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This is how America rations health care

Hepatitis C is a debilitating illness that wreaks havoc on the liver, making it unable to filter blood and letting toxins spread throughout the body. It kills about 15,000 people annually.

In 1990, David Morton found out he had it. Recently, he got some good news: There had been an incredible medical breakthrough for people like him. His doctor prescribed a new drug called Harvoni, which has a 90 percent chance of curing this previously incurable disease.

Then last fall, Morton received an astonishing letter from his insurance company. In order to get the drug, his insurer explained, he'd have to wait for his disease to get worse. The hepatitis hadn't yet done enough damage to Morton's liver to merit Harvoni.

"Essentially they're saying I have to get closer to becoming a liver cancer victim before I can have treatment," says Morton, 62, who lives in the Seattle area.

The drug is part of a wave of expensive and effective hepatitis C treatments that came onto the market in 2015. But these drugs come with a catch. One course of Harvoni costs $94,500. Each pill has a price tag above $1,000.

Harvoni (and its predecessor, a similar drug called Sovaldi) is among the most expensive drugs to hit the American market in recent memory. It's not that these drugs contain some excessively expensive ingredient. Rather, drugmakers have found that hepatitis C patients are desperate enough for a cure to allow these types of prices.

Insurers did the math. They knew that there are 3.2 million people in the United States living with hepatitis C — and the costs of buying Harvoni for all of them would cause premiums to skyrocket. Some began to ration access. Morton's insurer, Group Health, decided to limit coverage to hepatitis C patients with more advanced liver disease.

Another Seattle-area insurer, Regence BlueShield, says that "given the high cost of oral medications … coverage is limited to patient population at the highest risk of severe complications."

Patients are starting to fight back. Morton is part of a class-action lawsuit that argues these insurers must make good on their contractual promise to pay for "medically necessary" services. The complaint is unique — and the eventual ruling could have national consequences as more expensive new drugs come onto the market.

"I think we're in new ground with this," says Kevin Costello, senior associate director of Harvard's Center for Health Law and Policy Innovation. "It's an emerging issue, as we're seeing this explosion of high drug prices."

The Morton case is a window into how America's especially high health care prices lead to rationing. The fact that we pay thousands of dollars more for Harvoni and countless other drugs means we can't afford to buy as many prescriptions. It means that our system, even if we don't like to admit it, has to pick and choose who gets access to lifesaving drugs — and in this case, Morton was not one of the lucky ones.

The big question: What counts as medically necessary?


Harvoni costs more than $1,000 per pill — or $94,500 for a full course of treatment. (Baltimore Sun)

Somewhere in the fine print of nearly any insurance contract is a promise to cover all "medically necessary" services for whoever decides to buy a policy.

The Morton suit argues that hepatitis C treatment is of course necessary for a hepatitis C patient. Left untreated, the virus has an 85 percent chance of causing a chronic liver infection. Somewhere between 1 and 5 percent of hepatitis C patients die from the disease's complications.

There is plentiful evidence that Harvoni can cure hepatitis C for early-stage patients. The American Association for the Study of Liver Disease recommends that all hepatitis C patients have access to medications like Harvoni, except for those whose disease is so far progressed they have little chance of survival.

But defining "medical necessity" isn't always easy. There's no one list of treatments that do or don't count. Insurers set their own definitions, and they're usually vague. Medicare, for example, defines medical necessity as "reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member." A gym membership, for instance, would likely "improve" the body's functioning — a trip to a nice spa might do the trick, for that matter — but insurers don't feel compelled to provide such benefits.

And there are more serious edge cases, like chemotherapy treatments that work in a small handful of patients. If there's a chance they might work, but the chance is small, should those get included?

Group Health, Morton's insurer, defended the policy as evidence-based.

"We reference widely adopted guidelines from national professional organizations to inform the clinical treatment options available to our members," spokesperson Jackson Holtz said in a statement. "And we are continuously re-evaluating recommendations from a number of research, policy, regulatory and advocacy bodies to help our members achieve better health outcomes."

The idea here is that Group Health isn't denying treatment and would certainly intervene before Morton's disease progressed toward liver failure or cancer. Fifteen percent of hepatitis C infections clear up without any treatment; it's possible his could be one of them.

"Insurers are saying, 'We'll treat you once your disease has become more severe,'" says Harvard's Costello. "This is medically equivalent to saying, 'We'll stand back and observe and be careful about not letting anything get out of control.'"

Morton's hepatitis C is still in early stages. On the 4-point scale used to measure the severity of the disease, with 4 being cirrhosis, he ranks between 0 and 1. Still, he gets pain around his liver and fatigue that he attributes to the disease.

"What I'm looking forward to, and what I've heard from others who have been cured, is really getting my energy back," he says. "I would like to feel fatigue-free. It's a disabling condition. I would like to live my life and be a contributing member of society."

Poor patients are fighting the exact same battle

Protesters host a sit-in at Gilead, the French pharmaceutical company that makes Harvoni, to protest the high prices (Getty Images)

Protesters host a sit-in at Gilead, the French pharmaceutical company that makes Harvoni, to protest the high prices. (Getty Images)

When Harvoni, Sovaldi, and other expensive hepatitis C drugs came onto the market in 2015, the public insurance program Medicaid created similar restrictions to those that insurers like Group Health and Bridgespan have now.

One study this summer found that 33 state Medicaid programs restricted access to the sickest patients, those who had scores of 3 or 4 on the 4-point fibrosis scale. Additionally, 35 states required patients to abstain from drinking in order to gain access to the drug.

A separate study found that at least half of Medicaid patients prescribed these drugs were denied coverage because the treatment wasn't "medically necessary."

"The combination of the high cost of treatment and insufficient Medicaid budgets precludes programs from providing widespread access to treatment," Lauren Canary, Monina Klevens, and Scott Holmberg wrote in a review article about state policies.

A memo from the Obama administration this past November urged Medicaid programs to revisit these policies to ensure that no patients were inappropriately denied medically necessary care. But it stopped short of outlawing such practices.

There's no easy answer for Medicaid programs. They are required, by law, to provide beneficiaries with medically necessary benefits. Medicaid is already the biggest budget item in most states' budgets, and getting legislators to provide even more funding can be an impossible battle.

"What dictates coverage is the money coming out of the state's general revenue," says Matt Salo, director of the National Association of Medicaid Directors. "If you can't get blood out of that stone, then you're a bit stuck."

Salo says that states end up in tough positions. Missouri, for example, considered eliminating all dental coverage for adults in order to pay for the pricey new hepatitis C drugs.

"That's not something anyone wants," he says. "But the trade-offs end up being very real."

The real problem is American drug prices. But nobody talks about that.



The reason this battle plays out in the United States — and not in Canada, or European countries, or really anywhere else — is that the United States doesn't regulate drug prices.

Other countries have negotiated with the drugmakers to get better deals. The United Kingdom, for example, pays $55,000 for the hepatitis C drug Sovaldi; the United States pays $84,000. For all the scaremongering about British health care, the country doesn't ration this drug like we do. Instead, it recommends Sovaldi for all hepatitis C patients — something it can do in part because it pays less for it.

Federal law specifically bars Medicare from negotiating drug prices in the way Britain does. Individual health plans can negotiate on their own behalf, but there are thousands of them scattered across the country, so they have little leverage in asking for a discount. The result is the United States ends up with the highest drug prices in the world, even though we're taking the exact same pills. Sometimes those prices lead to real rationing — as in the case of Morton.

Drugmakers argue that the higher American prices allow them to do more research and offer better drugs. There is at least some research that shows this is true. But one undeniable consequence is that we end up with these types of legal battles about who gets treatment — and who pays. When the bill is so big, it's impossible not to.

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