Sovaldi (sofosbuvir), the new hepatitis drug manufactured and marketed by Gilead Sciences, has garnered considerable media attention over the last several months. The drug was approved by the FDA in December after phase III clinical trials showed it was highly effective in the treatment of chronic hepatitis C (HCV) infection. In fact, with an overall SVR (sustained virologic response) of 90 percent for the genotypes studied, Sovaldi may represent a cure for many of the 3.2 million Americans afflicted with the disease.
Sovaldi’s price, however, has raised more eyebrows than its efficacy. At around $1,000 per pill, or $84,000 for a twelve-week course of treatment, there’s no denying it’s expensive. And given its hefty price tag, it’s no surprise that most insurance companies now require prior authorization before patients can obtain the drug. So is Sovaldi too expensive? Maybe it is, maybe it isn’t; we’ll address that shortly. But should insurers ever be allowed to require prior authorization for a drug, regardless of its price?
The two industries most relevant to this discussion possess diametrically opposed perspectives on drug pricing. For-profit biopharmaceutical companies want to be paid as much as possible for their drugs, and for-profit insurance companies want to pay as little as possible for those same drugs. Patent protection and substantial marketing budgets generally give drug makers the upper hand during negotiations. But the largest insurers and pharmacy benefit managers also have considerable leverage — they control the formularies that serve as lucrative gateways to the millions of patients they represent.
Once the initial price is set, however, the battle shifts from the boardroom to the physician’s office. And for both parties, generating profit then becomes highly dependent on their ability to influence physicians’ prescribing habits. Ironically, our society has a vested interest in ensuring that physicians remain impartial, that they deliver on their ethical responsibility to act solely in their patients’ best interests. This is why drug makers are prohibited from influencing physicians with expensive gifts—gone are the days of pharma-sponsored trips to Hawaii, lavish dinners, or even logo-emblazoned pens.
But if we don’t allow biopharmaceutical companies to provide physicians with financial incentives that might persuade them to prescribe a particular drug, why do we allow insurance companies to establish financial disincentives that dissuade physicians from prescribing that same drug?
We already know that prior authorization is a cumbersome, time-consuming, and expensive process that costs physicians thousands of dollars each year. In fact, at least one study has shown that the process, on average, requires more than 30 minutes and costs physicians over $40 per transaction. It, therefore, makes perfect sense that physicians often avoid prescribing drugs that require prior authorization. And that’s precisely what insurers want — the ability to avoid paying for costly drugs without risking the broader backlash associated with not including those drugs on their formularies.
But if we really want to protect physicians’ clinical judgment from being compromised by for-profit entities, we need to balance both sides of the undue influence equation. More importantly, insurers should be required to deal honestly with patients, not entice them by placing a drug on their plans’ formularies while simultaneously restricting access to it. Stated differently, patients must be able to rely on both the veracity of published formularies and the objectivity of medical advice. And insurance companies should, therefore, be prohibited from requiring prior authorization for any drug.
After all, they already enjoy the contractual right to audit medical records in order to identify isolated incidents of physician error or abuse. They also have the right, and the responsibility, to negotiate drug prices on their beneficiaries’ behalf and determine if inclusion of a drug on their formularies is justified. And they can also protect their profit margins by dropping physicians and drugs from their networks and formularies, respectively. But they should not be permitted to deceive patients or control the way physicians practice. And prior authorization effectively allows insurers to do both.
OK, let’s revisit that other question: Is Sovaldi too expensive? Well, given the structure of our current healthcare system, it is not unreasonably priced.
In a previous post, I addressed the urgent need to start demanding real value from the drug industry. Specifically, branded drugs that do not meaningfully outperform generic alternatives or lifestyle modification should not be prescribed, particularly when they only target disease markers with no definitive, quantifiable impact on actual outcomes. Thus far, though, the data suggest that Sovaldi does, in fact, deliver considerable value. The current value proposition may certainly change as ongoing studies shed light on its long-term efficacy and safety, but right now, it appears to be a clinical success.
HCV infection is the leading cause of liver cirrhosis and hepatocellular carcinoma in the United States. And there is reason to believe that the incidence of these particularly serious sequelae will rise in the coming years as the infected population ages. Of course, not all patients infected with HCV will develop liver cancer or require a liver transplant, a procedure that costs approximately $600,000. But studies have shown that, on average, chronic HCV infection costs our healthcare system approximately $24,000 per patient, per year. Over the next decade alone, the total costs could easily exceed $800 billion.
In addition to considering the drug’s possible impact on overall disease burden, we can also look to the cost of alternative, currently available therapies to evaluate Sovaldi’s price. Olysio (simeprevir), a drug developed by Johnson & Johnson, was approved by the FDA for the treatment of chronic HCV infection. That drug, with an SVR of 80 percent across the HCV genotypes studied, is comparably priced at over $66,000 for a twelve-week course of treatment. And older therapeutic approaches will likely be increasingly abandoned because they are less efficacious and have undesirable side effect profiles.
The point isn’t that Sovaldi is “cheap.” It probably could have been priced lower, but how much lower? Should Gilead have priced it below Olysio, despite that drug’s less impressive efficacy? Should a drug’s price be allowed to reflect the value it delivers relative to the overall disease burden and human suffering it mitigates? I don’t have all the answers, but it appears we may need to address these questions quickly.
AbbVie, Merck, and Bristol-Myers Squibb are all poised to release new HCV therapies, likely at comparable price points. And the next generation of cholesterol drugs, PCSK9 inhibitors, will probably be orders of magnitude more expensive than statins. Will prior authorization soon be required for every branded drug? Should a costly administrative process that adds no clinical value, effectively results in rationing, deceives patients, and threatens clinician objectivity be tolerated? If the practice continues, should biopharmaceutical companies be allowed to compensate physicians for the prior authorization costs associated with prescribing their drugs? Should insurers be required to do so?
The point is that the drug pricing paradigm has shifted. And the large-molecule, biotechnology-fueled, value-driven, high-priced specialty drug is here to stay. So insurers simply can’t continue to abdicate their duty to adjust their business models accordingly, negotiate drug prices aggressively, manage their own profit margins, and communicate honestly with enrollees by shifting that burden to physicians, and ultimately patients, via the prior authorization process.
Luis Collar is a physician who blogs at Sapphire Equinox. He is the author of A Quiet Death.