Insurers brace for high-cost Sovaldi

The new hepatitis C drug Sovaldi has become an $84,000 dilemma for private and public insurers, particularly Medicaid plans.

UnitedHealth Group, the largest private insurer, estimated its Sovaldi treatment costs at $100 million during the first three months of 2014. Aetna tabulated its first-quarter costs for the drug at $30 million, while Cigna estimated spending $10 million so far this year.

WellPoint initially projected costs for hepatitis C virus (HCV) treatment would double in 2014. But after racking up $50 million in costs during the first three months of the year, the insurer announced that it was boosting anticipated HCV-related expenses for 2014 by an additional $100 million. About 40% of WellPoint's expenses were from commercial plans, 35% from Medicaid plans and 25% from Medicare Advantage plans.

“Hep C is the biggest issue right now,” WellPoint CEO Joseph Swedish said on a call with investors last week. “It's the watch item for the industry.”

Sovaldi has a reported cure rate of higher than 80%. But the $84,000 price of the drug for a full 12-week course of treatment has led to fears that many who could benefit won't be able to get it, and that the costs will prove financially unsustainable for insurers and public-healthcare programs. Treating every one of the estimated 3.2 million Americans with HCV would cost about $270 billion, four times the cost of the entire Medicare Part D prescription drug program in 2013, according to a report from the Kaiser Family Foundation.

Jeff Myers, president and CEO of the trade group Medicaid Health Plans of America, estimated that Sovaldi could cost state Medicaid programs as much as $1.5 billion a year. If costs for other current and emerging HCV drugs are added, spending on prescriptions for the disease could top $2 billion annually, he said. Johnson & Johnson's HCV drug Olysio costs $66,000 for 12 weeks of treatment, and Solvaldi's maker, Gilead Sciences, 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.

Medicare is also at risk. In March, the CMS decided to cover HCV screening for all Medicare beneficiaries born between 1945 and 1965. The agency is expected to release a final rule on covering the screenings by June.

Still, Medicaid programs and plans have the most pressing concerns because a disproportionate share of those with HCV are low-income individuals. Medicaid Health Plans of America estimates that 20% to 35% of individuals with HCV are enrolled in Medicaid, which would make at least 600,000 beneficiaries candidates for the drug.

Medicaid plan leaders are raising concerns about the issue with state officials and Congress as they begin to set their 2015 rates. “The projected volume of patients in the Medicaid program that could benefit from this innovation, combined with the price of Sovaldi, will have a substantial impact on state Medicaid budgets,” Myers wrote in an April 28 letter to the National Association of Medicaid Directors. “The uptake of this medication will make it challenging to establish actuarially sound rates in 2015.”

Medicaid plans in some states are considering a variety of responses to Sovaldi's cost, including eliminating coverage for the drug, having Medicaid agencies pay for it above the standard rates paid to plans, or building the drug into the rates paid by state agencies, Myers said. Medicaid agencies in California, Florida, Louisiana and Michigan already limit access to Sovaldi based on case-by-case determinations.

David Axene, a fellow of the Society of Actuaries, also expects commercial insurers to consider additional co-pays and limiting the drug only to individuals who truly need it. “I see people asking hard questions,” he said.

Thirty-seven states and the District of Columbia contract with private Medicaid 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.

Molina Healthcare offers Medicaid plans in 11 states, including California, Florida and Texas, none of which currently reimburse the company for Sovaldi. Molina has created guidelines that limit coverage for the drug to the neediest cases, which in most cases means 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 to talk with state officials about other costly drugs that may be in the pipeline. “These new drugs could be a budget buster for state Medicaid programs,” he said.

But some experts downplay Sovaldi's impact on insurers. David Williams, president of the Health Business Group consultancy, said the cost problem should become “less acute” in the future as rival products for treating HCV reach the market, price competition increases, and the backlog of patients with longstanding HCV begins to clear.

It could also take years for all patients who are candidates for Sovaldi to receive the drug because many don't know they have HCV, noted Alan Weil, executive director of the National Academy for State Health Policy. “So there is time to build this into future rates,” he said.

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