Medicare’s prescription drug program spent nearly $4.6 billion in the first half of this year on expensive new cures for the liver disease hepatitis C—almost as much as it spent for all of 2014.
Rebates from pharmaceutical companies—the amounts of which are confidential—will reduce Medicare’s final tab for the drugs by up to half. Even so, the program’s spending will likely continue to rise, in part because of strong demand.
Medicare’s stunning outlays, spelled out in data requested from the government by ProPublica, raise troubling questions about how the taxpayer-funded program can afford not only these pricey medications, but a slew of others coming on the market.
Medicare’s drug program, known as Part D, already spent an eye-popping $4.8 billion for hepatitis C drugs in 2014, not including rebates. The high amount partly reflected the medications’ breakthrough nature. Before the new drugs, treatments for hepatitis C had lower cure rates and came with undesirable side effects. The new drugs cure the disease in more than 90 percent of patients.*
“We’re all waiting to see when it plateaus or when it possibly goes back down. When will that pent-up demand be sated?”
But the cure comes at enormous cost: A 12-week course of treatment with the most popular drug has a list price of about $95,000, or $1,100 a day.
Pharmacies filled more than 183,000 prescriptions for hepatitis C drugs from January to June, and were on track for all of 2015 to far outpace the nearly 288,000 prescriptions filled in 2014, the data shows.
In terms of both patients treated and money spent, “2015 will be bigger than 2014,” said Michael Kleinrock, director of research development for the IMS Institute for Healthcare Informatics, which researches health-care use and spending patterns.
Kleinrock projects that 2016 spending will outpace that of 2015, but by a slower rate. The reason: Many people with acute liver disease will be cured by then and treatment will shift to those with less severe disease.
The Centers for Medicare and Medicaid Services, which oversees Part D, declined to comment for this story. Earlier this year, officials said they were watching the costs carefully.
“We’re all waiting to see when it plateaus or when it possibly goes back down,” said Sean Cavanaugh, director of Medicare and deputy administrator at CMS. “When will that pent-up demand be sated?”
The cost of the new hepatitis C drugs is picked up largely by taxpayers, who cover most of Part D’s expenses. But it may also translate into higher deductibles and maximum out-of-pocket costs for the drug program’s nearly 40 million enrollees, who pay a smaller share of its cost, experts and federal officials have said. Seniors and the disabled are eligible for coverage.
The data for 2015 also makes clear that one drug, Harvoni, made by Gilead Sciences Inc., is crushing its competitors. Wall Street analysts had expected a pitched battle between Harvoni and another drug made by AbbVie Inc., called the Viekira Pak, but that has not been the case.
From January to June, Medicare paid for 119,033 prescriptions of Harvoni, 35 times as many as the 3,352 it covered for the Viekira Pak. Patients using Harvoni need to take only one pill a day, compared to four for the Viekira Pak.
Sovaldi, which was the first of the new drugs to come to market and is also made by Gilead, was prescribed 23,933 times in the first half of the year, the data shows.
In a written statement, Gilead spokeswoman Cara Miller said, “Gilead continues to work with public and private payers to facilitate broad patient access to our hepatitis C cures” and provides discounts off its list price. She declined to answer specific questions. AbbVie did not respond to requests for comment.
Hepatitis C drugs aren’t the only costly new treatments confronting Medicare. Two drugs, known as PCSK9 inhibitors, were approved this year, promising to reduce the level of “bad” LDL cholesterol far more than cheaper drugs called statins. But they come with a list price of more than $14,000 per year before rebates. A number of new, effective cancer medications have also been approved this year.
“At some point, this march upwards in drug spending has to stop,” said Walid Gellad, an associate professor of medicine at the University of Pittsburgh and co-director of its Center for Pharmaceutical Policy and Prescribing.
Some studies have shown that, despite their price tag, the new hepatitis C drugs justify their cost based on the better quality of life they provide and the health expenses that patients avoid in the future. There is still an ongoing debate, however, about whether they will actually save the broader health system any money overall by avoiding transplants, hospital care, and other costs associated with liver failure.
A few days ago, Texas retiree Michelle Mynier took to Facebook to tell her friends that after 40 years with hepatitis C, including failed treatments and a liver transplant, she was cured. "Something wonderful happened today. They called from the liver center. After 40 years of having Hep-c, I am cured! Thank God, and harvoni."
Mynier, 64, is a retired unit maintenance supervisor for the Texas Department of Criminal Justice and qualified for Medicare because of her disability. While she’s heard of others having difficulty being approved for the new drugs by their insurers, she said her co-pay for Harvoni was only $35 per month.
“I was very lucky,” she said. “My insurance didn’t hesitate.”
Mynier said she views her cure as a new lease on life. If her transplanted liver had failed, she said, she might have been out of options. “It’s so hard for me to believe,” she said. “I still keep thinking maybe they had me confused with somebody else.”
*Update — October 20, 2015: A previous version of this story said that, before the new drugs, there was no cure for hepatitis C. In fact, some of the prior treatments for the virus cured a lower percentage of patients but the drugs often caused onerous side effects that caused patients to stop taking them.