Hep C Drugmakers' Best Outcome

Treating hepatitis C is a losing proposition. Unlike treatments for chronic diseases -- high blood pressure or diabetes, for instance -- if a hepatitis C drug does its job, the patient is cured. It's a one-and-done treatment. Since the hepatitis C epidemic peaked many years ago, hepatitis C drugmakers need to find a new source of patients.

A report published in Clinical Infectious Diseases might have the solution: people who are already infected, but don't know it yet.

Current guidelines recommend testing only people who have identified risk factors such as drug use, blood transfusions before blood-bank testing began in 1992, or unexplained liver-function abnormalities, for example -- but that misses a substantial number of infected individuals. Estimates vary, but somewhere between 50% and 75% of people infected with hepatitis C don't know it.

Most probably have the risk factors, but they're unwilling to admit to the drug use, especially if it was years ago, or have forgotten about the blood infusion. Or the doctors aren't asking the right questions to identify the risk factors -- it's a touchy subject, you know.

The solution: Test everyone. You'll get a lot of negative results -- less than 2% of the population is infected -- but you'll catch those who might not have been diagnosed before they progress to serious liver problems.

The researchers plugged everything from costs to cure rates to likelihood of progression of liver disease and a lot of additional parameters into one giant formula and concluded that it would be cost-effective to screen everyone between the age of 20 and 69. Hepatitis C leads to liver cancer and other complications, and eliminating the cost of a liver transplant -- a quarter-of-a-million-dollar procedure -- can make up for a lot of $20 tests.

Sounds good, in theory
One journal article isn't going to change public policy; that will require a recommendation from the Centers for Disease Control and Prevention, which is a slow and methodical process.

If the CDC does institute universal testing for adults, hepatitis C test makers would certainly benefit. Just keep in mind that there's substantial competition out there: Abbott Labs (NYSE: ABT  ) , Roche, Siemens, and OraSure Technologies (Nasdaq: OSUR  ) all sell hepatitis C tests. They don't disclose margins on individual tests, but considering the number of players involved, I'd have to guess they aren't great.

Drugmakers developing hepatitis C treatments will be the real beneficiaries if more people are diagnosed. With the cost of treatment in the $80,000 range, each new patient is quite valuable.

That is, if they're treated
As the authors of the paper point out, screening is cost-effective -- and makes drugmakers money -- only if the patients who test positive are actually treated. Hepatitis C is a chronic infection that takes years to do any real damage in patients. Unlike cancer, where there's an immediate need for treatment, hepatitis C patients can take their time.

That could mean patients are lost to follow-up. It could also mean patients wait until drugs go off patent and there are cheap generics available before taking the drugs.

Identifying more patients is good, but they're not going to be moneymakers without the help of doctors.

Something companies can control
The cure rate of hepatitis C drugs is one of the factors that determine whether testing is worth the effort. If there were no way to treat patients, identifying infected patients would be only marginally useful.

As it is, Vertex Pharmaceuticals' (Nasdaq: VRTX  ) Incivek has increased the standard of care substantially. Roche's Pegasys and Merck's (NYSE: MRK  ) Pegintron cure about half of the patients, while adding Incivek increases that to around 70%.

As Gilead Sciences (Nasdaq: GILD  ) , Abbott, and others develop better drugs, and we get closer to 100% cure rates, the benefit of testing will increase. It would be nice to have the patients waiting when the second-round of oral medications are approved, but drugmakers might have to get the drugs approved first and then show that identifying additional patients is beneficial.

While the hepatitis C market shrinks, Fool analysts have found a growing revolutionary tech market. Find out what it is and how to profit from it in our free report, "The Next Trillion-Dollar Revolution." Get your free copy by clicking here.

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Abbott Laboratories. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals, Gilead Sciences, and Abbott Laboratories. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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