Can You Guess Which State Won't Pay for Hepatitis C Drugs?

By Markets Fool.com

Hepatitis C is a serious viral infection that can cause cirrhosis and cancer of the liver and affects approximately 3.2 million people in the U.S. and 150 million people globally. Fortunately, we now have several game-changing drugs on the market, known as direct-acting antivirals, that can selectively target HCV, producing functional cure rates as high as 99% for some forms of the disease.

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Source: Gilead Sciences.

The unfortunate part, though, is that these drugs are mind-bogglingly expensive. Gilead Sciences' Sovaldi, for instance, started off at $1,000 per pill or $84,000 for a normal three-month course of treatment.

While the introduction of rival meds like AbbVie's Viekira Pak have led to steep discounts averaging about 40%, payers are still restricting access to only the sickest patients to manage the enormous cost and burden on the healthcare system in general.

Public payers such as Medicaid have struggled mightily to cover the massive demand for these drugs. State Medicaid programs, for example, saw their spending on hep C drugs skyrocket by nearly 300% from a year ago, forcing state healthcare administrators to make tough coverage decisions that often conflict with the medical advice of doctors.

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In fact, Medicaid programs in nearly half of all states chose to limit coverage to only the very sickest patients last year. But one state rebuffed Gilead's game-changing hep C drugs altogether.

Source: Wikimedia.

This state didn't cover new hep C drugs at all in 2014
According to a report from The Wall Street Journal, Texas spent nothing on Sovaldi prescriptions for Medicaid patients in 2014, making it the only state to do so. That's a harsh medical and economic reality, especially since Texas has the third-largest Medicaid population in the country, behind California and New York.

The story took an odd turn when a spokeswomanwith the state's Health and Human Services Commission, Linda Gockel, said the lack of long-term studies on these drugs, versus their enormous costs, somehow justifies this hard line stance. Put simply, Texas is suggesting that Sovaldi, and perhaps its counterpart Harvoni, will prove to be ineffective in the long run, making them a waste of taxpayer's dollars.

To be fair, relapse rates for patients receiving 12 weeks of treatment with Sovaldi are estimated to be somewhere in the neighborhood of 10%-15% based on some ongoing studies. If you factor in the few patients who fail to respond to treatment, you are then looking at long-term functional cure rates that should easily top 70% in the worse-case scenario. That's pretty much unheard of for any infectious disease drug or therapy, especially among patients with advanced disease.

Putting these numbers into perspective, most cancer drugs are considered to be highly effective if, say, 30% of patients turn out to be responders of some kind. And we're not talking about functional cures rates, just patients for which the drug has slowed disease progression to a degree.

AbbVie may benefit from Texas' stand against Gilead
The good news is that Texas has decided to start offering AbbVie's triple regimen therapy to select patients starting this month -- primarily to those with end stage liver disease. And Texas' recently revised Medicaid Formulary may help AbbVie's flagging therapy pick up steam against Gilead's hep C franchise.

Source: Superior Healthplan.

Source: AbbVie.

As a refresher, Viekira Pak was initially believed to be a serious rival to Gilead's drugs, perhaps even grabbing a 20% share of the market. But Gilead's decision to discount these drugs to several pharmacy benefits managers has hurt Viekira Pak's launch in a big way, forcing AbbVie to temper investors' expectations in their fourth-quarter earnings call.

Although Viekira Pak's sales have been gaining momentum since the start of the first quarter, according to data provided by Symphony Health Solutions, it's still nowhere near the Street's prior estimates based on first-quarter sales.

Specifically, Viekira Pak was once believed to have the potential to rake in over $2 billion in sales this year. Per its first-quarter number of $231 million, though, the drug is on track to miss this lofty estimate by about 40%, assuming relatively steady growth moving ahead.

Then again, this large Medicaid population opening up almost exclusively for Viekira Pak has the potential to push weekly prescription growth rates into the double-digit range on a consistent basis, meaning that sales could accelerate into the latter half of the year. In short, Viekira Pak could still surprise the naysayers and become an important revenue source for AbbVie before year's end.

The article Can You Guess Which State Won't Pay for Hepatitis C Drugs? originally appeared on Fool.com.

George Budwell owns shares of AbbVie and Gilead Sciences. The Motley Fool recommends Gilead Sciences. The Motley Fool owns shares of Gilead Sciences. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.