Hep-C Drug Could Strain Insurance Companies

Sovaldi, a promising "breakthrough treatment" that can potentially cure a patient of hepatitis C, has been estimated to cost approximately $1000 a pill, potentially placing a heavy burden on an unprepared insurance providers, including the still-very-new Affordable Care Act.

Sovaldi, which was attained approval from the Food and Drug Administration relatively recently, has found traction in the U.S. market with rising sales. The drug, which is taken daily in a more than 12 month treatment process, will cost an estimated $1000 a pill, costing patients approximately $84,000 per treatment.

This high cost recently got the attention of Democratic members of Congress Henry Waxman of California, Frank Pallone Jr. of New Jersey and Diana DeGette of Colorado, who sent Gilead Sciences a letter inquiring about the exceptionally high cost. Their concern was that the heavy cost would make the potential cure exclusive to high-income patients.

Now, a recent analysis conducted by Leerink Partners LLC Research's Ana Gupte, raises new concerns. For the high-priced treatment to be made available for all U.S. citizens at its current cost, it would have to be covered by private and federal insurance companies.

According to Gupte, if all patients currently eligible for the drug -- a mere nine percent of all U.S. medical patients -- were to receive it, it would cost as much as $27 billion dollars, not including an additional $8 billion in fully insured managed care.

According to Gupte's analysis, this burden would hurt earnings per-share of private insurance companies by as much as ten percent -- a massive hit to the private insurance sector.

Matthew Herper of Forbes raises an even more alarming concern. The companies involved in the analysis who appear to be lasted to take the hardest hits are the same companies that are involved in the Affordable Care Act, which is just now picking up a massive number of applicants, just before deadline.

According to Herper, this involvement will make it even harder for these companies to meet Sovaldi costs. The drug will also massively cost the Affordable Care Act itself, which is still just findings its feet.

The worst-case scenario is that private companies simply will elect not to cover the drug, but the impact the hepatitis C cure will have on healthcare in general is unavoidable.