A Novel Strategy for Eliminating Hepatitis C

The federal government, under the direction of the Department of Health and Human Services, should establish a voluntary licensing agreement with a patent-holding pharmaceutical company to distribute specialty hepatitis C drugs to currently underserved communities.  This novel strategy would save money while improving access, say Neeraj Sood, Gillian Buckley, and Brian Strom in a new Health Affairs Blog post which outlines a central recommendation to come out of the phase two report issued by the National Academies of Science, Engineering and Medicine’s Committee for a National Strategy to Eliminate Hepatitis B and C.

“The deal achieves the dual goal of reducing costs and improving access to treatment while preserving incentives for innovation,” write Sood, Buckley and Strom who were on the NAS committee. Sood is director of research at the USC Schaeffer Center for Health Policy & Economics as well as vice dean for research and associate professor at the USC Price School of Public Policy.

Though a cure for hepatitis C has been on the market since 2011, as of 2015 only 7 to 14 percent of the 2.7 to 3.9 million people who have chronic hepatitis C had initiated treatment with direct-acting antiviral agents.

While the cost of treatment has dropped significantly since it was first introduced, the high price is still a major impediment for resource constrained systems, disproportionately effecting low-income and incarcerated individuals who rely on government-sponsored health insurance. According to a recent study cited by the committee, almost half of Medicaid patients were refused hepatitis C treatment compared to only 5 percent of Medicare patients and about 10 percent of patients with commercial insurance. Less than one percent of prisoners with hepatitis C have been treated.

Currently about 700,000 individuals with Medicaid or in prisons are eligible for treatment. Given the current price of treatment and the budget constraints of state and federal agencies, the committee estimates only 240,000 patients will receive treatment by 2030. Left untreated, the cost of the disease- including liver transplants at more severe stages- is staggering for patients, families, and communities.

“Eliminating hepatitis C is possible but the high upfront cost of treatment is a barrier, especially for populations that would benefit the most,” explained Sood.

An Innovative Purchasing Strategy

The proposal outlined in the NAS report and Health Affairs Blog would position the government as a generic distributor of a patent drug for use in markets currently not being reached. Drug companies would compete to enter into a voluntary licensing agreement with the government. The government would buy the license at a price above present value for the purpose of manufacturing the patented drug generically for Medicaid and Indian Health Service recipients as well as prison inmates.

The negotiated price would depend on the degree to which the firms compete with each other to sell to the government and would take into account current market constraints.  The researchers predict a reasonable estimate to be $2 billion for the deal and $140 million for manufacture and distribution of 700,000 treatments.

This estimate is substantially less than the $28 billion it would cost to treat everyone at the current rate of $40,000 per person.

“Under our proposal, roughly half a million more individuals with government coverage would be able to receive treatment while reducing the government budget by a few billion dollars,”

Neeraj Sood

“Under our proposal, roughly half a million more individuals with government coverage would be able to receive treatment while reducing the government budget by a few billion dollars,” explained Sood.

The committee recognized the political challenge of getting buy in for a proposal like this but notes with the opioid crisis worsening and more people turning to illicit drugs, it is reasonable to assume more people will be infected by hepatitis C if there is no action.

“The deal is a win-win-win situation for patients, taxpayers, and pharmaceutical companies,” write Sood and his colleagues in the blog.