Taking advantage of a special waiver that allows it to deny routine coverage of drugs based on cost and efficacy, Oregon Health Plan intends to limit access to Gilead's (GILD) Sovaldi and J&J's (JNJ) Olysio. The combination therapy, which is becoming more and more popular among clinicians, costs $150,000 per regimen. Covering a third of the 7,000 OHP members with Hep C for Sovaldi alone ($84,000/regimen) would cost $196M. This would double its system-wide drug spending. Last year, the Plan spent a total of $377M for pharmaceuticals for all of its 600K members.
In 2012, Governor John Kitzhaber agreed to cap OHP costs in exchange for $1.9B in federal aid over five years. If costs rise above 3.4%/year it must reimburse the feds hundreds of millions of dollars.
The OHP situation is getting a lot of scrutiny because of the budget-busting consequences of paying for ultra-expensive drugs. Many observers hope its actions spur debate on how to curb prices without stifling innovation.