island, have similarly capped budgets. Oregon's waiver, however, includes a unique “prioritized list” provision that allows that state to deny coverage or offer little reimbursement for drugs deemed to have limited benefit, said Matt Salo, executive director of the National Association of Medicaid Directors.

“If (Oregon) does ultimately succeed in denying coverage, it's not a precedent for any other state,” Salo said.

A subcommittee of the evidence review committee was supposed to take up the proposal during a June 12 meeting but ran out of time, according to a spokeswoman for the agency that administers the plan, leaving the matter at a standstill until the subcommittee meets again in August.

In Rhode Island, 11,000 to 17,000 people may be infected with hepatitis C, with a disproportionate amount of them on Medicaid, according to RI Defeats Hep C, a program created to study the impact of the disease.

In 2009, the state entered into an agreement to limit Medicaid spending to $12 billion over five years.

Next month, it plans to release a coverage policy for the drug. Today the drug is not covered by the state's Medicaid program.

“We intend to base our policy on the best available evidence regarding the efficacy of Sovaldi, as well as ensuring that prescriptions are managed and overseen by qualified professionals,” said Beryl Kenyon, a spokeswoman for Rhode Island's Health and Human Services department.

New York, starting in 2011, began placing a cap on what the state can spend on most Medicaid programs, allowing the budget to grow no more than 4% a year. This budget was capped at $16.4 billion in fiscal 2014. Its Medicaid program counts as many as 75,000 people as having hepatitis C.

The state is covering Sovaldi for beneficiaries in its fee-for-service program, according to a spokesman for the New York State Health Department. Most of the Medicaid managed-care plans cover the drug with prior authorization, he added.

Other states are requiring prior authorization for the drugs to keep costs down, generally providing reimbursement only for patients with later stages of the disease or cirrhosis.

Officials in Oklahoma are eagerly awaiting the implementation of its prior authorization policy for the drug, which will kick in July 1 if approved by the Oklahoma Health Care Authority's board at its June 26 meeting.

Between January and June 9, the state has spent $12.5 million on Sovaldi alone. That's nearly double what the state spent on all hepatitis C drugs in 2013, according to state data.

West Virginia officials say they have already saved $5.5 million by manually reviewing requests for both Sovaldi and Olysio, a hepatitis C drug made by Johnson & Johnson that costs $66,000 for a 12-week regimen. The state has only approved one of the 50 requests received so far this year.

Some states have yet to determine how to proceed.

The Michigan Department of Community Health will hold a special meeting of its Pharmacy and Therapeutics Committee July 8 to discuss coverage for Sovaldi and other hepatitis C drugs. So far, the state has been reimbursing for them on a case-by-case basis.

“Given the clinical and financial impact of Sovaldi and Olysio, we want to make sure we determine what the appropriate criteria for coverage would be so that we can ensure appropriate coverage for our citizens,” said Angela Minicuci, a spokeswoman at the department said.

Medicaid debt seizures debated

California lawmakers are drafting a legislative fix for a long-standing policy that allows the state to recoup healthcare costs from the estates of dead Medicaid beneficiaries. There is concern that the provision may be leading people who are now eligible for Medicaid under the Patient Protection and Affordable Care Act to avoid enrolling, according to the San Jose Mercury News.

The legislation would reduce the amount of assets that could be recovered to the expenses incurred for long-term care in nursing homes for beneficiaries who were 55 and over. It would also eliminate asset seizure from estates of surviving spouses of deceased Medicaid recipients. Gov. Jerry Brown is fighting the measure, arguing that the state needs the funds seized from estates to fund the Medicaid program.

Illinois reverses Medicaid cuts

Illinois Gov. Pat Quinn signed a law Monday that would restore some Medicaid cuts the state made in 2012, according to the Associated Press.

The new law restores the cuts to adult dental and podiatry services. Lack of access to those services means more emergency room visits, which cost the state more in the end, according to state Rep. Greg Harris, a Chicago Democrat who sponsored the bill.

The new law also allows Medicaid coverage for eligible children who've been without private insurance for three months—they previously had to be without coverage for 12 months before they were eligible. It also lifts the four-prescription drug limit for Medicaid patients needing antipsychotic drugs.

To help pay for restoring the coverage, the law seeks about $400 million in federal matching funds for the approximately 349,000 Illinois residents who enrolled in Medicaid under the Affordable Care Act expansion.

Follow Virgil Dickson on Twitter: @MHvdickson

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