Months before Gilead Sciences’ breakthrough hepatitis C treatment hit the market, Oregon Medicaid official Tom Burns started worrying about how the state could afford to cover every enrollee infected with the disease. He figured the cost might even reach $36,000 per patient.

Then the price for the drug was released last December: $84,000 for a 12-week treatment course.

At that price, the state would have to spend $360 million to provide its Medicaid beneficiaries with the drug called Sovaldi, just slightly less than the $377 million the Oregon Medicaid program spent on all prescription drugs for about 600,000 members in 2013. It potentially would be a backbreaker.

Faced with those steep costs, Oregon and several other states are looking to limit who has access to the drug that nearly everyone acknowledges is a revolutionary treatment for the disease affecting more than 3 million Americans.

Expensive specialty drugs aren’t new to health care. But Sovaldi stands out because it is aimed at helping millions of Americans who carry hepatitis C, and a large share of those infected are low-income and qualify for government coverage. Its arrival also coincides with the aggressive expansion of Medicaid and private coverage under the Affordable Care Act, whose purpose was to extend health care to tens of millions Americans who previously couldn’t afford it.

Sovaldi has prompted fears among insurers and state officials that the breakthrough drug, despite its benefits, could explode their budgets. And that has sparked an urgent and highly sensitive debate in Medicaid offices across the country: How far should society go to make sure the poor get the best available treatments?

“The purpose of health care and the purpose of the Affordable Care Act was supposed to provide — and now mandates — access to quality and affordable treatment,” said Ryan Clary, executive director of the National Viral Hepatitis Roundtable, a patient group partly sponsored by drugmakers. “They’re now finding that they’re not able to get cured for the condition that’d been keeping them from being in the health care system.”

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The Centers for Disease Control and Prevention estimates 3.2 million people in the country are infected with the chronic liver disease hepatitis C, which kills about 15,000 Americans each year – higher than the rate of HIV-related deaths. Hepatitis C, which is most commonly spread through needles, can lead to chronic liver disease, cirrhosis or liver cancer if left untreated.

Before Sovaldi, hepatitis C was typically treated with a combination of daily drugs and up to 48 weeks of weekly injections of interferon, which comes with the risk of devastating side effects that prevented many from receiving the treatment – and its cure rate was only around 50 percent. Many patients receiving Sovaldi still receive interferon injections, but Sovaldi’s 12-week course is more manageable and has far less severe side effects.

Allan Hurst, a 53-year-old computer network engineer from the San Francisco area, went through 48 weeks of interferon treatments seven years ago but wasn’t cured of his hepatitis C. At the time, his doctor told him his liver was still in decent condition and he could wait a few years for better treatments.

But when cirrhosis set in last December, his doctor recommended treatment with Sovaldi and Johnson and Johnson’s Olysio, another new hepatitis C drug that costs $66,000. Hurst said he couldn’t wait any longer. Despite the drugs’ high costs – which his insurer agreed to cover only after he appealed to state health officials – he saw big savings in avoiding more serious complications down the road.

“I couldn’t wait for another year or two years. In my case, it really was an urgent thing,” Hurst said.

Executives at Gilead, which makes Sovaldi, said the uproar over the drug’s price tag will die down as more stories emerge about patients being cured.

“We believe that over time the health-care system will save a lot of money by these patients being healthy again,” said John Milligan, president and chief operating officer, on an earnings call Wednesday night.

Sovaldi recorded $2.3 billion in sales over the first three months of the year, making it the best launch of a drug in history. On Wednesday Gilead reported second quarter sales totaling $3.5 billion.

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Those massive numbers have unleashed a debate in Washington over the drug’s cost. Lobbyists for drugmakers say Sovaldi’s cost is justified because of the expense of the research that goes into groundbreaking drugs, as well as related savings to the health-care system. The treatment also allows patients to avoid expensive hospitalizations and liver transplants, which on average cost $577,000.

Groups representing employers, insurers and others who pay for health care have aggressively scrutinized Sovaldi’s pricing. They warn that Sovaldi is a harbinger of a coming wave of expensive specialty medicines, with spending on hepatitis C drugs alone projected to reach $20 billion by the decade’s end. Senate Finance Committee chairman Ron Wyden (D-Ore.) and Sen Chuck Grassley (R-Iowa) have also asked Gilead to explain its pricing.

Beyond the Beltway, states are questioning how they could afford the up-front costs. Express Scripts, a pharmacy benefits manager, estimates that about 750,000 Americans infected with hepatitis C are enrolled in Medicaid or are in the prison system. That amounts to a $55 billion hit to state budgets if every infected person received Sovaldi, though a majority of those infected with hepatitis C don’t know they have the disease.

“We see the most expensive people in the country on a day-to-day basis, but we’ve never seen before the combination of a drug that costs this much multiplied by not 500 people, but 3 million,” said Matt Salo, executive director of the National Association of Medicaid Directors. “That’s what’s really made this kind of a game-changer.”

Some states are responding by limiting access to the drug. Oregon’s Medicaid program, which has a unique waiver from the federal government allowing it to consider a drug’s cost-effectiveness, is advancing recommendations to make Sovaldi available to the sickest patients.

“We recognize that there are those patients who must be treated, and we’re going to treat them,” said Burns, director of pharmaceutical purchasing at the Oregon Health Authority, which oversees the state’s Medicaid program. “But the vast majority can wait while we figure out a policy that doesn’t bankrupt this state.”

State Medicaid programs are generally required to cover Food and Drug Administration-approved treatments regardless of price unless similar options are available.

Adding to the pressure in Oregon and other states is a new wave of Medicaid enrollees, a product of the new health law. Nationwide, enrollment has grown by nearly 7 million people since last fall. Oregon added 300,000 to its existing 600,000 Medicaid beneficiaries this year, and the state isn’t sure how many of the new enrollees have hepatitis C.

Diana Sylvestre, who founded an Oakland clinic treating hepatitis C patients, said new Sovaldi guidelines from California’s Medicaid program appear overly burdensome.

“The new policies are going to further restrict access to care for thousands of patients on the basis of no evidence,” said Sylvestre, who said she’s prescribing Sovaldi to only the highest-need patients.

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The big unknown is whether a new round of hepatitis C treatments expected to hit the market in the next couple of years will come in at a lower cost or if they’ll be as effective as Sovaldi.

“Our worry is that you see shadow pricing — they come out at fairly similar prices,” said Steven Miller, chief medical officer of Express Scripts.

As states consider their Sovaldi coverage policies, one legal challenge could offer a cautionary tale. Three Arkansas patients suffering from cystic fibrosis filed a lawsuit last month claiming the state refused to cover a $300,000 drug because of its cost. Salo of the Medicaid directors group said he worries about the potential for similar lawsuits over hepatitis C coverage guidelines.

“When you have this public health mission coming out from CDC and other folks, any attempts to sort of draw a line to say, ‘We will cure this person of an infection but not this person’ ... any attempt to draw a line on an infectious disease will be met with a swift overturn in the courts,” he said.

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