The Value of Curing Hepatitis C
June 13, 2016
Author: Joe Sageman, C’17
When people first contract the Hepatitis C virus, they suffer what’s known as an acute infection. These infections show relatively few symptoms, and any symptoms that do arise – like fever or nausea – are unlikely to raise alarm bells. The Hepatitis C virus, then, often goes undetected for decades until acute infections develop into chronic infections. Chronic infections, in turn, can lead to liver failure 20 to 30 years down the line. At advanced stages of liver disease, treatment options have historically been limited. Between 2013 and 2015, though, the pharmaceutical industry introduced a series of remarkably successful new drugs that can cure better than nine in ten Hepatitis C cases.
While the new medical technology has extraordinary and lifesaving potential, the drugs are attached to exorbitant price tags that vary between $50,000-$100,000. Though insurance coverage can encourage Hepatitis C patients to seek treatment, even insured patients can face upwards of $10,000 out of pocket costs. A recent panel of experts at a United States Senate briefing weighed in on the economic and epidemiological calculations that insurers and medical care providers face in allocating or authorizing these coveted drugs.
Even setting aside the human cost, the pain, suffering, and loss of life that inevitably results from the withholding of treatment, the panelists’ cold calculus led them to conclude that the new drugs are worth the going market price. Why, then, are insurers so reluctant to foot the bill for them? According to Darius Lakdawalla, the University of Southern California School of Pharmacy’s Chair of Pharmaceutical Development and Regulatory Innovation, perverse incentives in the insurance industry deserve much of the blame. Though the Hepatitis C drugs are unquestionably expensive, their effectiveness saves patients from even greater costs associated with liver disease and liver failure later in life. After taking those averted costs into consideration, the insurance industry would recover its upfront costs of the new drugs after about 16 years. The catch, though, is that insurers only recover those costs if patients retain the same insurer over the course of that entire period. Given that Americans switch insurance plans about every three to four years, insurers are unlikely to see the long-term health benefits of treating Hepatitis C patients translate into profit.
This prevailing – but suboptimal – business strategy is a classic Prisoner’s Dilemma for insurance companies, who have little to gain from acting in the long run interests of patients who remain on their plans solely over the short run. Lakdawalla is interested in making markets work better which, in this case, means incentivizing insurers to treat Hepatitis C patients as soon as they are diagnosed. If he succeeds, all parties involved would stand to gain a lot. Patients would live longer and healthier lives. Insurers would save money given a healthier pool of patients. Medicare, a program that often gets stuck treating elderly patients suffering from chronic Hepatitis C infections, would save an estimate $5 billion if many of those patients’ conditions are properly identified and treated.
The failure to treat Hepatitis C patients with the best, most advanced medicine available also means that society loses out on important spillover effects. Harvard Medical School’s Anupam Jena argues that the economic benefits of using the new Hepatitis C drugs are understated by traditional calculations. The obvious value of a Hepatitis C cure is that is prevents billions of dollars in health care costs in the affected patients. Jena points out two additional hidden values worth considering. When a Hepatitis C patient is cured, a liver transplant they would have needed can now go towards the care of one of thousands of non-Hepatitis C patients with liver disease. These include patients with diabetes, alcoholism, and hereditary conditions, many of whom die on transplant waiting lists. If Hepatitis C is eradicated, Jena estimates the United States could save over 10,000 liver transplants over the next 20 years and add about 75,000 years to American lives. A second hidden benefit of early and aggressive treatment is that it prevents the spread of Hepatitis C, an infectious disease. Each cured patient reduces the likelihood that the disease spreads.
Ryan Clary, Executive Director of the National Viral Hepatitis Roundtable, uses troubling trends and statistics to argue that the response to the Hepatitis C crisis does not match the urgency of the problem. Owing in large part to the opioid epidemic, acute Hepatitis C infections have doubled over the past five years. The virus disproportionately impacts the most vulnerable Americans, including minorities and veterans. At times when they rely on government and insurers to help them secure the medical care they need, patients are often dismayed to find that discriminatory restrictions on the new drugs put them out of their reach. Despite the benefits of treating Hepatitis C in its early stages, many states limit drugs to patients in late stages of liver disease in an effort to save costs over the short term. All in all, a total of 40 states have restrictions in place that deny care to patients with early stages of liver disease, who cannot pass sobriety tests, or who have insurance providers unwilling to cover the treatment. In Illinois, for example, patients are not eligible to receive the new Hepatitis C drugs until they have full blown cirrhosis and a documented one year period of sobriety.
Economists, health care professionals, and health advocates alike are working to expand access to these lifesaving drugs. Researchers are already making compelling economic and epidemiological cases in favor of the new treatment. Advocacy and the threat of lawsuits have also played a role in six states’ (CA, CT, DC, MA, NY, PA) decisions to reduce restrictions on the drugs.
Additional Blog Posts
Student Blog Disclaimer
The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Wharton Public Policy Initiative’s strategies, recommendations, or opinions.