Medicare spent $4.5 billion on new, expensive medications for treating hepatitis C in 2014 reports Charles Ornstein of the non-profit public interest newsroom ProPublica. That’s more than 15 times the amount spent by the program in 2013 on older treatments for the serious and potentially fatal liver disease, Mr. Ornstein observes, citing previously undisclosed federal data.

Data released earlier this month in the 2014 Express Scripts Drug Trend Report, also revealed that new, high-priced hepatitis C drugs and an exploitation of loopholes for compounded medications in particular were primary factors behind a dramatic rise in prescription drug expenditures overall in 2014, with cost escalation greater than had been experienced in more than a decade, and the largest annual increase since 2003.

The report found that in 2014 Americans spent nearly 743 percent more on hepatitis C meds than in 2013, with more than half of last year’s cost spike attributable to the astronomical cost of Hepatitis C and compounded medications.

Express Scripts, a St. Louis based provider of integrated pharmacy-benefit management services, found that with those two therapy classes excluded, 2014 drug cost inflation (i.e.: the year-over-year uptick in per capita drug spending) was a still substantial but more modest 6.4 percent, and estimates that by 2016, spending on hepatitis C medications will exceed that of medications for much more common conditions, including high blood pressure and high cholesterol, with the explosive trend led by new therapies that cost as much as $1,000 a day, and sometimes more than $100,000 per patient, No therapy class has experienced such a high spending increase in the 21 years that Express Scripts has measured drug trend data, and inflation is adding a punishing premium over and above already inflated treatment costs.

The financial burden is being borne largely by federal taxpayers, who pay for the lion’s share of Medicare’s prescription drug program, Ornstein notes, but enrollees also are obliged to co-pay a share based in part on their drug usage. However, once a threshold of $4,700 in out-of-pocket drug cost is crossed, which in the instance of these new Hep C drugs will be within just a few days after beginning a prescription, Medicare “catastrophic” coverage kicks in, with the program picking up 80 percent of the cost, the health plan paying 15 percent, and the patient the remaining 5 percent, which as it plays out will result in higher deductibles and maximum out-of-pocket costs for many of the Medicare’s 39 million senior and disabled beneficiaries.

For example, Ornstein reports that in 2016 the program’s basic deductible paid by all enrollees will increase to $360 from $320, and the out-of-pocket maximum catastrophic coverage threshold is being raised to $4,800 from the current $4,700, plus insurance premiums which not yet announced for 2016 may also increase somewhat.

Ornstein observes that the Medicare Part D program spent approximately $286 million on earlier-generation hepatitis C drugs in 2013, according to data provided by Centers for Medicare and Medicaid Services (CMS) director of Medicare and deputy administrator Sean Cavanugh. The Express Scripts researchers observe that for employers and health plans, these costs are unprecedented and unsustainable, noting that spending on specialty medications, including biologic and other high cost therapies for complex diseases like multiple sclerosis and cancer, accounted for more than 31 percent the 2014 cost spike, and as Express Scripts had forecast last year, the steepening trend in spending on specialty drugs more than doubled to 30.9 percent during 2014. However, the brutal cost of Hepatitis C medications was responsible for a whopping 45 percent of the total increase in specialty drug spending, notwithstanding it being the second lowest prescription volume category among the ten most prolific specialty conditions being medicated.

The new hepatitis C drugs’ cure rate is up to 90 percent higher than with previous treatments, and accompanied by fewer harmful side effects, says Ornstein, with some studies indicating that despite their punishing cost, the new drugs justify their cost based on their providence of better quality of life and lower health expenses for recipient patients in future due to lower likelihood of the Hep C leading to liver cancer meaning lower future demand for liver transplants.

“For the past several years, annual drug spending increases have been below the annual rate of overall healthcare inflation in the U.S., but that paradigm is shifting dramatically as prices for medications increase at an unprecedented and unsustainable rate,” observes , Express Scripts Senior Vice President for Clinical, Research and New Solutions Glen Stettin, M.D. in a release.

However, Ornstein maintains that the drugs may not represent overall savings for Medicare, even over the longer term, citing a recent study published in the journal Annals of Internal Medicine suggesting that only about one-quarter of the $65 billion cost of the new drugs (including for patients not funded by Medicare) will actually be offset by fewer hospitalizations and other treatment costs, since the vast majority of hepatitis C patients don’t get liver transplants.

And the new Hepatitis C therapies are just one example of what Express Scripts calls “non-orphan drugs with orphan-drug price tags.” They note that future pharmaceutical innovations, such as new cancer drugs and PCSK9 inhibitors for high blood cholesterol, will continue to challenge drug cost payers. PCSK9 inhibitors alone, which are projected to cost as much as $10,000 per patient annually, with a potential patient population of as many as 10 million Americans, could eventually cost the U.S. healthcare system an estimated $100 billion per year.

At this rate it’s hard to imagine how either ways to rein in the cost of new drugs, or some sort of rationing, or a combination thereof will not ultimately have to be implemented in the face of economic reality.

Charles Ornstein’s ProPublica article can be found here:
http://bit.ly/1IcTgD0

Sources:
ProPublica
Express Scripts Drug Trend Report