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You are here: Home / Anderson On Health Insurance / Generic Harvoni, Hep-C and risk adjustment

Generic Harvoni, Hep-C and risk adjustment

by David Anderson|  October 3, 20187:18 am| 16 Comments

This post is in: Anderson On Health Insurance, C.R.E.A.M.

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A few weeks ago, Gilead Pharmaceuticals announced that they were creating an authorized generic version of Harvoni with a list price of $24,000.

In the case of Harvoni and Epclusa, which carry list prices of $94,500 and $75,000, respectively, the $24,000 price tag for a course of treatment with the generics is roughly equal to the net price paid by many insurers…

There are a lot of interesting nuggets to pull out of this. The most obvious is that list price and actual price are at best tenuously connected. The second point is that the average cost of treatment for a Hep-C cure is someplace under $30,000 once all of the behind the scene deal making is accounted for. Thirdly, this is a case where me-too/look-alike drugs actually have created a very viable, competitive market.

What I am most interested in is the risk adjustment games that can be played with a new, much lower list price (even if the effective net price is close to the same as before).

Risk adjustment for the ACA, Medicare and Medicaid use claims from the past to predict incremental cost increments for different disease and therapeutic drug classes. Pharmacy claims are based on the list price and not the net price. Risk adjustment co-efficiencts lag reality. This works well when the treatment modality is reasonably constant and pricing does not have a huge shock.

Oops… that is precisely what will happen with Hep-C. Right now, Hep-C antivirals risk adjust on the ACA individual markets at about a co-efficient of 39. Someone picking up a Sovaldi, Harvoni or any other Hep-C antiviral cure gets a risk score that predicts their annual costs will be about 39 times average statewide premium.

That co-efficienct is based on the last three years of available data and it is a blend of commercial and Exchange information. The list price of the Hep-C drugs for this period was over $80,000 per dose.

Insurers have been fairly aggressive in shifting their formularies to lower net cost to them Hep-C anti-virals. I would expect that insurers will aggressively push for the authorized generics for a risk adjustment edge. If the list price collapses to $24,000 there is a huge arbitrage wedge that insurers can exploit for at least 2019 if not also in 2020. They can get credit for $84,000 or $95,000 treatments while only paying out $24,000.

This advantages insurers that can both aggressively identify and treat folks with Hep-C. It also advantages insurers that have very good pharmacy benefit management that can get a really good net price on Hep-C anti-virals as it creates a bigger wedge to exploit.

On net, this type of wedge will incrementally encourage more Hep-C treatments to be approved and taken for folks who are in the ACA individual market for 2019 and perhaps in 2020 until the risk adjustment co-efficiencts catch up to the pricing/technology/legal shock of low list price authorized generics.

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Reader Interactions

16Comments

  1. 1.

    Elizabelle

    October 3, 2018 at 7:33 am

    Cannot speak to the pricing, but “Harvoni” is one of the strangest drug names I’ve ever heard. It just sounds like a fraud or fake product. Rhymes with Baloney, no less.

  2. 2.

    David Anderson

    October 3, 2018 at 8:12 am

    @Elizabelle: Figuring out how the marketing department comes up with branded drug names requires eyes of newts and good psychedelics.

  3. 3.

    Nilesh Kalyanaraman

    October 3, 2018 at 8:18 am

    Do you have a sense of how this would affect 340b rebates?

  4. 4.

    Elizabelle

    October 3, 2018 at 8:20 am

    Harvoni sounds like something that makes music at a circus.

  5. 5.

    David Anderson

    October 3, 2018 at 8:51 am

    @Nilesh Kalyanaraman: No, I don’t know how this would impact 340(B)

    I try not to play in the Rx space as I don’t know enough to say anything more than “It’s complicated”. I feel comfortable talking about Hep-C as a risk adjustment issue but not as a rebate/opacity issue.

  6. 6.

    Nilesh Kalyanaraman

    October 3, 2018 at 8:55 am

    @David Anderson: thanks. I’ll keep digging.

  7. 7.

    Wag

    October 3, 2018 at 9:01 am

    Very good news about Hep C treatment. Drug prices are incredibly opaque. Viagra 50 mg as needed for ED costs $500 for 10 pills. Sixty pills of generic sildinafil,!the exact same medication, in a 20 mg pill can be obtained with a coupon from GoodRx for $25. American pharacutical markets are insane.

  8. 8.

    Jeffery

    October 3, 2018 at 9:08 am

    I remember when a prescription cost $5.

  9. 9.

    opiejeanne

    October 3, 2018 at 9:13 am

    I was successfully treated for Hep C in 2005 with Ribavirin and Interferon. Five pills of the first and a shot once a week of the second. After two weeks they added ProCrit because I was so anemic at that point.
    Kaiser Permanente treated me; the hospital in Anaheim had a program set up for Hep C patients that had already treated thousands of Hep C patients, but I was only the 8th Type 4 they had seen, and it was rare enough in the US that they weren’t sure how long to treat me so they treated me for a full year. Preparation included seeing a psychiatrist to determine if I needed an anti-depressant because those meds could do strange things to your mind, and a training session for taking your meds: how to load the “pen”. They also vaccinated me for everything except Yellow Fever and Dengue before we began because my immune system was going to be compromised by the treatment. When treatment began I saw a Nurse Practitioner every three weeks, had blood drawn every three weeks, and every time I walked into the office the first thing they asked me was, “Are you still taking your meds?” I finally asked why and they told me that a lot of patients stopped treatment but weren’t honest about it for about a month. It was a harsh treatment and they recommended having a steady partner to help you get through it.
    The cost to me was about $35 a month. I saw the cost to the pharmacy listed on the receipt was about $3500 the first month but by the 12th month it was less than half that; I think the protocol I was on was fairly new when I began.

  10. 10.

    Cheryl from Maryland

    October 3, 2018 at 9:19 am

    This is excellent news. My husband is on dialysis and on the list for a kidney transplant. The more and cheaper Hep-C treatments there are, the more likely he won’t get the disease during dialysis and the more likely he can get a transplant in a timely manner (many organs from people who died from overdoses are discarded as there is no time to determine if the deceased has Hep-C. Pilot projects are starting which use those organs and treat the recipient for Hep-C. So far, highly successful.

  11. 11.

    MattF

    October 3, 2018 at 9:24 am

    @David Anderson: I’ve started taking a blood thinner named Xarelto. Unpronounceable.

    The prescription I got for this medication turns out to be relevant to the pricing issue– I got the prescripiton in an ER, and my PBM (Express Scripts) informed the pharmacy that it required pre-authorization. Which is entirely ridiculous– what if, e.g., it actually was an emergency (which, thankfully, it was not. And the price difference was significant– the retail price is around $15/pill, while the insured price is about $0.50/pill.

    Express Scripts plays lots of games with pricing and authorization, but this one crosses the line.

  12. 12.

    JamesKPolkEsq

    October 3, 2018 at 10:40 am

    Very interesting article from the Atlantic that goes over the international efforts to reduce the pricing for Ledipasvir/sofosbuvir

    A treatment that cures Hep C was a huge victory for everyone. Hopefully we can completely eliminate it in the coming years.

  13. 13.

    narya

    October 3, 2018 at 11:06 am

    @Nilesh Kalyanaraman: I’m guessing that 340b rebates drop. We pay a reduced price and get reimbursed for the “insured” price and keep the difference, so I’m guessing the insured price will drop.

    I am also guessing that this is in part to pull more patients into treatment. In IL, frex, if you’re on Medicaid I think you can only get treatment if (a) your liver damage has progressed to a certain point or (b) you also are living with HIV. Making the treatment cheaper to insurers may make insurers willing to treat people earlier in the disease process.

  14. 14.

    narya

    October 3, 2018 at 11:07 am

    i mean, when the insured price drops, the effective rebate drops.

  15. 15.

    LaNonna

    October 3, 2018 at 11:40 am

    Harvony covered completely in Italy, the powers that be having realized that it’s cheaper to cure Hep C than to have all the follow-on conditions, plus cuts down new cases via transmission. Cost of treatment = 0 eu. Worth paying our taxes here at 35% for “socialized medicine.”

  16. 16.

    Chris T.

    October 3, 2018 at 2:27 pm

    @Elizabelle: I play the harvonica at parties and the harvonium in concerts. :-)

    Serious question for David Anderson: can you explain how this “credit for list price” thing really works?

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