Sovaldi's cost-effectiveness is being overplayed

"Research on the cost-effectiveness of Sovaldi is still in the early stages, but it appears that use of the drug has the potential to actually save money over the long run.” —New York Times UpShot column, Aug. 2

Nothing could be further from the truth.

A detailed analysis of cost-effectiveness studies, which appeared six years ago in the New England Journal of Medicine, found that about 1 in 5 medical interventions save money by reducing the need for other, more costly treatments. For instance, if you have elevated cholesterol and take statins, it reduces the risk of heart attack. A relatively cheap pill prevents a very costly intervention.

But the cost-effectiveness of statins depends on how many people need to be treated before one heart attack is eliminated. That number is quite high—about 1,000, said a 2011 Cochrane Review.

Before statins became generic, the cost of extending one patient's life for one year (the measure is called a quality-adjusted life year, or QALY) was more than $250,000. More recent studies have lowered that spend to about $50,000 per QALY—as long as generic statins are prescribed and only for people with other risk factors of heart disease.

What statins do not do is save the system money. It costs money to prevent heart attacks and strokes.

As the Times noted, there are no published cost-effectiveness studies of Gilead Sciences' Sovaldi, the now infamous $1,000 pill ($84,000 per treatment) for hepatitis C infection, which resides in about 3 million people and kills about 16,000 people a year. Treatment, the paper suggested, would reduce long-term healthcare costs by eliminating hepatitis C-related cirrhosis, liver transplants and deaths.

But that is a false assumption. There have been cost-effectiveness studies that looked at the hepatitis C drugs from Vertex Pharmaceuticals and Merck & Co. that came along just ahead of Sovaldi and heralded a new era in the treatment of chronic hepatitis C. Those drugs succeeded in eliminating the virus in about two-thirds of patients when added to interferon, the long-standing injection treatment with terrible side effects and poor results.

Cost-effectiveness analysis of those drugs, published in the Annals of Internal Medicine in 2012, estimated the total regimen cost at $48,212 per patient treated. That translated to a total cost per QALY of about $35,700. That's cost-effective even by the standard of the United Kingdom's National Health Service, which generally sets its upper benchmark for what it will pay for at 30,000 pounds, or about $50,000.

The same research team is now looking at Sovaldi, which has superior treatment results (up to a 90% success rate in clinical trials) but costs twice as much. The back of my envelope says its QALY cost will come in right around or slightly above the earlier treatments—and somewhat below the $50,000 threshold.

I'm guessing that's how they set the price. Paying for R&D is just a smokescreen.

Bottom line: Sovaldi will not save the system money. It will cost money—a lot of money—to reduce premature mortality due to chronic hepatitis C infection.

But if Sovaldi is cost-effective even by the U.K.'s standard, what's the problem? Here's where the law of large numbers comes into play.

The U.S. Preventive Services Task Force recommended universal hepatitis C screening for 77 million baby boomers, the cohort most at risk of carrying the infection because of its alleged misspent youth. That program would replace targeting the test toward those who are truly at risk—those with a history of IV drug use and unprotected sex with people at risk.

That $2 billion screening program would identify most of the 3 million people with hepatitis C, each of whom would be eligible for treatment. Do the math. At $100,000 a treatment (all costs included), it would cost $300 billion to treat 3 million people with Sovaldi.

Huge controversies are now swirling around its use. State Medicaid departments and prison systems are reeling from the upfront costs of treating their populations, which include many people at high risk of carrying the virus.

Yet critical medical questions remain unanswered, such as when to begin treatment for chronic hepatitis C infection. Should treatment begin when the virus is discovered or only when liver disease emerges? Watchful waiting after identifying carriers could be a viable alternative, some physicians say.

If Gilead and other companies insist on slapping rare-disease prices on drugs for large populations, the nation's healthcare system needs to find a way to mitigate the overall cost. Having the Patient-Centered Outcomes Research Institute conduct a comparative-effectiveness and comparative cost-effectiveness analysis pitting watchful waiting against immediate treatment would be a good place to start.

Follow Merrill Goozner on Twitter: @MHgoozner