New Payment Model Could Help States With Hepatitis C Burden

According to a commentary in the Annals of Internal Medicine, a new contracting strategy that encourages competition among Hepatitis C drugmakers could help Medicaid programs afford costly treatments for the disease.

“Curative treatments first introduced in 2013 have achieved a sustained virologic response rate greater than 90% and that sustained virologic response is associated with lower mortality among patients with chronic hepatitis,” Neeraj Sood, PhD, Director of Research at the Schaeffer Center for Health Policy and Economics at the University of

Southern California, and colleagues explained. “However, treatment costs tens of thousands of dollars per patient, making it unaffordable for most patients and insurers.”

The authors further explained that further restrictions imposed by states due to budgetary interests also prevent patients from obtaining access to treatment. They explained that some states require Medicaid beneficiaries have an advanced state of hepatic fibrosis, limit which providers can prescribe the medication, and ban patients with a history of alcohol or substance abuse.

Dr Sood and colleagues outlined the current state of the hepatitis C treatment market within the United States. They explained that states have a large Medicaid patient population that need to be treated with Hepatitis C; however, only about 2.5% are treated each year. There are approximately three drugmakers that offer curative Hepatitis C products for around the same price, $40,000 after rebates. In this scenario, the state pays around $240 million to treat 2.5% of patients.

Under the proposed novel payment model, the state would contract directly with one of the drugmakers to cover 100% of the states Medicaid beneficiaries for a lump sum payment of $200 million. This would then allow the state to expand treatment to treat up to 10% of the hepatitis C patient population, while also netting the drugmaker $196 million—a profit increase of about $36 million more than under the traditional model.

“The deal works because it takes advantage of competition and decouples revenues from price per pill,” Dr Sood and colleague wrote. “The primary way for companies to increase revenue currently is to increase price, which limits access. The lump-sum payment allows the company to increase revenue without limiting access.”

The authors also explained that this model does not leave other drugmakers without any chance to make revenue off of their hepatitis C products.

“This solution does not necessarily create a winner-take-all market: Some states might strike a deal with one company, whereas other states might do so with other companies,” they wrote.

Dr Sood and colleagues concluded that if implements their model could significantly reduce the burden of hepatits C.

“This purchasing strategy may dramatically increase access to drugs for HCV infection in the Medicaid program without increasing state and federal costs,” they wrote. “We can begin to eliminate this condition in the United States if several states implement this approach.”

—David Costill

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