With specialty drug prices increasing each day, states are challenged to manage costs while patients face cost barriers to drug access, which negatively impacts adherence and cure rates. Hepatitis C, for example, is a costly disease impacting tens of thousands of people in the United States, which has historically struggled with a track record of low treatment rates. Louisiana, for example, has 39,000 Medicaid beneficiaries and prison inmates with HCV, but the state was only able to treat around 1,000 HCV patients last year. With an aim to lower drug spending and increase access to HCV drugs, Louisiana became the first state to adopt an innovative drug payment model known as the “Netflix model,” or subscription-based payment model.
What is the Netflix payment model?
Under this model, the state—instead of paying for each individual prescription—pays a flat subscription fee to a pharma company in exchange for unlimited access to their drugs over a period of several years. With the Netflix model in place, Louisiana intends to treat 10,000 Medicaid beneficiaries and prison inmates with HCV by 2020. The state has capped spending for the model at $35 million, which is the amount Louisiana spent treating HCV patients in 2018 (Stateline, Feb. 25, 2019). The Louisiana Department of Health received proposals from AbbVie, Asegua Therapeutics (a Gilead subsidiary), and Merck for its new payment model, and ultimately selected Asegua as its pharmaceutical partner in March 2019. On July 1, 2019, the five-year contract will begin providing Louisiana with unlimited access to the generic form of Epclusa (sofobsuvir, velpatasvir).
Are any other states following this new drug purchasing model?
Washington adopted the Netflix model with the goal to completely eradicate hepatitis C in the state by 2030. The state is taking a comprehensive approach through outreach, screening, and connecting hepatitis C-infected patients with appropriate care. However, Washington’s purchasing model does not completely reflect the subscription model nametag, as the state requires manufacturers to bid on a price the state pays up to a certain level of total spending (BioPharma Drive, June 11, 2019). Once the state crosses that point, it may procure drugs for an extremely low price.
Under this model, Washington will also provide HCV treatment options for Medicaid beneficiaries, prison inmates, and employees covered by the state health plan. The contracts will start on July 1, 2019, and Jan. 1, 2020, depending on the state program involved. The state expects around 30,000 patients to have access to HCV treatment as a result. The state awarded a five-year contract to AbbVie for the HCV drug Mavyret, which has a very low list price of $13,200—less than other HV treatment options—per four-week course.
Will Pharma endorse this new payment model and expand it to other therapy areas?
In April 2019, Sanofi announced its intention to deliver insulin products for $99 per month through the manufacturer’s Insulin Valyou Savings program. At that fixed price, Sanofi will provide up to 10 boxes of insulin pens and 10mL vials each month, regardless of the patient’s income. This program was designed for patients exposed to higher out-of-pocket costs, such as uninsured patients or patients who do not qualify for access programs. Many pharma companies—such as Spark Therapeutics, Novartis, BioMarin Pharmaceutical, and Bluebird Bio—are planning to adopt installment payments for their expensive gene therapies, depending on the efficiency of the therapy. Bluebird Bio, a biotech company, is planning to sell LentiGlobin, it first gene-replacement therapy for a rare inherited blood disease, on a five-year installment plan with each annual payment dependent on the treatment’s continued efficacy.
The Netflix model will benefit states by helping establish a fixed budget for expensive treatments and more control over Medicaid budgets. This will, in turn, extend patient access to these expensive drugs and expose more people to treatment. This improvement in access should increase therapy adherence and cure rates, which benefits the state by reducing the occurrence of or a completely eradicating a disease. Increased drug demand stimulated by the model can benefit pharma companies by increasing sales for innovative and expensive therapies, while the model can guarantee pharma companies a fixed revenue over time.
If the Netflix model is successful, more states could look forward to implementing similar programs. Since the model requires a huge one-time payment for drug access, other states that intend to follow Louisiana and Washington’s lead must accurately estimate the number of patients suffering from a disease, and the patients’ estimated treatment costs. Thus, model pricing could be tied to a disease’s prevalence within the state population.