Louisiana's Experiment Paying For Hepatitis C Drugs: Lessons For Other States, Other Treatments?

ASSOCIATED PRESS

Beginning July 1 the Louisiana Department of Health will be implementing a groundbreaking licensing deal. The state will pay Gilead Sciences subsidiary Asegua Therapeutics for a generic version of the hepatitis C medication Epclusa for five years in exchange for unlimited access to treatment. Asegua Therapeutics won the contract in a competitive bidding process.

During the five-year period, Louisiana will treat as many Medicaid beneficiaries and prisoners as it can for a lump sum, rather than pay a per-patient treatment price that is so costly it has severely limited access. This innovative arrangement has been called the Netflix model applied to pharmaceuticals.

The deal achieves an important public health objective: Early access to effective treatment, which can help the state avoid long-term costs.

Breakthrough treatments for hepatitis C were approved nearly six years ago. The antivirals are very effective, with the potential for cure rates up to 100%. But they are costly, and this has led to severe restrictions on access, especially among Medicaid populations where prevalence rates are relatively high.

Louisiana, for example only treated 384 patients in 2018 out of an estimated 35,000 Medicaid beneficiaries who carry hepatitis C. In late 2015, the Centers for Medicare and Medicaid Services issued a letter to a number of states warning that "unreasonable" restrictions on access to hepatitis C drugs may constitute a violation of statutory requirements for Medicaid state agencies.

Compared to traditional fee-per-prescription reimbursement, the subscription model offers an expedient way to balance the public health interest in attaining widespread and affordable access to certain medications, while assuring manufacturers generate sufficient revenues.

This could be a bellwether of change for payment for other mass administration drugs and vaccines.

Other states struggling with the high costs of hepatitis C drugs are taking notice. Surely, if Louisiana's model is successful, other states will likely follow suit.

But while this model may work for hepatitis C treatments, there are a number of caveats, particularly regarding its use as a template for other types of drugs. First, the model hinges on accurate estimates of numbers of patients who would need a prescription medication. This is easier to do with a drug such as Epclusa, with a clearly demarcated indication. It is more difficult for drugs with less well-defined indications, or the potential for a significant expansion of indications.

Second, pharmaceuticals tend to have high R&D costs, but often low marginal or manufacturing costs. This applies, for example, to hepatitis C treatments. Low marginal costs would appear to be a prerequisite in an all-you-can-use subscription deal. This would not apply, however, to biologics as well as cell and gene therapies.

Third, for many prescription drugs it's still going to be difficult to find a consensus around value endpoints. Specifically, when adopting the Netflix model, which subscription rate will be considered an appropriate value benchmark?

Fourth, there is the issue of getting around the Medicaid best price stipulation, as the price agreed to would become the "best price" and would therefore be applied for rebates paid to all Medicaid agencies.

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ASSOCIATED PRESS

Beginning July 1 the Louisiana Department of Health will be implementing a groundbreaking licensing deal. The state will pay Gilead Sciences subsidiary Asegua Therapeutics for a generic version of the hepatitis C medication Epclusa for five years in exchange for unlimited access to treatment. Asegua Therapeutics won the contract in a competitive bidding process.

During the five-year period, Louisiana will treat as many Medicaid beneficiaries and prisoners as it can for a lump sum, rather than pay a per-patient treatment price that is so costly it has severely limited access. This innovative arrangement has been called the Netflix model applied to pharmaceuticals.

The deal achieves an important public health objective: Early access to effective treatment, which can help the state avoid long-term costs.

Breakthrough treatments for hepatitis C were approved nearly six years ago. The antivirals are very effective, with the potential for cure rates up to 100%. But they are costly, and this has led to severe restrictions on access, especially among Medicaid populations where prevalence rates are relatively high.

Louisiana, for example only treated 384 patients in 2018 out of an estimated 35,000 Medicaid beneficiaries who carry hepatitis C. In late 2015, the Centers for Medicare and Medicaid Services issued a letter to a number of states warning that "unreasonable" restrictions on access to hepatitis C drugs may constitute a violation of statutory requirements for Medicaid state agencies.

Compared to traditional fee-per-prescription reimbursement, the subscription model offers an expedient way to balance the public health interest in attaining widespread and affordable access to certain medications, while assuring manufacturers generate sufficient revenues.

This could be a bellwether of change for payment for other mass administration drugs and vaccines.

Other states struggling with the high costs of hepatitis C drugs are taking notice. Surely, if Louisiana's model is successful, other states will likely follow suit.

But while this model may work for hepatitis C treatments, there are a number of caveats, particularly regarding its use as a template for other types of drugs. First, the model hinges on accurate estimates of numbers of patients who would need a prescription medication. This is easier to do with a drug such as Epclusa, with a clearly demarcated indication. It is more difficult for drugs with less well-defined indications, or the potential for a significant expansion of indications.

Second, pharmaceuticals tend to have high R&D costs, but often low marginal or manufacturing costs. This applies, for example, to hepatitis C treatments. Low marginal costs would appear to be a prerequisite in an all-you-can-use subscription deal. This would not apply, however, to biologics as well as cell and gene therapies.

Third, for many prescription drugs it's still going to be difficult to find a consensus around value endpoints. Specifically, when adopting the Netflix model, which subscription rate will be considered an appropriate value benchmark?

Fourth, there is the issue of getting around the Medicaid best price stipulation, as the price agreed to would become the "best price" and would therefore be applied for rebates paid to all Medicaid agencies.

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I'm an independent healthcare analyst with over 20 years of experience analyzing healthcare and pharmaceuticals. Specifically, I analyze the value (costs and benefits) o...