How much can 'Netflix'-style pricing for hepatitis C drugs save?

Keith Alcorn
Published:
03 June 2019

A 'Netflix'-style pricing agreement that allows the Australian government to treat an unlimited number of people with hepatitis C for AU$1 billion may result in savings close to US$5 billion, according to an analysis published recently in the New England Journal of Medicine.

The so-called 'Netflix' model, also being explored by the US state of Louisiana, allows treatment for an unlimited number of people during a fixed period, just as subscription to the streaming entertainment channel Netflix allows unlimited viewing.

For pharmaceutical companies, the attraction of such deals is a predictable income stream, especially if income streams are being eroded over time by competitors. These deals also fail to fix a unit price that can be used by other countries in price negotiations, say Suerie Moon of the Institute of Development Studies, Geneva, and Elise Erickson of the Harvard T.H. Chan School of Public Health, Boston.

For governments, the deals also offer budget predictability without restricting access to treatment, and the potential to achieve public health goals without large increases in health expenditure – if ambitious targets for screening, diagnosis and treatment can be met.

The Australian government concluded a deal with pharmaceutical companies to treat an unlimited number of people with hepatitis C for AU$1 billion (US$ 766 million) between March 2016 and 2020.

Using publicly-available data, Suerie Moon and Elise Erickson calculated the per-patient price of treatment with direct-acting antivirals under the Australian deal, and the total cost of treatment under previous pricing arrangements (estimated as 23% below the published list price taking into account negotiated rebates).

The Australian government went into the deal estimating that 61,500 people would be treated at a price of AU$16,260 (US$12,460) per patient. But if treatment uptake continues at the rate established in year 2, a total of 104,223 people will be treated at a per-patient cost of AU$9,595 (US$7,352).

Even if treatment uptake gradually declined, so that only 71,732 people were treated by 2020, the per-patient cost would fall to AU$14,011 ($10,736). 

If everyone were treated at traditional prices, it would cost AU$7.424 billion (US$5.688 billion).

The deal will save the Australian government AU$6.424 billion (US$4.922 billion), Moon and Erickson estimate.

Reference

Moon S & Erickson E. Universal medicine access through lump-sum remuneration – Australia’s approach to hepatitis C. New Engl J Med 380 (7): 607-10, 2019.

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