'Revolutionary' specialty drugs carry huge promise and a hefty price tag

At its worst, hepatitis C can decimate the liver and force patients into a life-or-death waiting game for a transplant.

It's a frightening prospect, and one of several fates that patients like Steve Busa of Minneapolis can avoid with revolutionary new ­medications.

"It means a chance to really be cured of hepatitis C," said Busa, who has finished treatment and will learn this summer if he's free of the disease. "It's not just treating the ­symptoms."

But at a list price of roughly $1,000 per pill, and $90,000 for the full treatment, the new medication also is a sign of a growing dilemma over the cost of promising new drugs.

The problem has big implications for both private and government insurers. Minnesota's Medicaid program, for example, paid pharmacies about $1 million for hepatitis C drugs in 2013; last year, that jumped to more than $9 million.

And insurers say hepatitis C is just the beginning. The pipeline is filled with promising drugs that offer patients hope — but not necessarily a cure.

"We're going into a pretty gray area here, where we have some fascinating new drug technologies emerging … but for which there's subtlety around when to use them and whether they're effective," said Dr. Mark Werner, chief clinical officer at Medica, a Minnetonka-based health insurer.

It's a big business undergoing a high-stakes transformation, as evidenced by Minnetonka-based UnitedHealth Group's $12.8 billion acquisition of an Illinois pharmaceutical benefit manager (PBM) just last month. The deal will make United's OptumRx division the third-largest drug negotiator in the country, ­analysts say.

"This will be important as the age of specialty pharma emerges," said Larry Renfro, Optum chief executive, during a conference call with investors on Thursday.

The PBM field in the Twin Cities also includes Eagan-based Prime Therapeutics, which analysts say is now the industry's fifth-largest player by prescription volume. Express Scripts Inc. in St. Louis, the nation's largest pharmaceutical benefits manager, employs more than 2,000 people at its operations in Bloomington.

Noting the influence of specialty pharmaceuticals, Prime Therapeutics sees medication costs growing from less than 20 percent of all health care spending in 2009 to more than one-third of all health care spending in 2018.

"If the 400 or so specialty drugs that we've been hearing about in the pipeline come into being, it's going to really bankrupt the system," University of Minnesota pharmacy Prof. Stephen Schondelmeyer said during a forum in Edina last week for large employers concerned about health care trends.

Medications currently account for about 10 percent of the nation's total health care spending, said Holly Campbell, a spokeswoman for PhRMA, the industry's trade group. It's been roughly that share for decades, Campbell said, and government projections show it will remain at that level for years to come, even with the pipeline of drugs in production.

Insurers "cherry pick" medications, Campbell said, when developing cost projections to show a bigger impact.

Plus, when insurers talk about future drug costs, they do so in terms of list prices that don't reflect discounts achieved through negotiations, Campbell argued.

Hepatitis C medications are a case in point, she said.

One of the first breakthrough drug treatments in the category came from California-based Gilead Sciences, but was followed in late 2014 by another effective treatment from a company called AbbVie, which is based in Illinois. Campbell noted that Express Scripts in December touted savings it achieved through a contract that makes the second medication the exclusive option for many hepatitis C patients.

Not all hepatitis C patients require or receive liver transplants, but the surgeries are one of the serious and costly consequences that drug companies argue could be avoided with use of the medicines. A liver transplant and care that follows can cost $500,000, says Robert Navarro, a clinical professor at the University of Florida College of Pharmacy.

Any such long-term savings, however, can be tough to see for the insurers and government programs that are paying today's bills. In 2013, the federal Medicare program spent $286 million on hepatitis C drugs — a figure that jumped last year to $4.5 billion, according to the Centers for Medicare and Medicaid Services.

Prime Therapeutics, which works with Blue Cross and Blue Shield of Minnesota and 19 Blues plans nationally, negotiated contracts with ­Gilead Sciences and AbbVie that give patients equal access to the dueling treatments. Prime tries to control the cost, ­however, by recommending that insurers limit access to those patients that meet certain clinical guidelines, including a numerical score that grades the progression of their liver disease.

The recommendations are developed with outside experts, said David Lassen, chief clinical officer at Prime Therapeutics. Even so, Lassen said there's been disagreement among insurers across the country about exactly where to draw such lines.

The dilemma posed by the new hepatitis C medications is somewhat unique, Lassen said, because the drugs offer a cure for many patients. The pipeline of specialty medications slated for regulatory approvals in the coming years, he said, likely will generate even tougher talks about how to finance the nation's medicine cabinet.

Drug companies argue that such comments can minimize the benefit for patients. Earlier this year, New York-based Pfizer obtained approval for a new breast cancer medication that it will sell at a list price of $9,850 per month.

Median survival for women with advanced or metastatic breast cancer after diagnosis is three years, said Sally Beatty, a spokeswoman for Pfizer. The previous approach extended survival without progression of cancer by about 10 months, Beatty said, but the new drug offers twice the benefit.

Boston-based Vertex Pharmaceuticals received approval in 2012 for a cystic fibrosis medication that comes with a list cost of about $311,000 per year. That came after 14 years of work on the medication — research and development costs that must be covered with a high list price, because there are so few patients with cystic fibrosis, said company spokesman Zach Barber.

The company hasn't released pricing information for a cystic fibrosis drug it hopes to launch in the coming year, but insurers are nervous. And Werner, the chief clinical officer at Medica, acknowledges: "If my son had cystic fibrosis, you can be damn sure I'd be beating a drum for him to get it."

As it has for years, the debate over drug costs in the United States features a potent mix of personal testimonials and macroeconomic critiques.

"You could almost forget you're carrying almost $30,000 worth of medicine," Busa said, noting the unremarkable appearance of his pill bottle.

His physician, Dr. John Lake of the University of Minnesota, says of the new medicines: "When I use the term 'revolutionary,' I'm not using too strong a term."

But then, there's the big picture. The new medicines offer important advances for patients, but the U.S. health care system winds up supplying a disproportionate share of drug company profits, argues Dr. Charles Fazio, medical director at Bloomington-based HealthPartners.

Drug companies justify high prices based on how medications can avoid other treatment costs, but Fazio believes the future prices used in those comparisons are often overstated.

"Does a breakthrough therapy warrant equal reimbursement to the traditional therapy," he asked, "or shouldn't breakthroughs sometimes lower the cost in health care — the way they do other markets?"

Twitter: @chrissnowbeck