Growing more anxious about the impact of the expensive new hepatitis C drug Sovaldi and the routes states may take, Medicaid managed care organizations are looking for help.
The costs for Sovaldi, the breakthrough treatment sold by Gilead Sciences, were not incorporated into 2014 Medicaid MCO capitated rates, but many states and MCOs are covering it for patients and sorting out payment on the fly.
For the 2015 plan year, this is casting a bit of a pall on actuarially sound rate setting, as states consider carving-out Sovaldi costs next year, "passing" them through or building them into per-member per-month reimbursement, said Jeff Meyers, CEO of Medicaid Health Plans of America.
The MCO trade group wants to create a joint working group with state Medicaid leaders to help the Centers for Medicare & Medicaid Services and Congress "understand the different options that are being considered" for Sovaldi, "especially since additional costly medications are on the horizon," Meyers wrote in a letter to the National Association of Medicaid Directors.
"Along with the Affordable Care Act's health insurance tax and the growth of the Medicaid population, the uptake of this medication will make it challenging to establish actuarially sound rates in 2015," Meyers wrote.
Upwards of three million Americans are estimated to have the hepatitis C virus, which can lead to chronic liver disease and, until recently, really did not have an effective treatment. Enter Sovaldi, with a 90 percent cure rate, limited side effects and a per-patient price tag of some $84,000 for a 12-week course, posing the problem of affordability.
"The projected volume of patients in the Medicaid program that could benefit from this innovation, combined with the price of Sovaldi, will have a substantial impact on state Medicaid budgets," wrote Meyers, a former government affairs representative for Cephalon, Biogen Idec, Pharmacia and Hoffman-LaRoche.
Of the three million estimated to have hep. C, as many as one million may be eligible for Medicaid; treating each of them over the course of a year would add up to about $80 billion, more than 15 percent of Medicaid's national budget last fiscal year.
How much Medicaid has spent on Sovaldi to date isn't clear. Insurers that have publicized their Sovaldi spending so far have shown mixed impacts in Medicaid and other businesses
For both commercially- and publicly-insured members, UnitedHealth Group spent about $100 million on Sovaldi in this year's first quarter. In Medicare Part D, some of the company's hepatitis C treatment costs are being offset by the reinsurance program, as patients quickly surpass the "donut hole" threshold, and in Medicaid, the company is hoping to recoup the costs, which weren't priced into their contracts.
"We're working with states on that funding gap" and "expecting that it will be reimbursed," UnitedHealthcare CEO Gail Boudreaux said in early April.
Aetna dropped $30 million on Sovaldi in its first quarter, but only "a very small amount in Medicaid," said CFO Shawn Guertin in an earnings call.
"To some extent that's an outgrowth of the timing of various Medicaid plans covering this," Guertin said. "Some of our Medicaid plans have carved out pharmacy as well; some of them we don't have any exposure."
Meanwhile, Gilead saw Sovaldi sales of $2.27 billion in the first quarter, just under half of its total $5 billion in drug sales.
A rival hep. C drug from Johnson & Johnson, called Olysio, also recently came to market -- at a price-tag of some $66,000 per treatment -- although it is only approved for use combination with interferon, the older therapy that comes with a range of serious side effects and mixed success rates.