State Medicaid Directors Want Federal Action on High Cost of Specialty Drugs

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By Nathaniel Weixel

Oct. 28 — Medicaid directors told House and Senate lawmakers Oct. 28 that states are struggling to cope with the high prices of specialty drugs like Sovaldi, and “immediate federal action” is needed.

The letter from the National Association of Medicaid Directors said that several states have reported prescription drug spending in the first quarter of 2014 has doubled or even tripled compared with their entire 2013 spending.

The letter was sent to members of the committees with jurisdiction over health care: the Senate Finance Committee, Senate Health, Education, Labor and Pensions Committee, House Energy and Commerce Committee and House Ways and Means Committee.

The NAMD in the letter said policy makers “have failed to address the cost and reimbursement issues associated with faster or increased pathways for the development of high-cost therapies and treatments. This is particularly concerning when there is limited information about the evidence base for these products.”

The letter said lawmakers need to “begin developing a new framework for conceptualizing the comprehensive costs and value associated with highly effective treatments in public health insurance programs, including Medicaid.”

The letter noted that Medicaid is “no stranger” to high-cost treatments, but Sovaldi and other new hepatitis C medications pose challenges due to their expense and the large population that's eligible for treatment.

Hepatitis C Drugs

The letter said that Sovaldi, manufactured by Foster City, Calif.-based Gilead Sciences Inc., costs about $84,000 (a minimum wholesale acquisition cost) over the course of treatment, or about $1,000 per pill. Another hepatitis C combination therapy targeted toward the most common types of hepatitis C infections, Harvoni (also from Gilead), was released in mid-October with an even higher price point of $94,500 per 12-week course of treatment, the letter said.

“Simply put, the federal Medicaid statute is not designed to allow states to respond to this new pricing approach for pharmaceuticals,” the letter said.

According to Gilead and the Food and Drug Administration, Harvoni represents a significant advance in the treatment of the disease because it delivers cure rates of 94 percent to 99 percent; eliminates the need for both peginterferon and ribavirin; reduces treatment time to eight weeks for many patients; and simplifies treatment so that patients take just one tablet daily. The manufacturer has said the prices of Sovaldi and Harvoni reflect the value of the therapies.

Budget Dilemma for States

Commenting on the budget dilemma for states, Darin Gordon, director of Tennessee's Medicaid program, said at an Oct. 28 conference that the pricing of specialty drugs “doesn't fit in today's financing model for health care.”

States live on fixed resources for health spending, Gordon said, “and I don't want to have to come up with a 7 percent reduction” in other sectors, just so the state can cover Sovaldi. Speaking at a conference sponsored by Medicaid Health Plans of America, Gordon, president of the NAMD, said the pricing of drugs represents a shift to drug companies wanting value for curing a disease, instead of just covering research and development costs.

Federal Policy Options

The Medicaid directors outlined potential policy options for the lawmakers to consider but didn't endorse any single solution.

“As more of the specialty drugs that are brought to market adopt this same pricing rationale, new thinking and approaches are required to safeguard the financial integrity of state Medicaid programs and ensure low-income patients are able to access appropriate medical innovations,” the letter said.

Some of the options include:

• Price controls. “While we recognize that direct price controls would be a politically volatile topic which could be expected to encounter substantial pushback, a strong case can be made for the unique circumstances of hepatitis C in particular,” the letter said.

• Enhanced federal match rates for “curative” specialty drugs.

• Modifying the “best price” policies for breakthrough drugs to include the selling price in other countries.

• Creating waiver flexibility allowing states to contract with drug manufacturers outside of Medicaid.

“Federal thinking on Medicaid financing must reflect” the reality of specialty drug costs “in order to maintain the fiscal strength of the program in the coming years,” the Medicaid directors said.

To contact the reporter on this story: Nathaniel Weixel in Washington at

To contact the editor responsible for this story: Brian Broderick at

The letter is at

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