In Arkansas’ Medicaid program, which covers about 600,000 Arkansans, costs for prescriptions drugs are climbing too. For the fiscal year that ended June 30, the Department of Human Services spent $372.3 million on prescription drugs, up 6 percent from the previous year.
The medicine Elizabeth “Lizzy” West of Arkansas County needs to treat her cystic fibrosis will cost about $300,000 a year for the rest of her life.
West and two other Arkansas Medicaid beneficiaries who have cystic fibrosis were initially denied the relatively new drug Kalydeco, allegedly because of its high cost, according to one of the patients’ lawyers, James Passamano of Houston.
Passamano, who is representing the patients pro bono, filed a lawsuit in June in U.S. District Court in Fayetteville against John Selig, the director of the Arkansas Department of Human Services, in an attempt to get the medicine for West and the other plaintiffs, Catherine Kiger of Sebastian County and a minor, Chloe Jones, who lives in Lawrence County. Since filing the lawsuit, however, the plaintiffs have received the drug.
Nevertheless, the case highlights brewing concerns over the high costs of specialty drugs such as Kalydeco, which was approved by the U.S. Food & Drug Administration in 2012.
“It’s a pretty big and growing issue,” said Matt Salo, executive director of the National Association of Medicaid Directors of Washington.
The issue reached a flash point when the pharmaceutical company Gilead Sciences Inc. of Foster City, California, released its drug Sovaldi to treat hepatitis C. The medicine costs about $84,000, and about 3 million people in the U.S. have the disease. Gilead boasts that its drug has a “very high” cure rate.
“That has kind of set off a lot of alarms in people’s minds,” Salo said. “We can cure hepatitis C, but can we afford to in the short term?”
Salo said more specialty drugs are in the pipeline, drugs that could treat cancers, Alzheimer’s disease and multiple sclerosis. “But the costs for all of these things are going to potentially be equally as mind-blowing,” he said.
Spending on specialty drugs in 2012 in the United States was about $87 billion, and it’s estimated that amount will soar to $400 billion by 2020, according to an April report by UnitedHealth Center for Health Reform & Modernization of Minnetonka, Minnesota, which studies health care issues and is related to the health insurance company UnitedHealth Group.
In Arkansas’ Medicaid program, which covers about 600,000 Arkansans, costs for prescriptions drugs are climbing too. For the fiscal year that ended June 30, the Department of Human Services spent $372.3 million on prescription drugs, up 6 percent from the previous year. And it projects spending on prescription drugs will rise 8.5 percent in the state’s 2016 and 2017 fiscal years “largely due to increased costs for hepatitis C and cystic fibrosis drugs,” according to an email to Arkansas Business from a department spokeswoman.
Salo’s organization sent a letter late last month to several members of Congress urging them to start looking for a solution to the potential crisis.
“This situation requires an immediate federal solution,” the organization said in the Oct. 28 letter. “[P]olicymakers and the public must also be realistic about the choices and trade-offs involved when taxpayer dollars are used to fund high-cost services and products. This conversation will be difficult, but it is one we believe federal policymakers must immediately begin with states and stakeholders.”
Salo said that he hasn’t heard back from any of the congressmen.
Private insurance companies are also feeling the sting from the cost of the specialty drugs.
Michael Stock, president and CEO of Little Rock health insurance company QualChoice, said the amount a person could spend on drugs isn’t capped.
“The line has already been drawn for us by the federal government,” he said. “The federal government has said there is no limit, basically.”
The Affordable Care Act says policyholders have to receive unlimited benefits, which raises concerns for Stock.
“It becomes a societal question,” he said. “At what point does a society as a whole say there’s only so much money we have to spend on health care?”
Drug Development Costly
In its letter to Congress, Salo’s organization of Medicaid directors has offered several suggestions on ways to curb the rising cost of prescription drugs. Some of those solutions involve price controls on the drugs.
But the Pharmaceutical Research & Manufacturers of America, which represents research-based pharmaceutical companies in the U.S., doesn’t agree with price controls. “We feel that it would really inhibit the development of new treatments and potential cures,” said PRMA spokeswoman Holly Campbell. She said investments in research would slow as a result.
The cost to develop and get a single drug to market is estimated at $2.6 billion, according to a study release last week by the Tufts Center for the Study of Drug Development at Tufts University in Boston. Tufts said in a news release that its estimates show the out-of-pocket cost for a pharmaceutical company is about $1.4 billion while the expected returns that investors sacrifice while a drug is in development total $1.2 billion.
“Drug development remains a costly undertaking despite ongoing efforts across the full spectrum of pharmaceutical and biotech companies to rein in growing R&D costs,” Joseph A. DiMasi, the director of economic analysis at the Tufts’ center, said in the news release.
PRMA’s Campbell said that once patients are on medication, their need to go to the hospital to seek more costly treatment might be alleviated, bringing down the overall cost of care.
Still, Salo said, some action will have to be taken. “A lot of people can disagree on what should be done, but I do think there’s a growing sense that well, yes, something should be done,” Salo said.
Director Voices Caution
Dr. William Golden, the medical director for Arkansas’ Medicaid program, said he is cautious when an expensive new drug, such as the one for hepatitis C, hits the market.
“We were one of the first Medicaid programs to study this carefully to make sure that when the drug is prescribed it’s actually going to be effective,” Golden said. “There was little in the [medical] literature to help guide therapy.”
He said that in the state’s Medicaid program, pharmacists and physicians review new drugs before they are used. And Arkansas Medicaid is working with the treating physicians to make sure the right drug is matched with the correct type of hepatitis.
“There are a variety of clinical factors that can alter which drug you use and how long you get the drug,” Golden said.
Golden said the Arkansas Medicaid program has spent about $3 million to $4 million this year on the hepatitis drugs while other states have spent millions more.
The NAMD said in its letter to Congress that several states reported that their expenditures on drugs for hepatitis C in just the first quarter of 2014 were double or triple their entire 2013 spending on the disease.
Golden also said he initially held off approving the new cystic fibrosis drug because there were too many questions about the drug and not enough answers in the medical literature, such as the best time to start treatment.
“So we limited the drug to patients who were clinically ill and waited for more literature to come out to give us better guidance,” said Golden, who was also named as a defendant in the lawsuit filed by the cystic fibrosis patients.
Over the summer, however, more data about the drug was released “to give us better guidance,” Golden said. So the patients who sued to receive the cystic fibrosis drug from Arkansas’ Medicaid program now qualify for it, Golden said.
Passamano, the attorney representing the Medicaid patients, said the lawsuit is continuing even though the patients have received the drug.
“The plaintiffs have taken the position that whatever policy is adopted, it needs to comply with the requirements of federal law,” Passamano said. “And the basic requirements are that medical necessity determined by the physician is the legal standard that Medicaid has to observe.”
Golden said he didn’t want to discuss the lawsuit in too much detail. He said he’s focused on whether a drug is effective and whether it offers value that other drugs don’t, rather than the price. “So it’s a comparative thing,” he said. “It’s not a pure price-tag issue.”
Golden said, however, that the rising price of prescription drugs concerns him.
“It’s something the taxpayer needs to reflect on,” he said. “Because one way or another, it’s federal and state tax dollars that are paying for these escalating prices from the industry.”
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