HepCThe need for new drugs seems higher than ever with population-wide health crises such as Ebola, H1N1, Anthrax and HIV/AIDS. Maintaining an innovative drug development environment seems increasingly critical for our existence. In addition, we are facing healthcare issues related to our lifestyle, which through cardiovascular disease and diabetes alone contribute heavily to escalating healthcare costs.

Drug pricing is often challenged despite the lifesaving nature of many drugs. It is undoubtedly complicated to understand due to industry cost structure, scientific complexity and the “dinner for three” phenomenon. (For those of you who are not familiar with the term “dinner for three,” I will talk more about that in an upcoming blog).

The Next Generation of Hepatitis C Drugs

A new generation of hepatitis C drugs is essentially delivering a cure to patients that so far only had access to poorly tolerated and relatively ineffective drugs. Many patients have postponed treatment with these older drugs, thus creating a worldwide “pool” of patients, anxiously waiting for a better treatment.

The medical and societal value of Sovaldi, and now Harvoni, the first all-oral regimen for many patients, which received F.D.A approval October 10, is uncontested. These drugs are an unparalleled breakthrough in medicine that will dramatically change the lives of millions of people in the U.S. and abroad. (Read my interview with The New York Times on Harvoni winning F.D.A. approval.)

Economically speaking, these drugs offer great value as they could avoid complications from hepatitis C, including liver disease, liver transplants and hepatic cancer. On that basis, the critical U.K. watchdog group, the National Institute for Health and Care Excellence (NICE), has given Sovaldi a positive endorsement. (What is interesting is that the actual cost of Harvoni is lower than an alternative combination of Solvaldi with interferon and ribavirin or with Olysio, which has been prescribed off-label for this use.)

The challenge is that a new drug treatment like Harvoni is so good that demand is temporarily skyrocketing until the pool of hepatitis C infected patients is treated. After that, the treatment is likely to virtually disappear.

A large U.S. problem is that some insurance companies (including the very vocal PBM Express Scripts) will not see the medical savings as they are only responsible for drug costs. Other insurance companies that do cover medical expenses may be concerned about the time horizon of the immediate drug expenses vs. the savings that will occur much later.

The Hepatitis C Market Is Very Competitive

Many similar hepatitis C drugs are in development in a race to market. BMS recently decided to withdraw its drug combination. Vertex announced earlier this year that they are exiting the market, only a few years after their launch of Incivek. Many other companies will likely follow over time. As a society, and under the current circumstances of periodic public health scares, we need to nurture innovative companies that deliver miracle drugs, not chastise them.

We do need to find a solution for the funding challenges that these new treatments are causing in the short run and celebrate the long-term public health improvements that they help us achieve. I would encourage health insurance companies to collaborate with drug companies in finding solutions for patients in need, rather than challenging the value of these miracle drugs.

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Topics: Market Access & Pricing, hepatitis C drugs, Drug pricing, Ed Schoonveld