High drug costs may lead to price controls, AHIP's Ignagni says

The staggering cost of Sovaldi, the $1,000-a-pill treatment for hepatitis C, is prompting serious discussions among healthcare leaders about the price tags of potentially life-saving specialty drugs and whether the government should regulate those prices.

“The Sovaldi example has brought us to a crossroads,” Karen Ignagni, president and CEO of the trade industry group America's Health Insurance Plans, said during a healthcare forum last week in Washington. “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.”

Ignagni's comments came during a forum sponsored by the Atlantic magazine titled “Future of Medicine: A Conversation on Cost and Value.” It focused heavily on Sovaldi, manufactured by Gilead Sciences, whose high cost is vexing private insurers, Medicaid and Medicare officials, and patients diagnosed with the chronic liver disease.

Sovaldi has proven remarkably effective in combating the hepatitis C 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. Medicaid managed-care insurers are asking state Medicaid agencies to pay for Sovaldi over and above the capitation rate paid to plans or else build Sovaldi costs into their rates. Most advanced countries regulate the price of drugs.

Meanwhile, the American Society of Clinical Oncology is developing an algorithm to rate the cost-effectiveness of expensive cancer drugs and is encouraging doctors to discuss costs with their patients. Taking the cost benefit of therapies into consideration has long been hugely controversial in U.S. medicine and politics.

Dr. Donald Jensen, director of the Center for Liver Diseases at the University of Chicago, said doctors “already are making triage decisions” about Sovaldi since hepatitis C can be asymptomatic for years and not everyone diagnosed with the disease will need immediate access to the drug. He noted that Sovaldi is being offered at much cheaper prices in other countries, particularly in Egypt and India. “Will there be treatment tourism?” he asked. “I hope that doesn't happen.”

In March, the CMS decided to cover hepatitis C virus screening for all Medicare beneficiaries born between 1945 and 1965, which could create a significant cost burden for Medicare in treating patients who test positive. According to Jensen, the average individual with the liver disease is 59 years old.

Dr. Sharon Levine, associate executive director of the Permanente Medical Group, said Kaiser Permanente's costs for hepatitis C treatment this year already are twice what was anticipated for all of 2014. But she noted that the problem of skyrocketing specialty drug costs is much broader than Sovaldi. “Gilead is just the dead canary in the coal mine at this point,” she said.

Representatives of the pharmaceutical industry argued at 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, said it costs an average of $1.2 billion and takes 10 to 12 years to get a drug to market, noting that the Food and Drug Administration's approval process 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.”

But Ignagni suggested taking a look at how much of drug company spending goes for research and how much for other areas such as marketing. She also said the government might require comparative-effectiveness research to help determine how much a drug therapy is really worth.

Sara Radcliffe, executive vice president for health at the Biotechnology Industry Organization, another pharmaceutical industry trade group, said drugs like Sovaldi actually will reduce U.S. healthcare spending in the long run by reducing the need for expensive procedures such as liver transplants. Pricing “is a huge discussion in our industry,” she said. “How do we create the products that those on the reimbursement side are going to pay for?”

Ignagni argued that pharmaceutical companies should take voluntary steps to bring down prices to avoid governmental intervention. “Manufacturers are charging whatever they can get away with,” she 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 (Medicare) Part D and blowing up the federal government. … It's a vicious circle here.”

She acknowledged the politically explosive nature of what she was saying. The concept of price controls is not popular in the business community or among most elected officials. “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