Treatment of infection with hepatitis C virus (HCV) has changed substantially in the last 3 years, with new therapies now reaching cure rates (defined by sustained virologic response) higher than 95%. As little as 3 years ago, treatment involved an arduous course of pegylated interferon and ribavirin, which caused serious adverse effects in more than 80% of patients; less than 50% of patients could finish the treatment course. Because HCV infection can be indolent, with slowly developing liver injury in the form of scarring and fibrosis, many patients were so-called warehoused by their physicians, followed up closely while waiting for more promising treatments.¹

Perhaps surprisingly, most media coverage of this important development in HCV treatment has not focused on the cure rates but, rather, on cost. The price of sofosbuvir is essentially $1000 per pill, or $84 000 for a standard 12-week course. The fact that pricing in the United Kingdom for a similar regimen is $54 000, and perhaps as low as $900 in Egypt and other developing countries,³indicates that the pricing in the United States is a purely financial decision by Gilead and has outraged many. Indeed, some pharmacy benefit managers are calling on their clients to boycott these products until alternatives are available late in 2014.⁴

Average wholesale price is only part of the equation. Value also has to consider the efficacy of treatment and requires more sophisticated cost-effectiveness analyses, such as the incremental cost-effectiveness ratio, representing the added cost of an additional quality-adjusted life-year. The evidence documenting the effectiveness and tolerability of the newer sofosbuvir regimens, and the expected reductions in downstream costs associated with averted progression of disease, suggest that these newer expensive medications may represent a relatively good “deal” by typical cost-effectiveness thresholds. Indeed, the cost per additional quality-adjusted life-year may be quite comparable with other therapies.

Perhaps the controversy about sofosbuvir is really about the increasing total cost of specialty medications, considering both cost and prevalence of treatment targets. While a daily oral medication that costs $1000 per pill gains attention, the more important issue is the number of people eligible for treatment. With broader screening, the pool of eligible patients may be as high as 3 million in the United States alone.⁷ The simple math is that treatment of patients with HCV could add $200 to $300 per year to every insured American’s health insurance premium for each of the next 5 years. Thus sofosbuvir is not really a per-unit cost outlier but is a “total cost” outlier because of its high cost and very large population eligible for treatment—a beacon for costs of specialty medications generally.

Given this context, how should costs be managed? In some state Medicaid programs, the new medications have not been added to the formulary, despite the new practice guidelines. Physicians for whom the drug is denied by the state are going to Gilead, and, by report, the company is quietly subsidizing the costs—there is an official assistance program offered by Gilead.⁹ In states where managed care plans provide the Medicaid benefit, many are not adding sofosbuvir to their formulary until they convince the state to renegotiate or consider “carving out the drug”—ie, having the state pay directly for the therapy outside the capitated payment agreement.

Some private insurers have added sofosbuvir to the formulary and are absorbing the costs but also are taking steps to ensure appropriate utilization by developing prior authorization programs based on practice guidelines. Some insurers are asking physicians to treat only patients who absolutely need therapy now. Delaying treatment for some patients promises lower future costs, as competition generated by new drugs will likely cause prices to decrease as pharmacy benefit managers negotiate for best prices on behalf of health insurers and employers. This approach has been countenanced recently by expert panels.¹⁰

The ultimate approach to cost will be lower prices, which will occur as more products create competition. However, it will likely entail narrower formularies, in which the physician choice of a particular medication is limited by the deals negotiated by insurers and pharmacy benefit managers. Even then, the costs could still be very high—restrictive formularies have led to discounts of 30% to 40% for branded medications, not the greater than 95% discounts that occur when drug patents expire and generic competitors enter.

In summary, the health care system is adjusting quickly, but perhaps not quickly enough, to compensate for the high prices of HCV medications and, more importantly, the high cost of treating all HCV-infected individuals. However, this is not an isolated phenomenon; other expensive specialty medications are in development, many with large potential pools of targeted patients. Effective approaches to control costs for high-priced medications need to be developed and evaluated to ensure broad, equitable, and appropriate use of these new interventions in an already stressed health care system.

Corresponding Author: Troyen Brennan, MD, MPH, CVS Caremark, One CVS Dr, Woonsocket, RI 08095 (troyen.brennan@cvscaremark.com).

Published Online: July 20, 2014. doi:10.1001/jama.2014.8897.

Conflict of Interest Disclosures: Drs Brennan and Shrank are employees of CVS Caremark, a retail pharmacy and pharmacy benefits management company that purchases and sells hepatitis C treatments.