Louisiana's Novel 'Subscription' Model For Pricey Hepatitis C Drugs Gains Approval

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Louisiana officials announced a deal Wednesday with Asegua Therapeutics, a subsidiary of Gilead Sciences, that would allow the state to provide hepatitis C treatment to its Medicaid and prison populations. They also secured the necessary clearance from the federal government Wednesday for a novel approach to paying for the drugs and expect the program to start July 15.

In Louisiana, at least 39,000 people either on Medicaid or in the prison system have hepatitis C, a viral infection that attacks the liver. It's a curable condition, but that cure is expensive — generics cost as much as $30,000 per course of treatment — and some states have been in the position of rationing care to limit the strain on their budgets.

When the Louisiana Department of Health began looking into providing the treatment, it estimated it would cost $760 million, which is "more than the state spends on K-12 education, Veteran's Affairs, and Corrections combined," Louisiana's secretary of health, Dr. Rebekah Gee, wrote recently.

Because of that, the state restricted who could get the drug, only paying for it for people who already had damage to their livers from the virus.

Louisiana Gov. John Bel Edwards explained how the new deal with the drugmaker would work in an announcement Wednesday at the CrescentCare clinic in New Orleans. Asegua will provide an authorized generic version of its drug Epclusa. "The state will receive an unrestricted supply of this lifesaving medication while capping our expenditures at the same time," he said.

And he explained what's in it for the drugmaker: "This model gives the company exclusive access in the Medicaid and corrections markets in this state."

Gee said her department's goal is to treat at least 31,000 people by the end of 2024. "An elimination plan and innovative payment model will ensure that we can cure this deadly disease and prevent long-term illness and disability in those who have it," she said in a statement.

Gee began negotiations with Gilead early in 2018, as NPR reported last July. She argued that the company is better off giving the state as much of the drug as it needs in exchange for a fixed amount of money, under what she calls a subscription or "Netflix" model of payment. The alternative, she argued, was that her department could afford to buy very little of the medication.

In the meantime the disease — which is transmitted most often through intravenous drug use — would continue to spread.

Now Louisiana can front-load the treatment, ridding people of the virus quickly and stopping its spread. In the early years of the deal, the state is likely to get more of the drug than it pays for. In later years, Louisiana may pay for more than it uses.

The deal allows the state to potentially eradicate the disease in a short time while maintaining a stable budget by spreading the cost over several years.

"We anticipate that other states will want to strike their own deal with these manufacturers for these drugs," said health economist Rena Conti of Boston University's Questrom School of Business. "It will likely be replicated, not just for hepatitis C but for other types of conditions as well."

Conti says the state is not "reinventing the wheel" with this plan — and from a public health perspective, that's a good thing. She points to hospitals that make bulk purchases of certain drugs used in emergency medicine, which both lowers the price and guarantees supply.

"The other great precedent here is Vaccines for Children that provides upfront payment and assurance of coverage for vaccine manufacturers in exchange for lower prices," she says. That's a program that has been around for decades.

"It's a proven model — and that's actually what makes it doable from the manufacturer's perspective, but also from the federal government's perspective," Conti says. "The state is doing something that has already been done, in these two particularly vulnerable, underserved populations."

The Centers for Medicare & Medicaid Services, in its announcement approving Louisiana's plan, encouraged other states to apply for approval to try subscription drug payment models for other expensive treatments. Such agreements can give states more certainty around their Medicaid budgets while ensuring drugmakers a steady revenue stream.

But it remains to be seen whether such a model can be extended to the expensive drugs that treat chronic illnesses and eat up much of states' Medicaid budgets, such as AIDS medications or anti-psychotics.

At Wednesday's announcement in New Orleans, Nikole McArthur spoke as a Medicaid recipient who has hepatitis C and hasn't been able to get treatment. "I was always told that unless I was at stage 4, I couldn't be treated," she said, referring to the progression of the disease. "At stage 4, you're dying. So that wasn't helpful."

"Knowing that I can now get treatment and live the rest of my life knowing that I'm free of this deadly disease is a wonderful thing," she said.