California lawmakers target $1,000 hepatitis pill, other costly drugs

California lawmakers are joining the national debate over what effect high-priced specialty drugs are having on medical costs for consumers and taxpayers.

A hearing Wednesday led by state Sen. Ed Hernandez (D-West Covina) is expected to feature testimony from an executive at Gilead Sciences Inc. about Sovaldi, the company’s $1,000-per-pill hepatitis C drug that has drawn criticism from members of Congress, Medicaid officials and health insurers.

The Senate Health Committee said it’s looking into the factors driving up medical costs and what can be done to keep health insurance premiums affordable for consumers.

A 12-week course of Sovaldi costs about $84,000. Gilead also introduced another hepatitis C drug, Harvoni, last fall with a cost of roughly $94,000.

Gilead, based in Foster City, Calif., reported Tuesday that Sovaldi had annual sales of $10.3 billion last year and Harvoni took in $2.1 billion. Overall, the company posted a profit of $12.1 billion in 2014.

In response to Sovaldi’s high prices, some health plans and pharmacy-benefit managers have struck exclusive agreements for a rival hepatitis C drug from AbbVie Inc. that won regulatory approval in December. Gilead has been offering undisclosed discounts to maintain market share.

More broadly, critics have warned that specialty drug prices industrywide are unsustainable and threaten to boost health costs for employers, workers and taxpayers funding government programs.

Dr. Sameer Awsare, associate executive director for Kaiser Permanente’s medical group in Northern California, is scheduled to testify about the financial toll at the HMO giant.

In an interview, he said Kaiser spent $3.5 billion last year on outpatient prescription drugs for its 9 million members in eight states, including California, and the District of Columbia.

Awsare said that figure could jump to $6.2 billion if all of Kaiser’s current patients with hepatitis C received Sovaldi for a year.

Gilead declined to comment prior to the hearing. On an earnings conference call Tuesday, executives were bullish about overcoming initial cost concerns and reaching even more hepatitis C patients this year.

“We believe treatment decisions are best made by doctors and their patients,” said Paul Carter, the company’s executive vice president for commercial operations.

Gilead as well as many medical experts say the new drugs mark a major advance over existing treatments because they offer cure rates as high as 95% with fewer side effects for patients.

The company says the new therapies can avoid the long-term medical expenses related to liver failure, cancer and transplants.

Many insurers and government programs have tried to limit their financial exposure by reserving Sovaldi and other new drugs for patients with more advanced liver disease.

Awsare said that rationing can be hard to explain to patients.

“Drug companies are entitled to some profit and sending it back to Wall Street,” he said. “But the state should ask for the rationale on their prices and how much it will cost us as taxpayers.”

In budget documents, Gov. Jerry Brown has included $100 million this fiscal year and $200 million for 2015-16 for costs related to new hepatitis C treatments. That covers patients on Medi-Cal, the state’s Medicaid program for the poor, and in state prisons.

In addition to drugs, hospital consolidation and what role that’s having on healthcare prices will be addressed at the legislative hearing.

Twitter: @chadterhune