A Netflix Model for Hepatitis C: One Price, Unlimited Meds

This story was originally published by Stateline, an initiative of The Pew Charitable Trusts.

Two states fighting an escalating hepatitis C crisis will soon pay a flat fee for unlimited drugs—Netflix style—to treat prisoners and low-income residents suffering from the deadly liver disease, with the goal of all but eliminating the infection.

Netflix, the popular DVD and video streaming service, charges customers a monthly fee that entitles them to view all the movies they want. Louisiana and Washington state want to do something similar with the expensive medications that provide a cure for hepatitis C.

Both states will pay a drugmaker to provide enough medication each year to treat its prisoners and Medicaid patients. Washington also plans to buy the drugs for others, including state employees, retirees and teachers.

The new design illustrates how states are trying to think creatively to tackle one of their costliest but most important long-term challenges: providing health care access to low-income residents and people in the state’s care.

Hepatitis C kills more Americans each year than any other infectious disease, more than the combined total of 60 infectious diseases reported to the U.S. Centers for Disease Control and Prevention. And eventually, both Louisiana and Washington hope commercial health insurers will adopt a similar model to cover all state residents with the virus.

In Washington, Democratic Gov. Jay Inslee announced last fall a mission to eliminate hepatitis C there by 2030.

Alexander Billioux, Louisiana’s assistant secretary for public health in the state’s Department of Health, said his state’s plan “is not about getting a good deal on a drug.”

“The bigger strategy is to eliminate the most deadly disease in Louisiana,” Billioux said.

Australia instituted the Netflix model in 2015, agreeing to spend about AU$1 billion to treat an estimated 104,000 people with the disease over five years. A recent analysis published by the New England Journal of Medicine estimated that Australia would save nearly AU$6.5 billion more than if it had tried to treat the same number of people under the traditional pricing method.

Even if Washington and Louisiana officials aren’t able to negotiate better prices through the Netflix model, health officials said it will offer more certainty about how much the states spend to treat hepatitis C from one year to the next.

“We believe this will protect us from over-expenditure in any one year [on hepatitis C drugs],” said Judy Zerzan, chief medical officer for the Washington Health Care Authority.

When the states first unveiled their plans for a subscription model, some officials wondered whether any of the manufacturers of the hepatitis C drugs—Gilead, AbbVie and Merck—would be interested in participating. With bids not yet due, it is still uncertain, but manufacturers have submitted detailed questions to both states about their plans, which is typical with state bidding contracts. Bids are due for Louisiana this week and the following week for Washington.

None of the companies responded to Stateline’s inquiries about the Louisiana and Washington models.

The two states also expect the winning bidder to assist in public health efforts to identify and screen those at high risk for having the disease and in training health care providers.

While the subscription model may not be useful for all prescription drugs, “where you have infectious disease in the population, this could make a lot of sense,” said Anna Kaltenboeck, program director at the Drug Pricing Lab, which researches drug prices at the Memorial Sloan Kettering Cancer Center in New York.

Other states also have set ambitious goals of ridding their states of hepatitis C. New York Gov. Andrew Cuomo, a Democrat, last year pledged to eliminate hepatitis C in the state without specifying by what date. The state estimates that more than 100,000 people in New York are infected.

Billioux and Zerzan both said other states have asked about their subscription models, though neither would identify which states.

But success with hepatitis C drugs could lead the states to expand the programs to include other drugs.

Billioux said likely candidates would be the drug Naloxone, which is used to treat opioid overdoses, and pre-exposure prophylaxis, a combination of two medications used to prevent HIV in high-risk populations.

High Prices

Some 2.4 million U.S. residents were living with hepatitis C in 2016, the most recent data available, according to the CDC. Many aren’t aware they have the disease, and if left untreated, it can cause liver damage, cirrhosis (or scarring of the liver), cancer and death. The hepatitis C virus is spread through blood. Many patients are infected through transfusions, though the infection rate is particularly high among those who share needles during illicit use of drugs, such as heroin.

Until 2014, the medicines used to treat hepatitis C were not particularly effective, required lengthy treatment spans, and came with severe side effects. But that year, the U.S. Food and Drug Administration approved a new generation of antiviral hepatitis C drugs that promised a cure, one that came with virtually no side effects and needed to be taken for as few as eight weeks.

The drugs carried an astounding price tag, as much as $94,000 for a single course of treatment. Alarmed by the budget impact, states at first tried to limit the new medications only to Medicaid beneficiaries and prisoners in advanced stages of the disease, denying it to others.

But several federal courts ruled that withholding potentially life-saving treatments to those infected was unlawful.

The states did catch one break: Other drugmakers introduced their own versions, bringing down prices. For Washington’s Medicaid program, the price of a course of treatment came down from $43,599 in 2015 to a still-hefty $22,433 last year.

Still, because hepatitis C is so prevalent, Washington state’s overall costs remain high. It spent more than $80 million last year on hepatitis C drugs to treat patients, including those in Medicaid and in prisons, as well as state employees.

But Zerzan said that even with that spending, only a fraction of the estimated 30,000 people infected and under the jurisdiction of the Health Care Authority have been treated.

“We’ve been reaching about 3,000 a year in Medicaid, but we need to do better than that to eliminate hepatitis C,” Zerzan said. The state estimates that another 35,000 outside of the authority’s jurisdiction also have the disease.

'Dire Situation'

In the Washington model, the winning bidder would provide the drugs until 2023 for a set treatment course price up to a total maximum each year, about the $80 million the state spent last year. (The total will be determined through negotiation with the manufacturer, subject to legislative approval.) Once that maximum is reached, the manufacturer would provide the drugs for a negligible amount, perhaps as little as pennies per course of treatment.

The model would work similarly for hepatitis C drugs going to non-Medicaid patients under the state’s Health Care Authority, which runs the state’s Medicaid program and buys health plans for state employees.

Louisiana would cap for five years the amount it would spend on the antivirals to the amount it spent in 2018, about $35 million. For that amount, the winning bidder (or bidders) would agree to provide all the drugs needed to treat all Medicaid beneficiaries and prisoners identified by the state.

Louisiana estimates that about 39,000 people with hepatitis C are either Medicaid beneficiaries or are incarcerated. It estimates the total population in the state with the virus is about 90,900.

The state hopes to treat 10,000 Medicaid beneficiaries and prisoners by the end of 2020. Last year, it treated only about 1,170.