Sticker Shock in Drug Pricing: Are We Missing the Bigger Picture?

Gilead’s new Hepatitis C drug, Sovaldi, has been causing an uproar in the U.S. and internationally because of its high price. A recent New York Times article asked the question “How Much Should Hepatitis C Treatment Cost?” Another, “Lawmakers Attack Cost of New Hepatitis Drug” looked at concerns from some members of Congress. Sovaldi received FDA approval in December 2013 and marketing authorization from the European Medicines Agency this January. According to the FDA label, clinical studies have demonstrated that for many patients, a 12-week treatment with Sovaldi completely removes all traces of the virus from the blood. Patients with hepatitis C virus (HCV) genotype 3 require a 24-week treatment regimen. And those with HCV genotypes 2 and 3 do not even need to take interferon as part of their treatment regimen; therefore they are able to avoid the debilitating side effects that go with it. The high cure rate, combined with the oral route of administration, shorter treatment duration, and milder or comparable side effects in some patient populations, makes the drug a compelling alternative to existing HCV treatments, which are administered through injections and can have severe side effects.

Sovaldi is priced at $1,000 per pill in the U.S. The 12-week treatment regimen costs $84,000 in the U.S., or £34,000 in England, with discounts and tiered pricing plans for middle- and low-income countries. As HCV genotype 3 requires a 24-week treatment regimen, it is, accordingly, much more expensive. Gilead defends its pricing by citing the drug’s advantages over older HCV treatments and the high cost of drug development. The company is also working to make the drug available in comparatively poorer countries through low-cost licensing deals.

We’ve Been Here Before, So Why Such Uproar?

This isn’t the first time an effective drug has been priced at a point that makes individuals and governments uncomfortable. In 1987, the US FDA approved the antiretroviral drug Retrovir, that delayed the onset of AIDS in HIV patients. A New York Times article in 1989 called the cost of the drug “inhuman” at $8,000 per year.

Sovaldi is also far from being the most expensive drug on the market today. Some drugs aimed at rare disease conditions, such as Soliris for paroxysymal nocturnal hemoglobinuria and Elaprase for Hunter syndrome, cost more than $350,000 per year.

In late 2012, Zaltrap, Sanofi’s colon cancer drug, was originally priced at $11,000 per month. When added to the existing treatment regimen (folinic acid + fluorouracil+irinotecan [FOLFIRI]), Zaltrap was shown to extend median survival in colorectal cancer patients by about a month and a half compared to patients treated with FOLFIRI alone. Even though Sanofi dramatically cut the price of Zaltrap, longer treatment regimens still remain too expensive for many.

Seeing Past the Sticker Shock?

Sovaldi presents an unprecedented situation: an expensive drug that works very well. For many patients, treatment can end after a single 12-week regimen, unlike cancer treatment with Zaltrap, which becomes increasingly expensive the longer the patient survives. Sovaldi may also prevent or reducesome long-term costs. Higher cure rates mean fewer liver transplants and shorter overall treatment durations. The milder side effects mean greater adherence and reduced cost of treating the symptoms of side effects. Though the up-front costs may be shocking, the potential benefits may be worth it.

Outside the U.S., there are a number of Health Technology Assessment (HTA) agencies that evaluate treatments for comparative clinical-efficacy, comparative cost-effectiveness, or both. We have found that the agencies that evaluate both clinical- and cost-effectiveness place greater weight on the economic aspects of a drug than on the clinical aspects when deciding whether to recommend a drug for reimbursement.

These agencies may choose not to reimburse an efficacious drug if it costs too much, while an inexpensive drug that is no better than existing treatments has a better chance of getting reimbursed. The UK’s National Institute for Health and Care Excellence (NICE), for instance, recently reviewed Zaltrap for colorectal cancer. NICE did not recommend the drug for reimbursement, noting that cost per quality-adjusted life year was almost double that which NICE usually finds acceptable. NICE is in the process of revisiting their cost-effectiveness evaluation methods to take long-term benefits and savings, similar to those potentially offered by Sovaldi, into account. However, these changes will likely come into effect too late to affect their decision concerning Sovaldi, which should be published this October.

All of this raises a series of interesting questions.

Outside of the U.S., major HTA agencies have yet to complete their assessments of Sovaldi, but their decision may be precedent-setting, particularly if we think of the context of their reviews and recommendations. The more important decision-making behavior we should be watching for are:

  • Will the high up-front costs scare the agencies away from recommending the drug for reimbursement?
  • Will the tremendous effectiveness and potential long-term savings lead to positive decisions?
  • What do these struggles to evaluate comparative- and cost-effectiveness say about how high drug prices can and should rise?

Efficacy Is Not Always Enough

This chart shows economic rationales for negative decisions that have been given to drugs shown to be efficacious. A high number of drugs demonstrating greater efficacy than or similar efficacy to the clinical comparator used in the review were granted negative overall decisions because of lower or uncertain cost-effectiveness. Once cost is taken into account, a drug that demonstrates efficacy similar to or greater than comparators may ultimately be judged as not cost-effective. An excellent drug may fail to make it through HTA agencies that conduct economic evaluations if the drug’s high price offsets efficacy and results in an overall lack of cost-effectiveness.

While we watch how HTA agencies outside of the U.S. evaluate these new drugs, we must also recognize that in the U.S., there is no effective or transparent way to understand the tradeoffs of a high-priced drug versus health service savings. As long as this context remains absent, we will most likely continue to see this type of outrage associated with high prices… potentially losing sight of the larger picture.