New drugs to treat hepatitis C, cheered by investors in pharmaceutical companies and jeered by those picking up the tab, will cost the U.S. health system $136 billion over the next five years, according researchers from the University of Texas M.D. Anderson Cancer Center.
The huge expense projection from these oral hepatitis C medications that cost $1,000 or more per pill means these drugs will within five years account for 1 in every 10 dollars spent on prescriptions in the U.S., according to the 12-page study. The report's projections, published in the March 17 issue of the Annals of Internal Medicine, cover last year when Sovaldi, also known as sofosbuvir, became available and run until January 2019.
This is good news for the makers of hepatitis C pills such as Gilead Sciences (NASDAQ:GILD), which markets blockbusters Sovaldi and Harvoni, and AbbVie (NYSE:ABBV), the maker of Viekira Pak. Merck (NYSE:MRK) also has skin in the game, with hepatitis C treatments in development. The high demand for these pills may also be good news for pharmacy benefit managers like Express Scripts (NASDAQ:ESRX) and CVS Health (NYSE:CVS), which are aggressively negotiating exclusivity deals to get price discounts.
However, "the large number of HCV-infected persons needing treatment could place a huge burden on health expenditures, reaching an average of $27 billion per year, which is equivalent to 10 percent of U.S. prescription drug spending in 2012," wrote Jagpreet Chhatwal, the study's lead author and assistant professor of health services research at M.D. Anderson.
"A large portion of the treatment cost will fall on the government," researchers wrote. "The Patient Protection and Affordable Care Act is expected to increase the number of patients with HCV who are covered under Medicaid."
More than two million Americans are infected with HCV, a virus found in the liver that is transmitted through blood-to-blood contact.
While acknowledging that "millions of people" need treatment, authors warn that the money might just not be there. Insurance companies and government health programs "don't have the budget to cover this tremendous expense," Chhatwal said in a statement provided by M.D. Anderson that accompanied the study.
The study, primarily funded by the National Institutes of Health's National Center for Advancing Translational Science, is the latest analysis warning health insurers, government health programs, and the public at large about the soaring costs of hepatitis C treatments. And it's certainly not alone in its findings -- just last week, Express Scripts said hepatitis C pills were the biggest driver in the 13 percent overall increase in prescription drug spending in 2014. This substantial jump was the biggest percentage increase in drug costs in more than a decade.
The cost of the new treatments is $65 billion more than it had been with the older hepatitis C drugs, according to the MD Anderson researchers.
And while these drugs are unarguably vast improvements in the efficacy of hepatitis C care, "cost effective does not imply cost savings," Chhatwal said. "Our analysis clearly does not support an assertion that the new treatments will save healthcare money."
The study is a signal that the controversy over the cost of hepatitis C pills will be around for the next several years, impacting the bottom lines of drug makers, pharmacy benefit plans, and health insurance companies. This could possibly point to future volatility in the stocks of these companies as coverage issues arise.
Bruce Japsen has no position in any stocks mentioned. The Motley Fool recommends CVS Health, Express Scripts, and Gilead Sciences. The Motley Fool owns shares of Express Scripts and Gilead Sciences. 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.