United States: Hijacking "Netflix": Why Louisiana's And Washington's HCV Deals Are Not Really Like Netflix

Last Updated: July 2 2019
Article by Christian Springer

From "Netflix and Chill" to the "Netflix Subscription Model", Netflix is apparently just as good at describing the way we consume media as it is for describing the way Medicaid will pay for prescription drugs. But how is what Louisiana and Washington have agreed to with certain Hepatitis C (HCV) manufacturers actually similar to Netflix? As with most other popular nomenclatures, affixing "Netflix" to Louisiana's and Washington's subscription models for HCV medications is not entirely accurate for a couple of reasons. Notwithstanding, the subscription models do represent promising advancements along the financing of care continuum towards population-based alternative payment models.

For as little as $8.99 per-month, you can read our overview of both models below, including how they differ from what a pure "Netflix" model for prescription drugs might look like!

Background on HCV

The Centers for Disease Control and Prevention (CDC) says that HCV, a blood-borne viral infection that can cause liver failure and death, kills more Americans than any other infectious disease. HCV is spread by direct contact with an infected person's blood. The infection can lead to chronic liver disease.

While there is no vaccine to protect against this virus, new treatments can cure HCV from 85 to 100 percent of patients. But the cost of treatment is high, ranging from $20,000 to $84,000 per course of treatment. As a result, many states have restricted patient eligibility to HCV medication based on the severity of their illness, often requiring patients to present near-complete liver failure before being eligible to receive HCV treatment.

Enter Louisiana With A "Netflix" Proposal

In 2018, Louisiana was the first state to announce that it was considering a novel subscription payment model to address the 73,000 lives affected by HCV. Under the subscription model, the state would make a set payment to a drug manufacturer or manufacturers for unlimited access to highly effective antiviral treatment for the individuals in Louisiana who are enrolled in Medicaid and in the correctional system for a set period of time. On February 12, 2019, Louisiana released the Solicitation for Offers (SFO).

The payment to the manufacturer would be equal to or less, net of Medicaid rebates, than what the state spent in 2018 on HCV treatment ($35 million). For expenditures above the cap, Gilead would provide Louisiana with a rebate. According to Louisiana, the subscription model creates an incentive for the state to find and treat as many people enrolled in Medicaid as possible. Meanwhile, the drug manufacturer would get a guaranteed fixed purchase price for a contracted period of time from a large volume payer, and it would enable the drug manufacturer to expand their product reach into populations that otherwise would not have received treatment.

In March 2019, the Louisiana announced that Asegua Therapeutics LLC (a subsidiary of Gilead Sciences, Inc.) would provide the State with "unrestricted access" to direct-acting HCV antiviral medications for 5 years as part of a novel "subscription" payment model. Louisiana and Asegua Therapeutics are under negotiations to finalize a contract. The state's goal is to treat 10,000 patients with HCV by 2021, which accounts for nearly a quarter of its infected population on Medicaid and in prison. In 2018, the state only treated about 1,000 patients with HCV. Louisiana currently states on its website that "beginning summer of 2019" Louisiana Medicaid beneficiaries and Louisiana correction inmates will be covered for HCV treatment at no cost.

On June 26, 2019, CMS approved Louisiana's SPA to enter into a single, state-specific Supplemental Rebate Agreement with "a drug manufacturer(s)" in both fee-for-service and managed care Medicaid, effective July 1, 2019.

Washington Hops on the "Netflix" Bandwagon

Following on the heels of Louisiana's announcement in 2018 that it would be seeking the implementation of a subscription model for HCV medications, Governor Jay Inslee issued a directive calling for the elimination of HCV in Washington by 2030 through "combined public health efforts and a new medication purchasing approach." A month later, the Washington State Health Care Authority (HCA) indicated that it would issue a request for proposals (RFP) for an alternative payment model that "focuses on a subscription model – with winner take all result." Washington issued its RFP on January 2019.

On April 26, 2019, the Washington HCA announced that AbbVie emerged as the successful bidder in a "massive undertaking to eliminate [HCV] in Washington by 2030...because they provided the best overall portfolio." Washington's subscription model is similar to Louisiana's: Washington would pay a fixed annual amount to AbbVie to purchase an "unrestricted" supply of HCV drugs. For expenditures above the cap, AbbVie would provide its HCV drugs with rebates. On June 12, 2019, CMS announced that it approved Washington's SPA that authorizes the state to "enter into value-based arrangements with drug manufacturers through supplemental rebate agreements."

Louisiana and Washington Subscription Models Are Not Like Netflix

The Louisiana and Washington subscription models have unique features that distinguish them from a "true" Netflix model for prescription drugs.

First, Netflix customers normally have access to any show under their subscription. But both the Louisiana and Washington models are premised on a favored drug. In the case of Louisiana, it is Gilead's products, while in the case of Washington, it is AbbVie's products. If the Louisiana and Washington subscription models were like Netflix, Medicaid beneficiaries in each state would have access to any HCV medication offered by manufacturers. To be clear, we know that Washington is not precluding access to other HCV drugs, but CMS recognized that Washington could subject non-AbbVie HCV drugs to prior authorization. Indeed, states would statutorily be prohibited from excluding the drugs of other manufacturers if those manufacturers are signatories of the Medicaid Drug Rebate Program (MDRP).

Second, Netflix customers actually have unlimited access to shows on the Netflix platforms; customers could spend 24 hours per day watching shows without additional charge. But the Louisiana and Washington subscription models do not actually provide Louisiana and Washington with "unlimited" access to HCV drugs. Instead, Louisiana and Washington have determined an "expenditure cap" on how much they are willing to spend per year for HCV drug, and the quantity of HCV drugs the states will actually be able to access under that fixed fee depends on the drugs' negotiated per-unit price. It is entirely possible that there are more Medicaid beneficiaries in each state that qualify for HCV treatment than there are HCV drugs that Louisiana and Washington are entitled to pursuant to their subscription arrangement. Under that scenario, Louisiana and Washington would purchase the additional HCV drugs separately, albeit at a discounted price.

In summary, the Louisiana and Washington subscription models are different from Netflix in important ways. They limit access to select HCV medications, unlike Netflix which guarantees access to a wide variety of competing shows. Furthermore, the Louisiana and Washington subscription models do not actually guarantee unlimited access to those select HCV drugs like Netflix guarantees unlimited access to a wide variety of competing shows—the subscription models guarantee access up to a certain threshold over which Louisiana and Washington begin to pay additional amounts for the drugs.

Even though the Louisiana and Washington subscription models cannot accurately be described as "Netflix" models, they are still innovative in their own right. Both subscription models represent a compromise between states managing their limited budgets on the one hand, and manufacturers seeking an acceptable rate of return for their investments on the other. Moreover, both models represent a population-focused approach to the financing and delivery of care that could inspire future population-based models. With more experience, future population-based models could integrate outcome-based quality metrics (which the Louisiana and Washington models do not appear to do at the moment) and potentially extend to non-infectious disease areas where protecting against the transmission of a pathogen is not the chief benefit of a population-based approach.

To view Foley Hoag's Medicaid and the Law blog please click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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