States: Blockbuster hepatitis drug Sovaldi costs too much

The breakthrough drug Sovaldi is nothing short of a miracle for some hepatitis C patients, promising to cure more than 80 percent of cases in 12 weeks with few side effects.

But at a cost of $1,000 a pill, it'll be a miracle if states can pay the unprecedented bill for the treatment.

There is a growing backlash at the state level to Sovaldi's high price-tag. The full course of the treatment, including the companion drugs that must be taken along with it, runs about $100,000 per person. Insurance companies and large employers are balking at the cost, and states are at a loss at how to afford it.

An analysis by Express Scripts (ESRX), a pharmacy benefits manager, estimates that states will have to spend some $55 billion to treat the more than 750,000 hepatitis C patients on Medicaid or in the prison system. "The unsustainable pricing of this medication has, essentially, become a tax on all Americans," the chief medical officer at Express Scripts said in a statement to The Wall Street Journal.

Are voters going to approve hundreds of millions of dollars in additional funds for hepatitis C cures? At this point, it looks like states don't even want to ask.

That's a big reason that Illinois and other states are putting tough limits in place for the treatment and requiring patients to jump through all kinds of hoops to access it. Illinois has already spent $16 million in its current fiscal year on Sovaldi, The Associated Press reports. Now, the state is saving the drug for its sickest patients and barring treatment for anyone who has used drugs or alcohol in the past year.

Another restriction in Illinois: Medicaid patients only get one crack at the drug. If it doesn't work after the full course of treatment, they don't get to try it again.

Oregon also wants to give Sovaldi to only its sickest Medicaid patients. The state would have to pay $360 million for all 5,600 of its Medicaid patients infected with hepatitis C, The Washington Post reports. But by limiting the drug to only the sickest, Oregon will instead pay about $40 million.

"The vast majority could wait while we figure out a policy that doesn't bankrupt this state," Tom Burns, who leads drug purchasing for the state's Health Authority, told the newspaper.

That approach is a tough pill to swallow for some doctors who see firsthand just how effective Sovaldi can be. The drug can help prevent severe liver damage and pricey liver transplants, which states would have to pay for as well. Other treatments for hepatitis C are far less effective and have awful side effects.

But Sovaldi's price tag has cast a long shadow over the drug and its potential. Its manufacturer, Gilead Sciences (GILD), has been raking in the cash from Sovaldi sales. It recently reported a second-quarter profit of $3.66 billion, with a net margin coming in at a jaw-dropping 56 percent.

While those numbers are great for Gilead investors -- the stock has soared 25 percent this year -- they have only fueled the outcry over the drug's price. Two senators, Oregon Democrat Ron Wyden and Iowa Republican Chuck Grassley, have asked Gilead to explain why Sovaldi costs so much.

The senators say their aides uncovered public documents that show an early treatment price estimate of $36,000 for Sovaldi. That estimate was from the company that originally developed Sovaldi and was later acquired by Gilead.

Gilead had no comment about the Senators' allegations, according to The AP. But Gilead executive Gregg Alton recently said that other hepatitis C treatments can cost between $150,000 and $200,000 to cure an infected patient. "So it is actually, on a per-cure basis, much less costly," Alton said, according to The AP.

  • Kim Peterson

    Kim Peterson is a financial journalist covering business and the economy. She has written for several online and print publications, including MSN Money and The Seattle Times.

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