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$1,000 Per Pill

Health insurance trade group criticizes high cost of specialty drugs

America’s Health Insurance Plans (AHIP), the leading U.S. health insurance trade group, has lashed out at the high cost of new specialty medications, saying drug makers are taking advantage of the insurance system by pricing products at unsustainable levels.

The group pointed to Sovaldi (sofosbuvir) as an example. The new treatment for hepatitis C virus (HCV) infection costs $1,000 per pill. According to the AHIP, the drug’s manufacturer (Gilead) — taking advantage of a lack of competition — has priced it at an “astronomical” level that is not sustainable for consumers, innovation, or society.

Sovaldi costs $84,000 for a single 12-week course and is typically prescribed with other medicines and courses of treatments, which can boost the total expense to $150,000, the AHIP said.

In its statement, the group quoted Bloomberg News, which noted: “If everyone in the U.S. with hepatitis C were treated with Sovaldi at its list price, it would cost $227 billion compared with the estimated $260 billion spent a year in the country for all drugs.”

Sovaldi is only the beginning, the AHIP remarked. “More and more specialty drugs and other high-cost prescriptions are coming into the marketplace that hold tremendous potential for patients, but are being priced in a way that threatens Americans’ access to them,” the group warned. “Before we reach a tipping point, we need to find a solution that ensures important drugs like Sovaldi are priced at sustainable levels so that we can foster even more life-saving innovation.”

In clinical trials, Sovaldi achieved an overall cure rate exceeding 90% after only 12 weeks of therapy, with few side effects. Before the drug’s approval, the treatment of HCV infection took 24 or 48 weeks, cured only about 75% of patients, and involved many more pills as well as injectable interferon, which can cause flu-like symptoms and other adverse effects that can lead patients to avoid or discontinue treatment.

In an earlier “issue brief,” released in February, the AHIP examined specialty drugs’ growing contribution to higher health care costs. According to this report, drug prices are one of the leading drivers of health care cost increases, growing two times faster than the rate of inflation in 2013. That year, U.S. spending on prescription medications totaled $263.3 billion, and 25% of that was spent on specialty drugs. Specialty spending is expected to more than quadruple by 2020.

According to the brief, in 2010 specialty drug approvals by the FDA exceeded traditional drug approvals for the first time — a trend that has continued each year since. Sixty percent of the drugs approved by the FDA in 2013 were expected to be specialty drugs.

The report also points out that, under current law, brand-name biologic drugs are given a 12-year exclusivity period upon approval from the FDA, whereas traditional drugs are given exclusivity protection for only 5 years.

According to the brief, “granting exclusivity to specialty drugs removes the economic benefits of price competition, resulting in higher prices relative to what they would be in a perfectly competitive market.” In this regard, the Government Accountability Office released a report examining trends in Medicare Part B spending and found that in 2010, 10 drugs accounted for 44% of all Part B spending, and none of these drugs had a generic version approved by the FDA.

The AHIP brief offers several policy options to promote high-quality, cost-effective drug coverage. These options include the following:

  • Encouraging alternative payments and incentive structures — such as coverage with evidence development — for new drugs and technologies
  • Shortening the exclusivity period for generic biologics — to promote greater price competition and earlier access to lower-cost specialty drugs or biosimilars
  • Removing barriers at the state level that restrict the use of biosimilars
  • Expanding agencies’ authority to consider research on treatment effectiveness
  • Adopting policies that encourage value-based benefit designs across public and private payers
  • Adopting a “least costly alternative” (LCA) standard for certain drugs covered under Medicare Part B
  • Prohibiting patent settlements between drug companies

Sources: AHIP; May 20, 2014; Reuters; May 20, 2014; and AHIP Issue Brief; February 2014.

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