By: Michael Lim, PharmD Candidate c/o 2020
In a February 2019 Senate Finance Committee hearing, executives from major pharmaceutical companies including AbbVie, Merck, and AstraZeneca were criticized for the high cost of brand-name prescription drugs.1 When asked why brand-name prescription drugs in the United States were more expensive compared to other developed countries, an acceptable explanation was not provided.
The astronomic cost of healthcare in the United States is not a new issue. However, it is important to note that the treatment of some disease states proves costlier than others. One disease state saturated with expense is Hepatitis C. Hepatitis C is a viral infection of the liver caused by the blood-borne Hepatitis C virus.2 Often transmitted through needle sharing, Hepatitis C is a short-term infection but becomes chronic in 70 to 85 percent of individuals.2 While treatment is selected based on individual patient genotypes, frequently used curative treatments that achieve a sustained virologic response, such as sofosbuvir (Sovaldi®) and ledipasvir/sofosbuvir (Harvoni®), come with the financial strain of costing 84,000 dollars and 94,500 dollars respectively for a twelve week regimen.3 In response to these lofty prices, an interesting payment model resembling the streaming service Netflix has emerged in Australia, Louisiana, and Washington.
According to the “Netflix” model, a state would form a partnership with one or more drug companies for unrestricted access to its Hepatitis C drugs.4 Similar to how Netflix offers consumers unlimited streaming of movies and TV shows for a flat subscription fee each month, the “Netflix” approach to drug availability would allow a state to purchase an unlimited amount of medication from a drug company at a fixed cost. This approach would prove beneficial from a state budget-planning standpoint while also expanding patient access to curative medications.4 For example, in Louisiana, one of the states pursuing this new drug procurement model, the unimpeded access to such drugs would cure an estimated 39,000 people in the state’s Medicaid and prison systems.4 In addition, the “Netflix” model proves to have garnered industry support with AbbVie, Gilead Sciences, and Merck all submitting bids for the proposal.4 The “Netflix” model relies on a concept known as delinkage. Delinkage refers to a pricing scheme that separates the reward for pharmaceutical innovation from a drug’s price.5 In the case of the “Netflix” model, the reward for innovation comes in the form of a large fixed payment rather than simply selling the drugs at a high price on an individual basis. According to Louisiana’s secretary of health, Dr. Rebekah Gee, MD, the state hoped to form contracts with one or more of these companies and start obtaining medications by July 2019.5 In Washington, a Netflix-style subscription payment model is also being pursued albeit on a larger scale. Washington’s deal proposes paying a flat fee for unrestricted access to Hepatitis C drugs across four state agencies including Medicaid beneficiaries, prisoners, and employees covered by the state health plan.6
Taking more lives in the United States than all other infectious diseases combined, Hepatitis C poses a dangerous and apparent threat.5 However, despite the debut of novel curative medications, only 450,000 people or fifteen percent of Americans with Hepatitis C have been treated.5 The “Netflix” model offers a cost-effective approach for the treatment of Hepatitis C and its success has already been proven outside of the United States, namely in Australia. A one billion Australian dollar (766 million U.S. dollar) agreement with Hepatitis C drug producers Gilead, AbbVie, Bristol-Myers Squibb, and Merck allowing the country access to all the Hepatitis C drugs it can use for five years has led to improvements in the treatment of the disease.5 According to a study in the New England Journal of Medicine conducted by Dr. Suerie Moon, PhD, MPA, of Harvard University and Elise Erickson, M.A., the agreement has allowed the country to treat seven times as many Hepatitis C patients than it would have without the agreement.5,7 Additionally, the government would have to spend 6.42 billion Australian dollars (4.92 billion U.S. dollars) more in order to treat this same number of patients.7
Given that this is a communicable disease, a strong public health interest exists in treating as many Hepatitis C patients as possible. Moving forward, it will be interesting to see how these Netflix-style deals progress in Louisiana and Washington and whether the results in Australia can be replicated in the US. Furthermore, it remains questionable whether or not other states will follow suit. From a pharmacy perspective, success with these agreements would mean not only expanded access to Hepatitis C medications among various patient populations but also increased pharmacist responsibility in ensuring that the drugs are used in a safe and efficacious manner. Success with adapting the “Netflix” business model could also open consideration to applying the scheme to other medications and disease states.5 For example, naloxone (Narcan®), insulin, and HIV treatments may be candidates for this payment model.5 The “Netflix” model offers a creative new approach to the high cost of Hepatitis C drugs and the future of this strategy presents exciting possibilities for addressing the cost of healthcare in the United States.
- Pear R. Drug Makers Try to Justify Prescription Prices to Senators at Hearing. The New York Times. https://www.nytimes.com/2019/02/26/us/politics/prescription-drug-prices.html?module=inline. Published 02/26/2019. Accessed 05/03/2019.
- CDC. Hepatitis C Information | Division of Viral Hepatitis | CDC. Centers for Disease Control and Prevention. https://www.cdc.gov/hepatitis/hcv/index.htm. Published 05/31/2015. Accessed 05/04/2019.
- Toich L. Will Hepatitis C Virus Medication Costs Drop in the Years Ahead? Pharmacy Times. https://www.pharmacytimes.com/resource-centers/hepatitisc/will-hepatitis-c-virus-medicaton-costs-drop-in-the-years-ahead. Published 02/08/2017. Accessed 05/05/2019.
- Sagonowsky E. Louisiana’s ‘Netflix’ deal for hepatitis C drugs wins bids from AbbVie, Gilead and Merck. FiercePharma. https://www.fiercepharma.com/pharma/louisiana-s-netflix-model-for-hep-c-drugs-attracts-bids-from-abbvie-gilead-and-merck. Published 03/07/2019. Accessed 05/06/2019.
- Rosenberg T. Treat Medicines Like Netflix Treats Shows. The New York Times. https://www.nytimes.com/2019/03/05/opinion/can-netflix-show-americans-how-to-cut-the-cost-of-drugs.html. Published 03/05/2019. Accessed 05/07/2019.
- Sagonowsky E. Washington takes ‘Netflix’ hep C drug pricing further with winner-take-all bidding. FiercePharma. https://www.fiercepharma.com/pharma/washington-seeks-proposals-for-winner-take-all-hep-c-deal. Published 01/28/2019. Accessed 05/08/2019.
- Moon S, Erickson E. Universal Medicine Access through Lump-Sum Remuneration — Australia’s Approach to Hepatitis C. New England Journal of Medicine. 2019;380(7):607-610. doi:10.1056/nejmp1813728