Prescription drugs, when properly used and administered, save lives. When insurance companies fail to provide lifesaving drugs, or delay providing the drugs, people can be seriously injured or even die as a result. Unfortunately, some of these vital drugs can carry extremely hefty price tags, which gives insurance companies and public health care providers and incentive to deny requests for their use.
One such drug is Gilead Sciences’ breakthrough hepatitis C treatment, Sovaldi. Those who are prescribed the drug must take it daily for twelve weeks. An extremely large percentage of people with a particular type of the disease who take Sovaldi are essentially cured with few side effects. But here’s the rub. The price for twelve weeks of drugs is $84,000. This means that just in the State of Oregon, according to the Washington Post, would have to spend $360 million to provide its Medicaid beneficiaries with the drugs. To put that into perspective, Oregon only spend $377 million on all prescription drugs for all Medicaid recipients in 2013.
This drug is particularly notable because its debut corresponds with the most of the Affordable Care Act going into effect. The Act mandates access to quality and affordable treatment for all Americans. But the Centers for Disease Control estimate that 3.2 million people in the United States have hepatitis C. That means the cost of Sovaldi for all of the patients who need it would be over $302 billion. Of course, if the treatment is successful it can allow patients to avoid hospitalizations and liver transplants, which cost an average of $577,000 each.
This all begs the question, why is the drug so expensive? The New York Times reports that sales of the new drug reached $3.5 billion in the second quarter. Its on pace to pace over $10 billion in sales this year. Its manufacturer defends the hefty price, claiming it is in line with prices for other drugs for hepatitis C, and that it is cheaper than some cancer drugs that do not even cure people. It also claims that in the long term the drug will save money by preventing cases of liver failure and liver cancer.
While much of the focus on this costs crisis has been on how states will struggle to pay for the drug for Medicaid recipients, that is far from the only issue. While many people with the disease qualify for Medicaid, a portion of the hepatitis C infected population is able to afford private insurance. Executives of CVS Caremark, a large prescription benefit manager, estimated that treatment of hepatitis C could add $200 to $300 a year to every American’s insurance premium for the next five years.
Those estimates may be a little high. They do not take into account the fact that not every person who knows he or she has the disease will seek treatment. They also don’t take into account the fact that many people who have the disease do not know they have it, because it typically causes no symptoms, at least in the early stages. There is also the issue of backlog. Doctors currently have their hands full treating the sickest of patients, so it may be years before they get around to treating patients who are not yet suffering the most serious consequences of the disease.