The encyclopedia · Strategy & Leadership · Strategic decision · 2019
Louisiana paid one flat fee for all the hepatitis C cures it could use
Louisiana buys unlimited access to hepatitis C drugs for five years at up to $58m a year, so Medicaid and prisons treat everyone instead of rationing.
Louisiana Department of Health
the move
Louisiana's Medicaid programme and prisons could not afford hepatitis C treatment for everyone: a course of the cure cost roughly $20,000–30,000, and treating all eligible patients was estimated at $760m.
In 2019 the state solicited proposals for a subscription model — one fixed annual payment for unrestricted access to a direct-acting antiviral, modelled on a Netflix-style flat fee.
In March 2019 it chose Asegua Therapeutics, a Gilead subsidiary, and in June announced the deal: up to $58m a year for five years, covering the generic form of Epclusa, with a cure rate of about 98% and a 12-week daily pill course.
The contract inverts the usual drug deal: the state wants to treat more patients, not fewer, and the manufacturer is paid for a capped budget rather than per pill.
why it works
- A flat fee capped spending at the level Louisiana already paid.
- Unlimited volume removed the rationing of cures by cost.
- The manufacturer's incentive shifted from price per pill to treating more people.
- The 98% cure rate made volume the only sensible metric.
what transfers
When a per-unit price makes you ration a cure, flip the contract: pay a fixed fee for unlimited volume, so the budget stays capped and the vendor profits from more cures, not more pills.
what came after
Louisiana launched the model on 1 July 2019 with a goal of treating more than 10,000 Medicaid and incarcerated patients by the end of 2020; the federal Medicaid agency won approval for a similar subscription arrangement, and the model became a reference point for state drug purchasing.
references
- Louisiana reaches 'Netflix-model' deal to tackle hepatitis C
- Louisiana picks Gilead subsidiary for 'Netflix' style HCV subscription plan
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