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Our Take: Louisiana seeks Netflix-style pricing for hepatitis C drugs

Jan 14, 2019

The state of Louisiana is looking to implement a monthly or annual fixed payment for expensive hepatitis C medications, according to reporting by The Washington Post.

Gov. John Bel Edwards told the Post that the state had contacted drug manufacturers for alternative pricing based on the Netflix model, which offers unlimited streaming of content for a monthly fee.

“I’ve had conversations with a number of governors to make sure they’re aware of what we’re doing—and if and when we’re successful, we’re going to have something worthy of emulation and replication around the country,” he said.

Gilead Sciences, maker of the hepatitis C treatments Sovaldi (sofosbuvir) and Harvoni (ledipasvir/sofosbuvir), responded favorably to the idea.

“A Medicaid subscription model for cures could create predictable expenditures for the state while ensuring broad access as part of [a hepatitis C] elimination campaign,” the company noted.

Our Take: This is a brilliant move by Edwards to reign in drug costs and improve access for patients needing treatment for hepatitis C covered by Medicaid and other state-subsidized programs.

Gilead first launched Sovaldi with an $84,000 price tag, followed by combinations of Sovaldi with other drugs that were priced even higher. The company countered objections from payers and congressional outrage by pointing out that Sovaldi was the first treatment to actually cure the disease and that Sovaldi offered lower net costs overall in comparison with existing drug regimens.

That provided little comfort to state Medicaid programs that saw their budgets balloon unexpectedly as scores of patients sought treatment. States had little relief when competitor drugs from Merck, AbbVie and Janssen became available at a modest discount.

Reportedly, the net price of these drugs is about half of list price—but let’s be honest, that’s still a steep price for states to pay.

According to Louisiana Health Secretary Rebekah Gee, Louisiana spends $35 million on hepatitis C treatments annually, which covers about 3 percent of Medicaid patients and 1 percent of prisoners who have the disease. To treat everyone, the state would spend more than 20 times that amount.

“Show me how to solve this equation. I have a $760 million problem, and I have $35 million,” Dr. Gee said on NOLA.com back in September when Louisiana first floated the idea of the subscription model. “In my view, we can’t solve the equation as it is. We have to rewrite the equation.”

A model that offers fixed pricing regardless of the number of patients seeking treatment would offer a predictable expense stream for the state and would increase the number of patients afforded treatment.

Gilead announced last September that it would launch generic versions of Harvoni and Epclusa (sofosbuvir/velpatasvir) in 2019, years before patent expiration, through a newly formed subsidiary, Asegua Therapeutics. The list price of the generic drugs, which are expected to be available this month, should be one-quarter to one-third of that for the branded drugs.

What else you need to know
New York City Mayor Bill de Blasio announced universal health care coverage for New Yorkers through one of the most comprehensive plans in the nation. According to a statement released on the City of New York’s website, the plan will serve 600,000 New York City residents without insurance by strengthening NYC’s public health insurance option, MetroPlus, and guaranteeing access to NYC Health + Hospitals’ physicians, pharmacies and mental health and substance abuse services through a new program called NYC Care. “While the federal government works to gut health care for millions of Americans, New York City is leading the way by guaranteeing that every New Yorker has access to quality, comprehensive access to care, regardless of immigration status or their ability to pay,” de Blasio said. More here.

In related news, Washington state’s governor, Jay Inslee, said he and Democratic lawmakers will introduce legislation for a public insurance option. He said the bill will authorize the state’s health care authority to contract with health plans to offer coverage on Washington’s Health Benefit Exchange. According to Inslee, reimbursement will be consistent with Medicare rates. More here.

Eli Lilly and Co. has agreed to acquire Loxo Oncology for $8 billion in cash, marking the largest deal in Lilly’s history. According to Lilly, Loxo’s pipeline includes targeted medicines focused on cancers that are uniquely dependent on single gene abnormalities that can be detected by genomic testing. Stamford, Conn.-based Loxo currently markets a single product, Vitrakvi (larotrectinib), an oral, first-in-class TRK inhibitor developed and marketed in collaboration with Bayer. “Using tailored medicines to target key tumor dependencies offers an increasingly robust approach to cancer treatment,” said Dr. Daniel Skovronsky, Lilly’s chief scientific officer and president of Lilly Research Laboratories. More here.

Civica Rx, the new nonprofit generic drug company funded by several integrated health systems, has a dozen new founding members. In a press release, Civica Rx said the new systems are Advocate Aurora Health, Allegheny Health Network, Baptist Health South Florida, Franciscan Alliance, Memorial Hermann Health System, NYU Langone Health, Ochsner Health System, Sanford Health, Spectrum Health, St. Luke’s University Health Network, Steward Health Care and UnityPoint Health. “We are thrilled to welcome these highly regarded health systems to Civica as founding members,” said Martin VanTrieste, CEO of Civica Rx. More here.

Catholic Health Initiatives is selling its Arkansas-based health plan, QualChoice Health Insurance, to Centene Corp. QualChoice is the state’s fourth-largest plan, behind Arkansas Blue Cross and Blue Shield, UnitedHealthcare and Centene Corp. The companies signed a definitive agreement for the sale on Thursday. The sale is subject to approval by the state’s insurance regulators; terms of the agreement were not disclosed. More here.

Hospice giant Compassus is reportedly exploring a sale, according to a Jan. 8 report from PE Hub. Citing three people familiar with the matter, PE Hub said Compassus has retained Jefferies Financial Group to help prepare the company for the sale. Compassus is one of the nation’s largest hospice providers, with more than 140 locations across 30 states. The company is owned by the private equity groups Formation Capital and Audax Group. More here.

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