Monday, February 27, 2017

Everyone loves insurance companies

Also in this week's C&EN, quite the story of bureaucratic wrangling to get a drug by Rick Mullin (emphasis mine): 
Anita Kissinger is an aggressive advocate for her health. When the retired teacher and administrator, who worked for a self-insured school district in Missouri, was diagnosed with hepatitis C in 2014, she had to fight for access to a cure.... 
...Her doctor prescribed Harvoni, a new drug from Gilead that has the rarest of qualities—the capacity to cure most patients. Then came the bad news: The district’s health insurance plan for prescription drugs, which is managed by MedTrak, a pharmacy benefit management (PBM) firm, turned her down for the drug, which costs $94,500 for a course of treatment.
Kissinger filed an appeal and was refused again. She appealed again and the insurer responded that it would reconsider coverage if a fibroscan indicated there was sufficient damage to her liver. After the scan, the plan turned her down again. 
Kissinger retained a lawyer who began communicating with the insurer on her behalf. Eventually she received approval for a course of treatment with Harvoni. She then took her $5,000 copay to the drug’s manufacturer. Gilead paid all but $15. In the end, Kissinger received the benefit of the $94,500 breakthrough drug for $2,015, including legal fees.
I gotta say, if I were stuck in that situation, I would be incandescently angry at everyone involved. I don't think Gilead can escape some culpability for causing the situation (i.e. pricing Harvoni at a very high price)*, even if they were ultimately not responsible for a process that requires showing sufficient damage to her liver.

*UPDATE: Dr. Zoidberg makes a good point that I missed about Harvoni's value to the patient. I think that Dr Z. is right in that Harvoni deserves a high price in that it is a cure, and that they have done a bad job of communicating its value. What I was trying to communicate (poorly) is my belief that Gilead set the terms of the debate, and should have known that it would come out badly for them, even though they were the ones who were providing Harvoni.

"Go argue with your insurance company" is not a solution that's going to endear pharma companies to patients. 


  1. I'm a bit surprised at your last sentence CJ. While price gouging is certainly a hot-button issue, Harvoni should fall into a class of its own. Something that Gilead failed miserably to convey is that this is a CURE, not a palliative. You don't take it your whole life, you take it for the one course, then never again. Also, you're not in the medical system getting treated for your liver, so the overall burden on the healthcare system comes down. This is genuine pharmaceutical innovation and should be rewarded as such. If actually curing a severe liver disease isn't worthy of a big price tag, then what is?

    1. Understood. And yes, that was very shortsighted of Gilead to expect people to handle it that way. I think they botched the PR for this in a number of ways. As a consequence, instead of celebrating something that is a very rare victory for pharma we're having to clarify why it's not the same as Turing or Mylan.

  2. I've really never understood why Americans so willingly accept insurance companies making treatment choices for them (REPLACE AND REPEAL!). I get that governments in other countries, the ones that pay half what Americans do per capita in healthcare costs while living longer ( edged out Cuba for the #31 spot, USA! USA! USA!) still have to make these healthcare rationing decisions but I'd rather have some politician who needs my vote making the choice than a for profit company that has a fiduciary responsibility to be greedy.

    Apologies for what may be one of the most convoluted sentences I've written in some time.

    Dr. Z's point on price is correct---goods ought to be priced at their value, not some silly sunk cost metric. If you like the perks of capitalism it seems to me hypocritical to decry how it gets paid for.

    1. My daughter was recently born in Japan. The total cost for her birth, including the standard five-night hospital stay, was about $4500. That’s not the out-of-pocket cost…it is the entire billed cost. The government picks up a flat $4000 per birth, so our out-of-pocket was $500. You can’t even say “hello” to your dentist if you bump into her at the golf course without getting billed that much in the US. As for paperwork, we have a one-page receipt, easy to understand. That’s it. At least on the Japan side, we don’t need it for anything. We were done the minute my wife walked out of the hospital.
      Everyone covered, super-low cost, minimal paperwork. And the upside of the US system is….what exactly? Japan even spends more on R&D as a share of the economy in the US, so you cannot cite that standard argument. Not that overpaying for drugs is an efficient way to spur research. Why not give money to NIH and get $0.95 in research for each dollar invested, rather than overpaying pharma and hoping that they re-invest maybe $0.25 of each extra dollar in R&D, before pocketing the rest?

    2. Clearly the US system is better cuz we're 'Murica!

      And the plus side of Americans dying younger is they don't have to put up with this absurd system for as long. Really a silver lining to everything.

    3. Hey Chad is that 95% return from NIH before or after the Universities pull out their 50% overhead cut? Please break down how much of that Japanese R&D investment in Pharmaceuticals vs other types of technology to support your opposition argument? As the topic of this post illustrates the main reason US is so darn expensive and paperwork heavy is the bureaucratic mess created by insurance companies and the government, all probably driven by lawyers where these groups do little to actually benefit anyone beyond themselves so please elaborate how Japan accomplishes this and what trade-offs are made as surely must be something controlling or funding their system.

    4. Clearly there is no problem: all is for the best, for this is the best of all possible worlds!

    5. Anonymous:

      I am in one of our Japanese offices right now as I type this. Guess what I am looking at? About thirty people working on medical R&D. But that's an anecdote. Looking around the net, I haven't found good R&D/GDP comparisons, but Japan's medical R&D/GDP ratio is close to that of the US (3-4 times less in dollar amounts, 3-4 times less GDP).

      How does Japan do what it does? Basically by mandating prices. They actually have multiple insurance systems (I'd describe it best as the US system plus Medicaid for All), but it is transparent to the user. You go to the doctor, show your insurance card, get treated, make a modest co-pay when you leave, and you are done. You get a receipt, but you don't really need it for anything. At the end of the tax year, you get a summary of all your expenses. If it exceeds something like $10,000, you get a tax deduction, but otherwise you don't need that either.

  3. Harvoni is the kind of drug that ought to demand bigger money - it does something demonstrably useful and (before its finding) singular. The complicating factor, though, is that much of its price (as well as those of its competitors) was based on the purchase of Pharmasset to get it. Had Pharmasset sold it, I believe that it would have been priced at about half as much, but because Gilead needed to make the purchase price back before competitors entered the market (in about a year), it had to be priced significantly higher (besides the desire to make money on the deal), and their price was a benchmark for other HepC drugs.

    So, while it does do something unique and useful, a significant part of the price has nothing to do with its utility, but the financial manipulations needed to hold the rights to it.