January 3, 2014

Even With ACA, Many May Be 'Underinsured'

Published: Jan 2, 2014

By Michelle Andrews , Kaiser Health News

People with chronic conditions will be better protected from crippling medical bills starting in January as the health law's coverage requirements and spending limits take effect. But a recent analysis by Avalere Health found that many may still find themselves "underinsured," spending more than 10% of their income on medical care, not including premiums, even if they qualify for cost-sharing subsidies on the health insurance marketplaces.

"You have some great protections in place, but these out-of-pocket costs and how plans are structured are going to create some serious problems," says Marc Boutin, executive vice president at the National Health Council, an advocacy group for people with chronic health conditions.

Potential trouble spots include prescription drugs; specialist care, including that provided by academic medical centers; and services such as physical therapy that typically require a course of treatment over weeks or months, say experts.

The health law prohibits insurers from turning down sick people for coverage and generally eliminates lifetime and annual dollar limits on benefits, including hospitalization and prescription drugs.

It also caps the amount people spend out-of-pocket in 2014 at $6,350 for individuals and $12,700 for families that buy a plan on the individual and small group markets, including the health insurance exchanges. People with incomes below 250% of the federal poverty level ($28,725 for an individual or $58,875 for a family of four in 2013) may qualify for cost-sharing subsidies on the marketplaces that reduce those caps as well as their deductibles and copayments.

The Avalere analysis found that many chronically ill people, especially those in Bronze or Silver plans that offer less generous coverage, will likely reach their out-of-pocket maximum every year.

John Earley worries he may be one of them. Earley, 60, has severe plaque psoriasis.

After he was diagnosed more than 30 years ago, topical creams and ultraviolet light treatments that slow the growth of skin cells worked for a while. But eventually their effectiveness waned. He finally found relief with Humira, a biologic drug that blocks the production of an immune system protein that causes inflammation. The twice monthly injections cost more than $2,200, but the Texas high-risk pool through which Earley and his wife are insured covers the drug with a $100 copayment. The drug's manufacturer, AbbVie, covers all but $5 of that amount through its patient assistance program. Their insurance premium is $1,460 per month.

With the Texas high-risk pool set to close early next year, Earley, who works on contract as an architect in Arlington, is checking into plans on the health insurance marketplace. The plan with the best Humira coverage -- a $150 copay per refill -- is a gold plan with a $1,718 monthly premium for the two of them, says Earley. Plans with lower premiums would require 40% to 50% coinsurance for the drug, which is in a high-cost specialty tier.

"What I'm finding with the insurance policies that are available, it's going to cost you either way," says Earley.

The gold plan with the best Humira coverage would cost roughly a quarter of their income, says Earley, who is not eligible for tax credits to subsidize his premium costs. But that may be their best option, even with financial assistance from the drug's manufacturer, given the high drug coinsurance charges on the other plans.

Drug costs are perhaps the most often cited coverage concern for people with chronic conditions, but there are others, say experts.

Access to specialists and to academic medical centers with the necessary expertise can be problematic on the marketplaces, where many insurers have opted for a narrow network of doctors and hospitals in order to keep a lid on premiums. A recent McKinsey & Co. study found that 70% of the 120 plans it examined offered narrow hospital networks that excluded at least 30% of an area's biggest hospitals. Academic medical centers were generally part of broader plans whose premiums were 10% higher than average.

For people who need specialist care, narrow networks can be problematic since the law's limits on what a patient spends out-of-pocket only apply to in-network care. Dermatologists trained in handling severe psoriasis may not be in network, nor the academic medical centers that some people need for treatment, says Leah Howard, director of government relations and advocacy at the National Psoriasis Foundation.

On the other end of the spectrum, sometimes the out-of-pocket costs for effective treatments such as phototherapy can deter patients who would have to make a copayment for perhaps dozens of sessions.

"We've seen people who would prefer to be on phototherapy, but can't afford $500 in copays over eight weeks, so they end up stepping up to a systemic treatment," says Howard.

In addition, although dollar limits on benefits aren't allowed, plans typically limit the number of sessions for certain treatments such as physical therapy.

Because of the rocky rollout of the exchange websites in many states, many consumers have found it difficult to get basic information about premiums and plan deductibles, say experts. Many don't know which providers are in the plan networks or what benefits the plans cover.

"As more and more people become covered and as people start to use their plans, we'll see if the cost protections in the plans are sufficient, and directed toward getting people the care they need," says Sara Collins, a vice president at the Commonwealth Fund.

This article, which first appeared Dec. 31, 2013, was reprinted from kaiserhealthnews.orgwith permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.


Gilead Seeks To Expand Its Blockbuster Hepatitis Platforms In 2014

Provided by Seeking Alpha

Jan. 3, 2014 2:27 AM ET |  About: GILD, Includes: MRK, VRTX

Henry Kawabe

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Gilead Sciences (GILD) received approval earlier this month for what may well be one of the most successful drugs to be approved in years -- Sovaldi, its novel hepatitis drug. Sovaldi, which some analysts say can actually cure some hepatitis cases, is expected to be a blockbuster for the company and could see sales surpassing $8 billion annually by 2018. On the heels of the approval, Gilead announced that it will now seek U.S.approval for a combination of Sovaldi and its newest hepatitis drug -- ledipasvir -- in the first quarter of 2014. The combination of these two drugs could be a "one-two knockout"… not just of the disease, but of the competition as well.

The National Institute of Health estimates that 180 million people have the hepatitis virus. What is interesting is that less than 50% of those people have been diagnosed, and less than 10% have been treated. Chronic hepatitis C affects roughly 4 million people in the U.S., and the costs for treating the disease is roughly $40 billion annually, and is expected to more than double over the next 20 years to $85 billion. Hepatitis is the leading cause of liver cancer, which has passed HIV/AIDS in the number of deaths. The current hepatitis drug market is estimated to be at $5 billion annually and expected to triple by 2018. That leaves a very big market opportunity, especially for companies developing far less invasive treatments. This is why a number of drug companies, including Abbyville, Johnson & Johnson, and Vertex Pharmaceuticals, have been competing with Gilead in racing to be the front-runner in battling hepatitis.

Hepatitis Treatments Have Advanced Greatly Over The Past Three Years

Up until a short time ago, the treatment for hepatitis had comprised of weekly injections of interferon alfa for 24 to 48 weeks, along with daily tablets of the anti-viral, ribavirin. The treatment cure rate was about 50%, and the side effects were brutal. In 2011, two new drugs -- Incivek from Vertex (VRTX) and Victrelis from Merck (MRK) -- gained FDA approval in combination with the existing treatment. These highly touted drugs shortened the treatment time in some cases to 24 weeks, and increased the cure rate for genotype 1 from 60% - 80%. And while at one time these promising drugs looked to be future blockbusters, they will probably see minimal sales as the new hepatitis drugs hit the market. Case in point is Incivek, which has already experienced a drop of 51% in sales in the fourth quarter 2012, as patients wait for the new drugs to hit the market. At one time, Incivek had sales forecasted to reach $4 billion; now these forecasts have been lowered to $669 million by 2016, roughly an 84% drop.

Sovaldi Is Designed To Stop The Hepatitis Virus From Replicating

The reason for the drop in Incivek sales is Sovaldi -- a once-daily oral nucleotide analog polymerase. And unlike previous medications to treat hepatitis, Sovaldi will not require injections of interferon (responsible for the brutal side effects) in some cases. Basically Sovaldi inhibits the virus's polymerase enzyme -- and the polymerase enzyme is what builds new genomes out of RNA allowing the virus to replicate. The drug has demonstrated its ability to cure up to 90% of patients treated after 12 weeks.

Gilead acquired Sovaldi in 2011 when it purchased Pharmasset for $11 billion. And while the purchase represented an 89% premium over Pharmasset's stock price prior to the announcement, Gilead should more than make up for the high premium now that the drug has FDA approval, making what at first appeared to be an overpriced purchase into a wise strategic investment. Sovaldi is currently approved for genotypes 1-4, and is the first oral treatment regimen for genotypes 2 and 3, and for patients waiting for a liver transplant. Sovaldi clearly makes Gilead the front-runner in the hepatitis drug market; and if it gains approval of its new drug combination, it should further its lead against its competitors.

The FDA still recommends taking interferon with Sovaldi and the oral anti-viral drug -- ribavirin -- for 12 weeks for patients with disease genotypes 1 and 4 (type 1 is the most common). But patients ineligible for interferon or who have liver cancer can just take Sovaldi and ribavirin. That combo is recommended for 12 weeks for patients with genotypes 2 and 3. That is where the combination with ledipasvir, a promising new class of drug that works by blocking the NS5A protein (which the virus also needs to replicate) comes in.

Gilead's Drug Combination May Cure Hepatitis Without Interferon

Gilead made its decision to seek FDA approval based on three late stage clinical trials where the combination of drugs, taken orally once daily in a fixed dose combination, produced a high cure rate in as short as 8 weeks with patients with genotype 1, the most common strain of hepatitis C, but also the most difficult to treat. In a 12-week regimen of the Sovaldi and ledipasvir along with anti-viral drugs ribavirin or GS-9669, the combination cured 100% of the study patients who had genotype 1 and advanced liver fibrosis or cirrhosis. And that was without the need of interferon injections.

Some analysts predict sales of Sovaldi could hit $2 billion in 2014; and once the drug combination is approved, Sovaldi could possibly work its way to become one of the world's top selling drugs. Sanford Bernstein analyst, Geoffrey Porges, commented on the upside of the new drug combination, pointing out that the tough-to-tolerate older drugs have led to thousands of patients delaying treatment for hepatitis, which could be potentially fatal. "The results certainly raise the bar and dim the outlook for competitors such as AbbVie, Bristol-Myers and Boehringer Ingelheim."

Mr. Porges pointed out that even though Gilead's competitors have all-oral programs in development, these programs will require more drugs and more pills than Gilead's to achieve similarly high cure rates. Additionally, the data coming out on Gilead's new drug combination could spell the end of ribavirin use and greatly expand the number of people seeking treatment. Therefore, Mr. Porges raised his peak sales forecast for Gilead's combination to $16 billion in 2016; however, he does see sales declining to $6.8 billion by 2020 as the backlog of patients awaiting treatment declines.

Stifel analyst, Joel Sendek, too sees the hepatitis drug combination as a blockbuster, but is a little less optimistic, forecasting sales in 2015 of $5.1 billion. There is a caveat -- and that is the extremely high cost. Gilead has priced each pill at about $1000, meaning a 12-week treatment can run $84,000, which makes the treatment unaffordable for many patients. This may be why competitors like AbbVie have the best chance of competing with Gilead, as many feel that its drug combination (currently in phase III tests) would likely be offered at a discount. Thus, it may put pressure on Gilead to adjust its pricing structure.

Gilead Science is a $115 billion company. The company stock has had an excellent run YTD, up over 100%. As a testament to its drive to refill its pipeline, Gilead has made 10 strategic purchases of companies since 2006, including Pharmasset. Through these purchases and with its own in-house developments, the company currently has 3 drugs in regulatory submission, 6 drugs in phase III trials, and 14 in phase II trials.

Better-than-expected sales helped Gilead beat 3rd quarter revenue estimates. Revenue rose 15% to $2.78 billion, beating Zacks estimate of $2.74 billion. And the company earned $0.50 per share, beating Zacks estimate of $0.47 per share. On Dec 20th JPMorgan Chase upped its target price on shares of Gilead to $100.00 per share, giving the stock a 25% upward potential. Separately, on December 20th, RBC Capital raised its target price from $80.00 to $90.00 on the stock. Gilead's stock closed on Friday December 26th at $74.45 per share.


Sovaldi has a number of factors that are working in its favor including a high cure rate, a reduction in treatment time, plus the elimination of the need for interferon injections in many cases. That alone should continue to send the stock to new highs. However, when one then adds in the combination of ledipasvir, if approved by the FDA sales will surely be bolstered. I believe that Gilead's stock, even though it has risen greatly this year, has the potential to reach and exceed $100.00 per share in the coming year.