It’s not just Louisiana working to tackle hepatitis C by purchasing drugs in a novel way. Officials in Washington are taking that state’s Netflix-style subscription model and upping the ante with a winner-take-all contract.
And Washington plans to put its purchasing power to work, too, aiming to trade its statewide business for bargain pricing. In the “winner take all” deal, Washington would pay a flat fee to open up hep C treatment across four state agencies, including all of its Medicaid beneficiaries and prisoners, and employees covered by the state health plan.
In a request for proposals, Washington asked that bidders include details on outreach and screening as well as drug pricing. The winning deal could be worth about $600 million, given a price of $20,000 per drug course, Bernstein analyst Ronny Gal wrote in a Monday note. About 30,000 patients would have access to treatment through the initiative.
Proposals are due in March and the winning bidder will be announced in April, Gal wrote. The contract will start on July 1, and Jan. 1, 2020, depending on state program involved, he added.
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Louisiana, meanwhile, is moving ahead with its “subscription-based” payment model, The Advocate reported. The state plans to tap one or more hep C drugmakers to provide its Medicaid recipients and prisoners unlimited access to drugs, in return for a flat annual fee. As Louisiana pointed out, most Medicaid beneficiaries and prisoners aren’t getting treated for the virus, so the flat-fee model could benefit the state and drugmakers alike.
Louisiana hopes to have a deal in place by July, the Advocate said.
Washington’s “winner take all” approach could force drugmakers to get even more competitive on pricing to secure a deal. Gilead Sciences management previously told the analyst that subscription deals can be “revenue neutral long-term,” he wrote, but states could also use the approach to drive pricing down. That’s exactly what Washington is doing with its initiative, the analyst wrote.
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Still, for hep C drugmakers, the “subscription” deals could represent an opportunity for additional revenue in a field where competition has seriously hurt pricing power over time. Gilead launched a new wave of hep C treatments in 2014 and 2015, but since then, competition from AbbVie and others has driven pricing down. Now, Gilead plans to launch authorized generics to its own drugs Harvoni and Epclusa in an effort to boost patient access and secure new sales.
