Costly drug becomes financial headache for states

The hepatitis C treatment Sovaldi costs $1,000 a day. That's a steep price for state budgets to cover.

By MSN Money Partner Jul 17, 2014 1:51PM
Credit: Gilead Sciences/AP

Caption: The Hepatitis-C medication Sovaldi made by Gilead SciencesBy Bertha Coombs, CNBC

The nation's Medicaid programs could find themselves on the hook for more than $55 billion to pay for breakthrough hepatitis C treatments like Sovaldi, which costs $1,000 a day for a 12-week treatment, a new study says.

That's even with a 23 percent Medicaid plan discount for the drug,pharmacy benefits firm Express Scripts said in its state-by-state analysis that estimated the staggering costs of the treatment.

"These states are saying 'What is it we're supposed to do?'" said Dr. Steve Miller, Express Scripts medical director. "This is just unimaginable for state budgets today."

Nationally, Express Scripts estimated that more than 750,000 Medicaid patients and prisoners now covered under state health programs suffer from chronic hepatitis C, a viral infection that can lead to deadly liver cancer.

With one of the nation's largest Medicaid populations, California faces $6.7 billion in hepatitis C spending, while Texas' tab could top $5.3 billion. Florida and New York could see nearly $4 billion each in hep C spending.

Miller calls it a massive tax for state health systems. The fact that Sovaldi is a breakthrough drug -- an effective, well-tolerated cure for a degenerative disease that impacts more than 3 million Americans -- will put health officials in a difficult position. 

"Should the states be compelled to pay for everyone?" he said. "You're going to have to figure out if you're going to have to go back to your voters and ask for more funding."

Some states have looked to follow the lead of commercial insurers like UnitedHealth Group (UNH), which restricted approval for Sovaldi to patients with advanced hep C-related liver disease, after it incurred $100 million in drug costs during the first quarter. But some Medicaid officials are not sure states can be as restrictive as private insurers.

"You can put those policies in place, but are those legally defensible?" said Matt Salo, executive director of the National Association of Medicaid Directors. "Within the public health community, many don't think so."

Salo said that the Centers for Disease Control and Prevention and other public health advocates have undertaken outreach campaigns to get Americans to undergo testing for the virus, which many people may not know they have. He expects awareness will serve to boost demand.

"Hep C is an infectious disease. It is a public health scourge," he said. "Because of that, denying treatment is unacceptable."

Gilead Sciences (GILD), the maker of Sovaldi, has argued that its drug will actually save on health costs in the future by effectively curing hep C patients and saving them from costly liver failure, which runs in the hundreds of thousands of dollars. Still, federal officials have begun to push back at Gilead. This month, the Senate opened an investigation into the drug's pricing. The drugmaker said it was cooperating with the probe.

Sovaldi is now prescribed in the combination with ribavirin, which costs roughly $1,200 for a course treatment, or Johnson & Johnson's (JNJ) Olysio, which is priced at more than $60,000. Gilead is expected to gain approval for a single-pill version of Sovaldi next October.

"The concern in the marketplace is that Solvadi will come out with the new product at $100,000 and say it's a 30 percent discount on the combination in the market today," Miller said.

More from CNBC

Jul 17, 2014 2:58PM
Did most of the State and Federal inmates who now have hep.C aquire it from lifestyle/  If so they need to be responsible for their bad decisions...not the tax payer.  If not lifestyle ie: IV drug use etc. then healthplans should cover it...especially for those ho pay their on premiums. United Health Care CEO makes 50 million a year. W/O bonuses  They profit 5 billion a year as well...gotta feel sorry for the insurance company.
Jul 17, 2014 10:12PM

$84,000 in the US; $57,000 in Great Brittian; $900 in Egypt--apparently there's a lot of flexibility in the pricing of this miracle drug.

Jul 17, 2014 11:50PM
I'd like to see a cost analysis. If these people are not treated, how much will that cost ( surgery, transplants, anti-rejection medicine, etc.) ? I'm not saying it would be more expensive to not use this medication, I'm saying I don't know.
Jul 17, 2014 2:58PM

so glad the govt is going to cover this drug.  Now the taxpayer gets to pay this $1k a day, meanwhile the person who has this ailment pays nothing thanks to obamacare.


people with jobs and paying taxes are suckers

Jul 18, 2014 12:31AM
Could someone explain to me why this same drug is cheaper in the rest of the world? I mean if its the cost are that much then how is it possible that its cheaper in the UK? 

Its like a lot of drugs are more expensive here; the SAME EXACT DRUGS and cheaper some where else. 
Jul 17, 2014 3:58PM

The cost of research and development is driven higher by FDA, some say as much as 8 times higher.  Here is a prefect example of the cost of government regulations. 

If you socialize the programs, then all development ceases.  Over time, the prices will fall.  But this is the cost of progress. 

Jul 17, 2014 5:13PM
before we let this descend into partisan name-calling, can we all ask why this stuff "costs" $1,000/day?  Is it made from concentrated unicorn tears?

Jul 17, 2014 3:43PM
No one should accept a gift without reciprocating. The US should gift these people for the illegals coming over the boarder.  I'm sure Honduras and Guatemala will take care of them.
Jul 17, 2014 2:37PM
No need to say it because you would just delete it...Enough said.......GO FIGURE!!!!!
Jul 18, 2014 12:16PM
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