Implementing a novel drug purchasing strategy may dramatically increase access to drugs for hepatitis C virus (HCV) infection for patients enrolled in Medicaid without increasing state and federal costs, according to a study recently published in the Annals of Internal Medicine.
Although the annual HCV-related death toll in the United States exceeds that of a combination of HIV and 59 other infectious diseases, curative treatments introduced in 2013 resulted in sustained virologic response that has been associated with lower mortality in individuals with chronic HCV infection.
Therefore, a national strategy was proposed to eliminate HCV infection as a public health problem with the goal of reducing incidence by 90% come 2030. To meet this goal, all patients would receive the new treatment regimen regardless of disease stage.
However, treatment is unaffordable for most patients and insurers, with fewer than 3% of eligible people in state Medicaid programs and prisons receiving treatment partly due to restrictions on accessing drugs imposed by many states. These restrictions are designed to limit the impact on state budgets and are not justified by clinical guidelines or cost-effectiveness analyses. Although competition among manufacturers has increased discounts, costs remain high.
Imagine if pharmaceutical companies A, B, and C produce treatments and charge the same net price per treatment ($40,000) after rebates, and imagine if 2.5% (6000 people) of a state’s 250,000 HCV-infected people in the Medicaid program are treated each year. If company A is dominant, 4000 patients receive treatment while 1000 patients receive treatments from the remaining companies (B and C), resulting in $200 per patient being the manufacturers’ cost of producing and distributing the drug. Currently, state and federal governments spend a combined $240 million on drugs ($40,000 x 6000 patients) with the state’s federal Medicaid matching rate of 50%. Given that production and distribution costs are low relative to price, the companies’ profits are approximately equal to their revenues, with the revenue for company A at $160 million and the revenue for companies B and C at $40 million.
Implementing a Medicaid purchasing strategy may mitigate this problem by encouraging competition among drug manufacturers for an HCV contract, thereby resulting in the state saving money to expand treatment while the manufacturer increases profit. Under this novel strategy, the state and company A would make a lump-sum payment deal of $200 million, resulting in a $40 million cost savings between the state and federal governments. In return, during the contract, company A provides a 100% rebate on drug purchases for the state’s Medicaid recipients; this results in an essentially free drug for additional patients. With no additional costs, the state can expand treatment, resulting in a 3-fold increase if 10% more people are treated. Additionally, company A would receive increased profits ultimately providing the financial incentive to make the deal.
Unfortunately, reducing the cost of treatment is not enough to achieve this goal; efforts to increase HCV testing and linkage to care through the enactment of educational campaigns for increasing awareness, developing agreements among community organizations, providing training to primary care physicians for screening and treatment, and increasing the use of telehealth services will also be needed for success.
Sood N, Ung D, Shankar A, Strom BL. A novel strategy for increasing access to treatment for hepatitis C virus infection for Medicaid beneficiaries [published online May 15, 2018]. Ann Intern Med. doi: 10.7326/M18-0186