Drug prices in the United States remain the highest in the world.1 New payment approaches are needed, a point illustrated by the new treatments for hepatitis C virus (HCV) infection that are highly effective but also very expensive, at least from the view of many payers, physicians, and patients. Five years after the introduction of these drugs, and due in many cases to budgetary constraints of state Medicaid programs and prisons, only 15% of the estimated population of more than 3 million individuals with HCV infection in the United States have been treated.
The Department of Health of the State of Louisiana, a state with a high prevalence of HCV infection and low treatment rates, recently published a Request for Information regarding an alternative payment approach, seeking to engage a drug corporation in a subscription-based arrangement to pay for HCV treatment for the state’s residents.3 Gilead Pharmaceuticals indicated the corporation’s willingness to explore the idea.4 The National Governors Association has released a white paper endorsing subscription-based models for treating HCV infection as well.5
In a few media outlets, the idea has been referred to as “the Netflix model,” a term used to describe subscription-based models in general.6 Netflix is a video-streaming service that provides unlimited content for a flat fee; the analogy is a pharmaceutical corporation providing an unlimited supply of its HCV treatments to treat all infected residents of a state in exchange for a flat recurring fee.
The current shortfall in HCV treatment is in part due to the reliance on the per-prescription revenue model. Often what generates the most revenues and profits for drug corporations is charging a higher price per prescription, even if that approach leads to a lower number of filled prescriptions. With HCV treatments, state Medicaid programs and prison systems have responded by limiting access to these drugs, even though it would be better if persons with infections such as HCV were treated rapidly and broadly and even though current pricing puts these therapies in the range of typical cost-effectiveness thresholds. Put simply, under the per-prescription model, the states’ only alternatives are unappealing: raising taxes or reallocating funds from other parts of their discretionary budget, including other priorities in health care.9
The proposed subscription model developed for HCV elimination within a state includes several key components. First, the subscriber should not be the state, but a purchasing coalition constituting all payers for health care. The coalition would have 3 purposes: to provide scale for the buyer, streamline a statewide effort at HCV elimination across payers, and ensure that the payers collectively recapture the long-term cost savings from avoided future medical costs. Currently, no payer has sufficient certainty those future savings will accrue to them. The purchasing coalition would ideally include state governments, private insurers, and agencies that cover federal employees, veterans, and military members who reside in the state.
Second, in exchange for the subscription fees over a fixed number of years, the drug corporation would not only provide access to its HCV therapies, it would also commit to patient and provider outreach efforts to enhance treatment rates in tandem with complementary commitments by the purchasing coalition. To ensure implementation, the contract between the coalition and the drug corporation would include bonus or milestone payments due on achieving predefined public health targets, such as treating 80% of the prevalent population.
Third, the subscription price would be determined through a bid process open to all manufacturers.