Money & Business

Insurance Group Balks at High-Priced Pharmaceuticals

By / May 23, 2014 (iStock/Thinkstock)

The costly Sovaldi is extremely effective at treating hepatitis C, but a leading insurance group warns that the drug industry is setting itself up for potential federal regulations with its $1,000-per-pill regimen.

Sure, it works—but the price of a single pill is more than a week’s pay for most Americans. And health insurers aren’t happy.

The hepatitis C treatment Sovaldi, a blockbuster drug produced by Gilead Sciences that’s been shown to cure more than 90 percent of all cases of the disease within 12 weeks, has drawn criticism from medical groups for its incredibly high price—$84,000 for the regimen, or $1,000 per daily pill.

And one of the largest health insurance trade groups, America’s Health Insurance Plans, has issued a warning that, if the prices of drugs like Sovaldi aren’t kept in check, it could threaten the healthcare system at large.

“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,” AHIP warned this week. “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.”

AHIP CEO Karen Ignagni went a step further Wednesday, warning that rising drug prices could put drug companies in danger of price caps, similar to the 80/20 rule in the Affordable Care Act, which requires insurance companies to spend 80 percent of the premiums they receive on medical care.

“Manufacturers are charging whatever they can get away with,” she said, according to Modern Healthcare. “We can’t have a system that operates that way. We can’t sustain it. It will go back to blowing up family budgets and blowing up [Medicare] Part D [prescription drug coverage] and blowing up the federal government. … It’s a vicious circle here.”

Defending the Price

For its part, Gilead Sciences defends its pricing by noting that Sovaldi costs roughly as much as prior generations of hepatitis C (HCV) drugs that worked over a longer period of time.

“Sovaldi reduces total treatment costs for HCV—taking into account the cost of medications (including those for side effects or complications) and healthcare visits—and it represents a finite cure, an important point to consider when comparing the price of a pill or bottle to the lifetime costs of treating a chronic disease,” the company told Reuters.

Still, as a March Bloomberg report noted, if each of the 3 million Americans with hepatitis C took Sovaldi at its list price, it would cost $227 billion—just a touch shy of the $260 billion spent each year on all drugs in the U.S.

Despite such comparisons, the Pharmaceutical Research and Manufacturers of America (PhRMA) has defended Gilead—even as pressure has ramped up from the likes of the World Health Organization, which recommends Sovaldi and another drug, Olysio, for all hepatitis C sufferers worldwide.

“Their lives, in short, will be transformed,” PhRMA President John Castellani said at the group’s annual meeting last month. “The value to these patients and to their loved ones and society—you can’t put a price tag on it.”

Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. More »

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