Guest Blog, Modern Healthcare Editor Merrill Goozner: When it comes to pricing Sovaldi, how NICE of them

Merrill Goozner is the editor of Modern Healthcare. During 30 years as a journalist and educator, he has been a foreign, national and chief economics correspondent for the Chicago Tribune and professor of journalism at New York University. He was a keynote speaker at this year’s HSCA National Pharmacy Forum. This article originally appeared in Modern Healthcare.

Are the British agency's guidelines setting U.S. drug prices?
The first cost-effectiveness analyses of Sovaldi and other new drugs for treating chronic hepatitis C virus infections are in, and it appears the guidelines set by the United Kingdom's National Institute for Health and Clinical Excellence (NICE) have become the new ceiling for setting U.S. drug prices.

For those who have never heard of NICE, it is the advisory body that makes recommendations on the affordability of new therapies to the budget-constrained British National Health Service. When the price of a new drug goes over $50,000 per “quality adjusted life year” gained or QALY, NICE usually recommends the NHS look elsewhere for treatment options.

During debates over the Affordable Care Act, former Alaska Gov. Sarah Palin accused the Obama administration of backing British-style cost-effectiveness analysis to limit access to drugs. Coining the phrase “death panels,” which PolitiFact dubbed “the lie of the year,” the former vice presidential candidate stoked widespread fears the government would now apply a cost test to life-saving therapies.

Cost-effectiveness analysis made headlines again last year when Sovaldi hit the market at the budget-busting price of $84,000 per course of treatment, which amounted to about $1,000 a pill. In an editorial challenging the usual justifications for high drug prices (see “Why Sovaldi shouldn't cost $84,000”) and another debunking claims in the New York Times that it would save the healthcare system money over the long run (see “Sovaldi's cost-effectiveness is being overplayed”), I speculated that “the back of my envelope says its QALY cost will come in right around or slightly above the earlier treatments—and somewhat below the $50,000 threshold.”

I based that analysis on the fact that a cost-effectiveness analysis for another new drug that wasn't quite as effective as Sovaldi tipped the pricing scales at about $35,000 per QALY gained.

A study released yesterday that will appear in the journal Clinical Infectious Diseases confirms that speculation. It found that using sofosbuvir (Sovaldi) and ribavirin for HCV will cost $47,304 per QALY gained. In darts, that is pretty close to a bullseye.

The study's authors, affiliated with NORC at the University of Chicago and the U.S. Centers for Disease Control and Prevention, received funding for the study from the CDC foundation. But they also report they received other funding from Gilead Sciences, Inc., the maker of Sovaldi.

Sovaldi is now in a price war with newer treatments on the market, especially Viekira Pak from AbbVie. In the same NORC study, that combination pill's cost-effectiveness tipped the scales at $24,921. Pharmacy benefit managers Express Scripts and CVS Health have cut exclusive deals with the competing firms to help drive down the price, and it's likely that the market price for Sovaldi these days is as much as 40% below the original $84,000.

The final word isn't in yet on Sovaldi's cost-effectiveness, however. Another study that appeared today in the Annals of Internal Medicine pegged the drug's cost-effectiveness at $55,400 per QALY gained - higher than the NICE threshold. But like the earlier study, that is probably based on the original price – not the discounted price.

Perhaps the last word should go to NORC researcher David Rein, who wrote on the organization's Sparks blog that “limiting treatment access to patients with moderate and advanced disease has been offered as one possible solution to financing concerns. This strategy appears reasonable when one assumes no health impact from delaying treatment."

Unfortunately, physicians don't have research to support a medical decision to delay treatment and “studies examining this issue will not be available for several years,” Rein wrote.