Late last year, the Food and Drug Administration approved a pair of new drugs to treat hepatitis C, a viral infection that can lead to cirrhosis and liver cancer. Patients exalted at the news, as the new medications (called Sovaldi and Olysio) can cure most cases of this life-threatening disease.
But when the drugs’ manufacturers announced the price tags for the new medications — $84,000 for a 12-week course of Sovaldi and $66,000 for Olysio — it poured gasoline on an already heated debate about prescription drug costs.
Until recently, the standard therapy for hepatitis C was a course of treatment lasting six to 12 months that involved weekly injections with interferon along with one or two antiviral drugs. Patients had to endure months of debilitating side effects from the interferon injections that included flu-like symptoms, anemia and depression. As a result, vast numbers failed to complete the therapy.
In clinical trials, the new drugs showed significantly higher cure rates than current treatment regimens. And for most patients, it’s a simple course of treatment: Just take the pills, which carry few side effects, once a day for 12 or 24 weeks.
Many doctors and insurers predicted that the prohibitive cost of the drugs would make their widespread use impossible. But when the drugs hit the market, both proved immediate blockbusters.
In the first quarter of 2014, Olysio sales yielded $354 million for Johnson & Johnson. Sovaldi brought in $2.3 billion for Gilead Sciences, shattering quarterly and even annual sales records for a new drug.
The new hepatitis C medications are but the latest example of the emergence of so-called specialty drugs: costly medications used to treat challenging medical conditions. Not surprisingly, these high-priced therapeutics represent the fastest-growing sector of the pharmaceutical industry.
At the Oklahoma Medical Research Foundation, we’re already seeing the bottom-line impact of specialty drugs on our health-care costs.
Last year, in a self-insured health plan that covers approximately 700 lives (OMRF employees and their family members), fewer than five people accounted for more than 20 percent of OMRF’s total pharmacy expenses. The reason? Those individuals suffer from chronic conditions for which the standard of care included costly medications administered on a regular basis.
OMRF’s experience mirrors what’s been happening nationwide. CVS Caremark, a pharmacy benefit manager, reported in April that spending on specialty drugs increased by 15.6 percent among its clients last year. Another drug benefit manager has predicted that the country’s spending on specialty drugs will increase another 63 percent by 2016.
Cost versus benefit
In response to rising drug costs, employers are increasingly asking plan participants to foot a higher portion of these costs. While it certainly makes sense to give participants an economic incentive to act like consumers when making medical choices, this approach can only go so far.
If, say, plans require people suffering from hepatitis C to bear too much of the costs of new drugs, many simply won’t be able to afford the treatments. They’ll have to try less expensive, less effective therapies. Or they’ll do nothing and wait to see if the disease progresses to where they’ll need a liver replacement — a procedure that their plans would cover.
Plus, asking patients to carry a heavier load also focuses on the wrong part of the equation. Drug companies, not consumers, are the ones setting these costs.
Right now, pharmaceutical manufacturers price their products in the United States at whatever levels they like. In Europe and Canada, national health care and insurance systems give governments the power to set prices when they negotiate with companies. As a result, costs are significantly lower than for the same drugs in the United States.
Tip of the iceberg
Like every U.S. employer that helps underwrite the costs of its workers’ health care, OMRF will continue to grapple with the costs of new specialty drugs. But when it comes to conditions like hepatitis C, private employers represent only the tip of the iceberg.
Hepatitis C affects 3 million Americans, and it disproportionately strikes the poor. That means Medicaid — the government — will bear the lion’s share of the costs of treating the disease. Or, if you want to think of it another way, we’ll all underwrite a hefty share of Gilead and Johnson & Johnson’s profits.
Dr. Stephen Prescott, a physician and medical researcher, is the president of the Oklahoma Medical Research Foundation.