One of the costliest drugs on the market threatens the Veterans Affairs Department's health budget — to the point that VA, which added the medication to its formulary in April, may end up providing it to only the sickest patients.

At a commercial cost of $1,000 a pill, the hepatitis C drug Sovaldi received FDA approval in 2014, a breakthrough that reduced the time it takes to treat patients with the blood-borne virus to 12 weeks, down from a year, and at reduced risk.

But treating all of the 174,000 hepatitis C patients in the VA health system is cost-prohibitive. Even with the cost negotiated by VA with the company's maker, Gilead Sciences Inc. of Foster City, California — $594 per dose — treatment would run nearly $12 billion.

So VA may be taking a conservative approach to providing the treatment, reserving Sovaldi and its competitor, Olysio, made by Janssen Therapeutics of Titusville, New Jersey (negotiated cost: $413 per pill), according to Sen. Bernie Sanders, I-Vt.

"With numbers like these, we're not talking about a company looking to make ends meet, or even fund their next great medical breakthrough. So we must ask, how much is too much — when VA is forced to choose which veterans get care because they can't afford to give the same care to everyone, can't we all agree that is just too much?" Sanders said during a congressional hearing in December.

In fiscal 2014, the Veterans Health Administration treated more than 5,400 veterans with Sovaldi at a cost of $370 million. And VA has asked Congress for roughly $1.3 billion to provide Sovaldi and other new hepatitis C drugs for another 30,000 patients.

But even with the more than 40 percent discount VA has negotiated with Gilead, the department pays more for the total treatment regimen than the health systems of Canada, where 12 weeks of Sovaldi costs $55,000; Germany, where it costs $66,000; or India, where Gilead is negotiating to provide generic versions for $2,000.

The price differential has led some U.S. lawmakers and advocates to accuse the company of price gouging.

Sanders said Gilead bought the company that developed Sovaldi for $11 billion and is expected to make more than $200 billion from the drug.

In the first three quarters of 2014, Gilead made $11.4 billion in sales of the medication, according to quarterly earnings reports.

"When a company can make back an $11 billion investment in just one year on just one drug, is that too much? ... We're looking at a company who is milking a cash cow for everything it's worth," Sanders said.

However, VA officials stressed that cost is not restricting their distribution of the medications. VA in 2014 treated more than 7,400 infected patients with sofosbuvir or simeprevir-based regimens, and an additional 1,100 patients received a recently approved combination drug, officials said.

According to VA, more than half those treated did not have evidence of advanced liver disease.

"With the exception of cases where safety concerns (e.g. drug interactions) may exist, VA does not limit use of HCV drugs," a VA spokeswoman said.

Gilead executives were asked to speak at the hearing but they declined, citing overseas business travel, Sanders said.

But in an email to Military Times, Gilead spokeswoman Michele Rest defended the price and the company's billing structure.

Noting that Sovaldi does not merely provide a "long-term or indefinite treatment" of the type needed for other chronic diseases, but rather cures a life-threatening disease and wards off the need for the kind of costly lifelong care required after liver transplants, Rest said the price "reflects the value of the medicine."

Sovaldi also is priced similarly to other hepatitis C regimens that take up to a year and have significant side effects, she added.

Side effects of older medications include severe anemia to the point that some patients require blood transfusions; low white blood cell counts; and skin reactions, including hives and peeling.

Rest said Gilead offers a tiered pricing program in different locations, with countries categorized by gross national income per capita and the prevalence of hepatitis C infections in their populations.

Responding to concerns raised by Sanders that the cost of the medication in India will be significantly lower in that country than in the U.S., Rest said India falls "into our lowest pricing tier."

An estimated 12 million Indians are believed to have hepatitis C, according to the World Health Organization.

"Sovaldi represents a significant therapeutic advance over older therapies to treat hepatitis C ... and has reduced or completely eliminated the need for interferon injections depending on the patient's genotype. In addition, Sovaldi is the first oral treatment regimen for hepatitis patients with [certain] genotypes," Rest said.

About 3.2 million Americans are infected with hepatitis C, according to the Centers for Disease Control and Prevention. The virus is spread by shared needles, an inadvertent needle stick, or having sex or using the toiletries (toothbrush, razor) of an infected person.

Also at risk are those who received a blood transplant or organ transplant before 1992, when widespread screening became available in the U.S.

VA is the largest single provider of hepatitis C care in the U.S., with a high-risk population of Vietnam War veterans who may have contracted the disease through blood transfusions for battlefield injuries or the intravenous drug use common in the era.

VA has screened aggressively for the disease, testing nearly two-thirds of all patients born from 1945 to 1965. But being on the forefront of hepatitis detection and treatment means the department also has a significant share of patients with the virus.

And as those patients age, their livers are failing.

"The introduction of very costly, highly effective and less toxic anti-viral therapies, which are easier to administer than older treatments, holds the promise of eradicating this disease in infected veterans," said Michael Valentino, chief consultant for pharmacy benefits at VA. "However, addressing the cost of these agents remains a major challenge."

VA is not the only federal agency grappling with the question of cost versus treatment. Medicare initially balked at covering Sovaldi and other medications but approved guidelines in 2014 that said the drugs can be used for patients who have not responded to older treatments or were not candidates for other options.

In February 2014, the federal prison system also began making the medications available to inmates who need them.

The Defense Department requires Tricare beneficiaries to receive prior authorization to get these medications but has made them available, through military treatment facilities, by mail order and at retail pharmacies.

Tricare spokesman Kevin Dwyer said the DoD's Pharmacy and Therapeutics Committee will review the medications in May to consider their use, therapy outcomes, new products and all clinical evidence to provide recommendations on which medications should be placed in the DoD uniform formulary and guidelines for their use.

Over an 11-month period last year — from Dec. 13, 2013, through Nov. 28 — the Pentagon spent $124.6 million on these new hepatitis C treatments for its beneficiaries: $10.5 million for Harvoni, also made by Gilead, $27.7 million for Olysio, and $86.3 million for Sovaldi.

"DoD continues to evaluate and monitor specialty drugs, not only for hepatitis C but also in cancer chemotherapy, diabetes, cholesterol management, for formulary placement, optimal point of service and evidence-based clinical protocols to ensure continued appropriate, safe and effective use of these medications," Dwyer said.

According to Valentino, new hepatitis C treatments from other manufacturers are expected later this year, and he expressed hope that the new regimens would relieve the budget crunch caused by the cost of Sovaldi and other current medications.

But Robert Weissman, president of the consumer advocacy group Public Citizen, warned that the prices of the new options might not be any better, and he pressed Congress for policy changes such as nonvoluntary licensing of new hepatitis C drugs with the intent to lower costs, or a government buyout of the patent.

"These prices are intolerably high and imposing unsustainable costs on consumers, insurers and taxpayers," Weissman said, adding that rationing "would be unfortunate but somewhat unavoidable if the drugs were extraordinarily expensive to manufacture, or if research-and-development costs had been unusually high. But neither is the case."

During the recent congressional hearing, Sen. Richard Burr, R-N.C., pointed out that lawmakers and budget experts should not lose sight of the "promise these breakthroughs hold" for patients, despite the costs.

"Innovation is expensive," Burr said. "Every time we innovate a new therapy, a new drug, a new device, there's a recovery cost and many times it's government that drives it up because we lengthen the approval time and therefore we shorten the patent lifetime."

This story was updated on Jan. 28.

Patricia Kime is a senior writer covering military and veterans health care, medicine and personnel issues.

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