Can the ACA Solve Staggering Prescription Drug Prices?

by Anthony Wilson, California Healthline Contributing Editor

Last December, FDA approved the hepatitis C treatment Sovaldi, giving it a coveted breakthrough therapy designation that allowed its maker, Gilead Sciences, to fast-track its approval.

Observers hailed the drug as a "game changer" because it combined a high cure rate with a 12-week regimen, far shorter than other treatments. For many of the estimated 3.2 million U.S. residents with chronic hepatitis C, relief from the disease's highly elevated risk of long-term effects -- such as liver damage, cirrhosis, liver failure, or liver cancer -- was now just 84 days away. Noting that previous treatments lasted 24 to 48 weeks, had a lower cure rate and often came with serious side effects, such as anemia and depression, many individuals with hep C and providers celebrated the development.

Then they saw the price tag: $84,000, or $1,000 per pill. Cue the outrage.

Industry analysts argued that the cost was unreasonable. Lawmakers got involved, with Rep. Henry Waxman (D-Calif.) and two other Democrats and the Senate Finance Committee writing letters to Gilead's CEO, asking him to explain the price. Meanwhile, high-profile payers -- like Aetna, CVS Caremark and Express Scripts -- balked at the price and questioned whether they would cover it.

The better part of a year later, the dialogue on the drug's price continues, but stakeholders who want to see the price drop still have no concrete answer on how to do just that.

How Can the ACA Help?

At this point, you might be saying, "Wait just a minute, surely the Affordable Care Act can do something about the high cost of Sovaldi, right?" Fairly or unfairly, many U.S. residents view the ACA as a salve for all that ails the nation's health care system.  So what does the ACA do to hold down what some would call exorbitant prices for prescription drugs?

Technically, nothing.

The ACA does have several provisions that seek to control costs, but none of them relate to prescription drug pricing. And while lawmakers for years have suggested that the federal government be allowed to negotiate prices on behalf of Medicare beneficiaries, no such provision made it into the ACA.

Compromising Affordability?

In fact, the ACA might actually work to make certain drugs less affordable for some people. While all exchange plans must cover prescription drugs, insurers are permitted to use a tiered system of coverage. The highest tier -- for "specialty medicines," which typically are costly, brand-name drugs -- can feature comparatively large copayments and, in some cases, a separate deductible. As a result, consumers can be required to pay 100% of a drug's cost until the deductible is met, and those deductibles can vary by thousands of dollars.

A number of patient advocacy groups already are alleging that insurers are giving wide berth to the letter of the law and discriminating against people with chronic illnesses by forcing them to pay more out of pocket for their treatments. The National Health Law Program, the AIDS Institute and other patient advocacy groups have filed a discrimination claim with HHS, and the department is in the process of developing a response.

America's Health Insurance Plans has responded to the claims, noting that consumers have the option to pick the plan best suited to them. Insurers have pointed to the high cost of new specialty drugs and say they are merely trying to control costs. The drug that they point to as an example of out-of-control prescription drug prices? Yep, Sovaldi.

Just What the ACA Ordered

Ironically, a treatment like Sovaldi might just be exactly what the ACA had in mind.

Remember those cost-control provisions in the the law? A major one is facilitating preventive care, in the hopes that investing in care now will hold down long-term costs for major illnesses. While the five-figure price tag for one round of Sovaldi is eye-popping to some, many observers note that it pales in comparison to the cost of treating the long-term effects of hepatitis C.

As University of Southern California's Schaeffer Center for Health Policy and Economics Executive Director Dana Goldman told, "Would I rather be spending $600,000 for a liver transplant and living a restricted life afterwards, or would I rather pay $80,000 up front and guarantee I never have to go through that?"

Around the Nation

Here's a look at several other stories making news on the road to reform.

Losing its power: Are Republicans backing away from using the ACA as a criticism against Democratic opponents? It appears so, according to Bloomberg's Heidi Przybyla. The Washington Post's "Morning Plum" evaluates Przybyla's claim.

An ACA alternative: Avik Roy, a senior fellow at the Manhattan Institute for Policy Research and a former health care policy adviser to Mitt Romney, recently introduced his own plan to replace the ACA. He describes the plan in a post on his Forbes blog, "The Apothecary." Writing at the same blog, fellow Forbes contributor Yevgeniy Feyman evaluates the numbers on Roy's plan.

What's happening with CHIP?: Billy Wynne, a lawyer and founder and CEO of Healthcare Lighthouse, writing in a Health Affairs blog post examines the ACA's effect on CHIP and what will happen to the program in the coming years. 

CORRECTION: This article previously stated that the Schaeffer Center for Health Policy and Economics is part of the University of California. The Center is actually part of the University of Southern California.
Robert Forster
Thanks again to Dr. Apgar to reveal the real commitment this drug may bring to tax payers. Additionally, ACA or PPACA only has theoretical "savings" here and there from other Federal programs that history tells us will be mitigated or ignored and/or the savings are simply mathematical foul play. During the dark hours of passage of this trashy legislature, the president promised the 3 major pharmaceutical manufacturers would not be "reformed" to get their support and avoid further true but negative feedback to the tax payers. Thus, just follow the buck with Obama and you can predict many of the deals that let a minority bill pass which in reality is not healthcare reform but reform of the evil insurance plans first with the bill to follow. Savings by promising to find fraud better is almost laughable. The driver of ACA was affordability. It is estimated that subtracting losers of insurance from new enrollees cost tax payers $1Million per net new insured-some deal?.
Frank Apgar
And if you treated all people who developed cirrhosis, you will still be treating 80% of the people who had a chronic infection and would never develop cirrhosis. Fortunately, liver physician experts don't simply treat all individuals with a chronic infection, but only those in whom liver biopsies begin to show early signs of progression towards the development of this complication.
Frank Apgar
On the surface, Dana Goldman's observation makes economic sense. A deeper analysis of CDC data however reveals the following. Five to 20% of people with chronic liver disease will develop cirrhosis over a period of 20-30 years. More importantly, only 1-5% of the people with chronic liver disease will die from cirrhosis or liver cancer as a result of the infection. Accordingly, we would be treating at least 95% of the population at a cost of $80,000 per patient to prevent the cost of $600,000 for 5 individuals requiring a liver transplant. The math doesn't support his position. More importantly, why should the American taxpayer carry the burden of supporting the cost of new drug development for the rest of the world where governments tightly regulate the cost of drugs. Americans are supporting the R&D costs of the drug industry for the rest of the world.

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