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The American Journal of Managed Care Special Issue: HCV
Real-World Outcomes of Ledipasvir/Sofosbuvir in Treatment-Naïve Patients With Hepatitis C
Zobair M. Younossi, MD, MPH, FACG, AGAF, FAASLD; Haesuk Park, PhD; Stuart C. Gordon, MD; John R. Ferguson; Aijaz Ahmed, MD; Douglas Dieterich, MD; and Sammy Saab, MD, MPH
Sofosbuvir Initial Therapy Abandonment and Manufacturer Coupons in a Commercially Insured Population
Taruja D. Karmarkar, MHS; Catherine I. Starner, PharmD; Yang Qiu, MS; Kirsten Tiberg, RPh; and Patrick P. Gleason, PharmD
Improving HCV Cure Rates in HIV-Coinfected Patients - A Real-World Perspective
Seetha Lakshmi, MD; Maria Alcaide, MD; Ana M. Palacio, MD, MPH; Mohammed Shaikhomer, MD; Abigail L. Alexander, MS; Genevieve Gill-Wiehl, BA; Aman Pandey, BS; Kunal Patel, BS; Dushyantha Jayaweera, MD; and Maria Del Pilar Hernandez, MD
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Does Patient Cost Sharing for HCV Drugs Make Sense?
Darius N. Lakdawalla, PhD; Mark T. Linthicum, MPP; and Jacqueline Vanderpuye-Orgle, PhD
Value of Expanding HCV Screening and Treatment Policies in the United States
Mark T. Linthicum, MPP; Yuri Sanchez Gonzalez, PhD; Karen Mulligan, PhD; Gigi A. Moreno, PhD; David Dreyfus, DBA; Timothy Juday, PhD; Steven E. Marx, PharmD; Darius N. Lakdawalla, PhD; Brian R. Edlin, MD; and Ron Brookmeyer, PhD
The Wider Public Health Value of HCV Treatment Accrued by Liver Transplant Recipients
Anupam B. Jena, MD, PhD; Warren Stevens, PhD; Yuri Sanchez Gonzalez, PhD; Steven E. Marx, PharmD; Timothy Juday, PhD; Darius N. Lakdawalla, PhD; and Tomas J. Philipson, PhD
Costs and Spillover Effects of Private Insurers' Coverage of Hepatitis C Treatment
Gigi A. Moreno, PhD; Karen Mulligan, PhD; Caroline Huber, MPH; Mark T. Linthicum, MPP; David Dreyfus, DBA; Timothy Juday, PhD; Steven E. Marx, PharmD; Yuri Sanchez Gonzalez, PhD; Ron Brookmeyer, PhD; and Darius N. Lakdawalla, PhD
Coverage for Hepatitis C Drugs in Medicare Part D
Jeah Kyoungrae Jung, PhD; Roger Feldman, PhD; Chelim Cheong, PhD; Ping Du, MD, PhD; and Douglas Leslie, PhD

Does Patient Cost Sharing for HCV Drugs Make Sense?

Darius N. Lakdawalla, PhD; Mark T. Linthicum, MPP; and Jacqueline Vanderpuye-Orgle, PhD
Despite the high cost of novel hepatitis C treatments and patients' apparent willingness to bear part of it, high patient cost sharing is both inefficient and inequitable.
The point of insurance is to protect risk-averse consumers from bearing the full risk of large negative outcomes. Most individuals would prefer to pay a $1000 premium for homeowner’s insurance than live in the perpetual shadow of a 1% chance of a $100,000 loss. Even though the expected cost of both these arrangements is identical, risk-averse consumers would strictly prefer to buy actuarially fair insurance than to live with the risk of a sudden, large financial loss. The same logic applies to health insurance: consumers would rather pay an actuarially fair premium to cover services that they may or may not eventually use than to bear the risk of a large, but uncertain, negative outcome.
This is true even in the case of high cost-sharing arrangements. Suppose annual healthcare costs for a severely ill patient are $100,000 and that 1 of 10 premium-paying beneficiaries is severely ill in a given time period. Now, compare a cost-sharing arrangement that requires those who become severely ill to pay $10,000 of their healthcare costs out of pocket with one that increases premiums by $1000 for all beneficiaries. Both of these arrangements generate the same amount of total revenue to the insurer; however, most consumers would rather pay $1000 in premiums to avoid the 10% risk of suddenly losing $10,000 with the onset of a severe illness. To this point, prior research shows that consumers would rather pay $260 per month in additional premiums in order to avoid an expected cost of $100 per month in cost sharing on high-cost drugs.3
This is not to say that cost sharing is never a useful tool or that premiums are always a preferable substitute for them, but the economic goal of cost sharing is to discourage inappropriate use of therapies that are not legitimately needed—this is not the issue with novel HCV therapies. New DAAs are highly appropriate and effective,4 curing HCV in more than 90% of patients.5-7 Other research in this special issue on HCV argues that even early stage patients with high functional status can benefit substantially over the long-term from DAA treatment.8 
Cost sharing appears even less efficient when one considers that treatment makes long term financial sense for society: the treatment of HCV today will lead to lower medical expenditures for covered individuals in later years. Combined with the health and longevity gains from treatment, this is likely to lead to a return on investment within 8 years.8 Curing more patients with HCV in the present also prevents more cases of infection in the future, and the reduced rate of transmission will accelerate the return on investment even further. Further, there is no good economic reason to discourage patients with HCV from using novel agents and every reason to protect them against financial risk.
Finally, high cost sharing for HCV is not only inefficient, it is also inequitable. The imposition of high out-of-pocket costs on highly effective drugs can have disastrous effects on patients’ financial well-being. These effects are seen clearly in other clinical areas: for example, patients with cancer in Washington state have more than double the risk of filing for bankruptcy compared with individuals without cancer.9 Furthermore, cancer’s financial burden is particularly high for low-income households, with over a quarter of personal bankruptcies among low-income households filed as a result of patients’ out-of-pocket medical expenses.10 The question of equity becomes particularly acute in the case of American patients with HCV, nearly one-third of whom live below the poverty line.11 Shifting costs onto the least financially secure members of society is tantamount to a regressive tax, with high potential penalties—in terms of illness and HCV transmission—for those unable to pay.
HCV treatment is expensive, but it is also extraordinarily effective. Although investing in it will impose real costs on society, those costs are justified by even larger downstream benefits. Insurers are struggling to find ways to afford the costs of treatment, but high cost-sharing arrangements that impose large out-of-pocket expenses on very sick individuals are sub-optimal solutions. Instead, modestly higher premiums for all beneficiaries can achieve the same financial goals for the insurer, without excessively burdening the sickest and least advantaged members of society. 

Author Affiliations: Leonard D. Schaeffer Center for Health Policy & Economics, University of Southern California (DNL), Los Angeles, CA; Precision Health Economics (MTL, JV-O), Los Angeles, CA.

Source of Funding: None.

Author Disclosures: Dr Vanderpuye-Orgle and Mr Linthicum are employed by Precision Health Economics (PHE), a healthcare consultancy to life science firms. Dr Lakdawalla is the chief strategy officer and owns equity in PHE.

Authorship Information: Concept and design (DNL, MTL, JV-O); acquisition of data (JV-O); analysis and interpretation of data (DNL, MTL, JV-O); drafting of the manuscript (DNL, MTL, JV-O); critical revision of the manuscript for important intellectual content (DNL, MTL, JV-O); statistical analysis (JV-O); and supervision (DNL).

Address correspondence to: Darius N. Lakdawalla, PhD, USC Schaeffer Center, 635 Downey Way, Verna & Peter Dauterive Hall (VPD), Ste 210, Los Angeles, CA 90089-3333. E-mail:

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8. Moreno G, Mulligan K, Huber C, et al. Costs and spillover effects of private insurers’ coverage of hepatitis C treatment. Am J Manag Care. 2016;x(x):In Press.

9. Ramsey S, Blough D, Kirchhoff A, et al. Washington state cancer patients found to be at greater risk for bankruptcy than people without a cancer diagnosis. Health Aff (Millwood). 2013;32(6):1143-1152. doi: 10.1377/hlthaff.2012.1263.

10. Gross T, Notowidigdo MJ. Health insurance and the consumer bankruptcy decision: evidence from expansions of Medicaid. J Public Econ. 2011;95(7-8):767-778.

11. Denniston MM, Jiles RB, Drobeniuc J, et al. Chronic hepatitis C virus infection in the United States, National Health and Nutrition Examination Survey 2003 to 2010. Ann Intern Med. 2014;160(5):293-300. doi: 10.7326/M13-1133. 
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