Reform Update: Medicaid plans look to states for help with expensive hepatitis C drug

Medicaid managed-care plans are looking to state officials for help as they face massive outlays for the new hepatitis C drug Sovaldi, which costs $84,000 for a 12-week course of treatment.

The companies that administer the Medicaid plans are eager to raise the matter with state officials and Congress because conversations are beginning now to set the 2015 rates, Jeff Myers, president and CEO of the trade group Medicaid Health Plans of America, said in an April 28 letter to the National Association of Medicaid Directors (PDF). The trade group is asking the Medicaid directors to form a workgroup to tackle the problem.

Plans in some states are considering eliminating coverage for the drug, having Medicaid agencies pay for it above the capitation rate paid to plans, or building the drug into the rates paid by state agencies, Myers said. Medicaid agencies in Louisiana, California, Michigan and Florida have already limited access to the drug based on case-by-case determinations.

Gilead Sciences' Sovaldi was approved in December by the FDA and has been shown to have cure rates higher than 80%. As many as 3.2 million people have the disease, and 20% to 35% of them are estimated to be enrolled in Medicaid, according to the trade group for the managed-care plans, which would make at least 600,000 beneficiaries candidates for the drug.

Gilead reported this month that U.S. sales of the drug reached $2.1 billion in the first quarter of 2014, and 7%, or $160 million, came from state Medicaid programs. Myers estimated that Sovaldi could cost state Medicaid programs as much as $1.5 billion a year and noted that if costs for other current and emerging hepatitis C drugs are added, spending on drugs for this one disease could top $2 billion annually. Johnson & Johnson's Olysio costs $66,000 for 12 weeks of treatment, and Gilead is expected to release another offering in October.

“We need to look at how to best provide treatment so that we don't destabilize the program,” Myers said.

Thirty-seven states and Washington, D.C., contract with Medicaid managed-care plans, which are not eligible for the 23.1% discount that state Medicaid programs get for branded drugs under the Patient Protection and Affordable Care Act. Even states with traditional fee-for-service programs would recoup only about $230 a pill—the course of treatment would still cost nearly $65,000.

Molina Healthcare offers health plans in California, Florida, Illinois, Michigan, New Mexico, Ohio, South Carolina, Texas, Utah, Washington and Wisconsin. None of these states currently reimburses the company for the Sovaldi, so Molina has created guidelines that limit coverage of the drug to the neediest cases, in most cases meaning the patient has developed cirrhosis, the final stage of chronic liver disease.

Dr. J. Mario Molina, the company's president and CEO, said he hopes creating a work group with state officials could lead to discussions about other costly drugs that may be in the pipeline. “These new drugs could be a budget buster for state Medicaid programs,” Molina said.

Some experts are downplaying Sovaldi's effect on Medicaid programs and insurers. “The problem should become less acute in future years as Sovaldi competitors reach the market, price competition increases and the backlog of patients with long-standing infections begins to clear,” said David Williams, president of Boston-based consulting firm Health Business Group.

In the meantime, it could take years for the full population of candidates for Sovaldi to find their way to the drug because many don't know they have the disease, said Alan Weil, executive director of the National Academy for State Health Policy. “So there is time to build this into future rates.”

Pennsylvania's Medicaid enrollment is up by more than 18,000 people since the Oct. 1 launch of the Patient Protection and Affordable Care Act's health-insurance exchanges.

That state has yet to formally expand Medicaid, so the increase is being attributed to a “woodwork effect”—which means people who were already eligible for the program joined thanks to the publicity around Obamacare, essentially coming out of the woodwork to sign up for coverage.

This new group of enrollees accounts for less than 1% of the 2.21 million now enrolled in Medicaid in the state. Other non-expansion states like Montana, Idaho and Florida saw their program enrollments jump between 7% and 8% in the last six months.

Pennsylvania is waiting for a CMS decision regarding Republican Gov. Tom Corbett's private option alternative plan, which proposes using federal funds to buy coverage for state residents under 138% of the federal poverty level. The plan has such controversial provisions as a work-search eligibility requirement. Public comment period for the plan ended April 11. If approved, an additional 454,000 state residents could get coverage.

Medicaid expansion is favored by a majority of surveyed Kansas voters, a poll released earlier this month found. The results could spell bad news for Republican Gov. Sam Brownback, up for re-election in November.

The poll conducted by Public Policy Polling for MoveOn.org Political Action (PDF), a left-leaning organization, showed that 52% of Kansans favored expanding the healthcare program to include those making up to 138% of the federal poverty level, while 35% said they opposed expansion and 13% said they weren't sure. In addition, 41% of voters said Brownback's unwillingness to expand Medicaid would make them less likely to vote for him. The survey also showed Kansas Democrat gubernatorial candidate Paul Davis leading Brownback 45% to 41% with 14% of voters undecided.

Follow Virgil Dickson on Twitter: @MHvdickson