Healthcare: Lesson from Hepatitis C virus

Views in this article are personal opinions and do not represent the views of the organization I work for.

My interest in Hepatitis C started when Nobel Prize was awarded in 2020 to three scientists namely Dr Harvey J Alter, Michael Houghton and Charles Rice for discovery of Hepatitis C virus. I studied carefully about their work which further firmed my belief that Science is the answer to most challenges faced by the world. Thanks to these three scientists and countless others, we now have a treatment for Hepatitis C. Hepatitis C virus will be abbreviated as HCV in this article. Two Aha moments stood out for me as I read through their work. Discovery of HCV and subsequent treatment took more than 3 decades spanning generations and places. I began to appreciate the scalability of collaboration in scientific community. Scientists found an effective way to stand on each other shoulders to push the envelope in solving the most complex of the problems. I also began to appreciate the pace of vaccine development in the fight against COVID-19. HCV cure took more than 3 decades to come to fruition. Vaccine development against COVID-19 took only just about an year.

My interest in Hepatitis C increased substantially after I chanced upon an outpatient ward of one of the Hepatologists last year in Hyderabad where 60% of patients in the waiting room were not Indian Citizens but are health tourists from USA, UK, Middle East and Australia. All are in India for Hepatitis C treatment. I started looking at the reasons and was astonished to say the least. Hepatitis C treatment is similar across the world. Patient has to take daily a pill for 84 days. In India pill costs around $1 and the same pill in US costs around $1000 per pill and this price difference is driving the health tourism. Price difference translates to $84000 in US and $84 in India for complete treatment. Question is why the same drug sold by the same company Gilead Sciences Inc (will be shortened to Gilead) would cost so much more in US than in India? Article tries to answer this question based on my interviews and study around this subject.

It is important to put down the timeline before analyzing it. Below is chronology of events

1. HCV was first identified in mid-1970s. Virus was cloned and sequenced by 1989.
2. In 1990, blood test was developed to screen patients for HCV. By 1991, first medicine was approved by FDA. Medicine was ineffective and produced very low virological response rates.
3. In 1998, Schinazi and colleagues founded a company named Pharmasset to develop a oral drug for Hepatitis C. Schinazi worked part-time at Atlanta Veteran Affairs and retired from VA in 2016.
4. Michael Sofia from Pharmasset has synthesized a compound PSI-7977 and was later renamed sofosbuvir based on his name. This compound would later be renamed as sovaldi. Sovaldi is the oral drug prescribed today as the treatment for HCV infected patients.
5. Pharmasset began animal toxicity studies in 2008 and Phase 1 studies in March 2009. In 2011, Pharmasset announced success of PSI-9777.
6. Pharmasset was acquired by Gilead in January 2012 for $11.2 billion dollars. Gilead supported additional Phase 3 studies and submitted drug application to FDA for Sofosbuvir. Drug was approved on Dec 6, 2013. Sovaldi/Sofosbuvir (PSI-7977) is a wonder drug with 95% response rate

Below are the findings from my study

• US public is paying twice for the Hepatitis C drug: US public is paying to fund the research in drug discovery process and is also paying for the drugs. Please do read the paper here. Federal Dollars estimated to be $60.9 million was spent in evolution of the drug. It is worth noting that Pharmasset also had spent similar amount for the drug. Medicaid alone (State and Federal govt health insurance for low income families) had spent around $12 billion on HCV drugs between 2014 and 2017 and this is roughly 5% of the total spending of the Medicaid program on outpatient prescriptions. HCV drug discovery is definitely partially funded by public money and hence government run health care programs should get some benefit and public should not be paying twice. Most governments at federal and state level are left with no choice but to ration the drug owing to its high price. For example Louisiana state had 35,000 HCV carrying citizens who were on medicaid and uninsured. Louisiana state decided to cover only 324 residents a year. Patients who already suffered liver damage because of the virus are prioritized first. Such a travesty to ration the life saving drug.
• Market Distortion: Discovery of virus and the subsequent drug development is a complex value chain. In Hepatitis C case, value is captured predominantly by two firms namely Pharmasset and Gilead while the treatment was result of several years of hard work and investment by several scientists and organizations. Asymmetry between value creation and value capture is the market distortion. This market distortion is untenable and will bring more government regulation and oversight if not addressed.
• Patient advocacy in India: Please read the Gilead press release here. On September 15, 2014, Gilead announced that it has signed agreement with 7 India based generic pharmaceutical manufacturers to manufacture Sofosbuvir. More importantly India based generic companies were allowed to set their own price for the drug. This is the reason why drug price is so low in India. But why did Gilead signed such an agreement with generic manufacturers? Stated reason as one can notice from press release is that Gilead signed the agreement to advance the humanitarian goals of the organization in low income countries. I interviewed several people around the low drug price in India and below is the summary.

1. Gilead always knew that they have to price the drug low in India. Else many Indians will skip the treatment and postpone the treatment to a future date. Gilead had low expectations to begin with and hence went with partnership with Indian Pharmaceutical companies.
2. Doctors directly and Indian Generic manufacturing companies indirectly have become strong advocates for patients. Four stakeholders namely Doctors, Indian generic pharma companies, government and Non-profit organizations worked together to make the drug accessible to patients in India.
3. As a strategy Pharma companies like Gilead straddle two worlds. In high income countries, they are pursuing high margin, high risk and high capital investment path. In low income countries, they are going for low margin, low investment and high social capital path for the same drug. This is unsustainable because it opens significant arbitrage opportunities. One of the entrepreneurs I talked to seriously thought of docking a ship with Indian flag besides coast of Florida to ship cheaper medicines to Hepatitis C patients in US. Please read the article here to learn how this differential pricing is creating medical tourism opportunities for countries like India.

Following need to happen for making the future drugs accessible to everybody.

1. US Govt need to find a way to eliminate double payment. This will make the drug accessible to patients in Medicaid and uninsured in US. Also US need to find a better way to incentivize innovation without making the drug prohibitively expensive.
2. Patient advocacy need to improve in developed countries. In India, doctors were at the forefront of advocating for their patients. Similar missionary zeal need to be shared by all stakeholders in developed countries.
3. Accelerate globalization: Strong global integration would eliminate ability of companies to set differential pricing. For example Health Insurers should be able to facilitate the treatment for members (with member's consent) in countries where the cost of treatment is low. Consumers should be able to order and ship drugs from different countries.
4. Drug Pricing: Hepatis C if left untreated would result in liver cancer or cirrhosis in future. Liver cancer or cirrhosis is very expensive to treat. Sovaldi is priced high keeping the future potential cost savings in mind. This kind of value based pricing should not be applied to life saving medicines like Sovaldi. Government regulation in this area is key.

Hepatitis C drug was a major medical breakthrough by US scientific community. Other countries have much to learn from it. I developed deep respect for Indian health fraternity for their effort and leadership to make the drug accessible to poorest of India. Same should be replicated in high income countries to make the drug accessible to poorest in developed countries.