Medicare paid $3 billion last year for Gilead Sciences’ hepatitis C drug Sovaldi and another $670 million for its new drug, Harvoni, which started on the market in October. Olysio, Johnson & Johnson’s drug which is frequently used at the same time as Sovaldi, resulted in an additional $821 million in Medicare spending.
We spend a lot of time in the office dealing with cases of the fraudulent overbilling of Medicare and Medicaid. It’s central to the False Claims Act. But the amount of money that is being authorized by the government on these drugs is astronomical.
In 2013, Medicare spent $286 million on hep-C drugs. The number is now 15-fold higher. If you add in the amount of money that was spent on older drugs, the total spending reaches $4.7 billion.
The amount of money spent on these drugs now exceeds the amount that is recovered from Medicare fraud under the False Claims Act every year. The Department of Justice publishes an annual report of the money spent due to health care fraud that it recovers. Last fiscal year, it recovered $2.3 billion.
The astronomical cost of these drugs has raised questions among politicians in the United States. Sovaldi is priced at roughly a $1,000 a pill, making the cost of a full course of treatment roughly $84,000.
Competitors are starting to spring up in countries where Gilead does not have patent protection. The cost of a full course of treatment of these drugs is less than the cost of one pill in the United States. Generic manufacturer Incepta launched its version of the drug in Bangladesh and priced it at $900 for a full course of treatment. The price of one pill is 1/100th of the cost of the Gilead drug it copies in the US.
Of course, some doctors have justified the cost by noting that the drugs work and that they prevent other serious and expensive complications in patients. They have a cure rate of 90 percent or higher and fewer harmful side effects are known.
An Annals of Internal Medicine Study analyzed the potential economic benefits of the higher cure rates of these drugs. It concludes that the new drugs would cost an additional $65 billion in the next 5 years with estimated cost offsets of only $16 billion.