May 28 (Reuters) - Drug prices in the United States vary based on the buyer. The following is a brief explanation of drugs are priced in light of a backlash by insurers over Gilead Sciences' $84,000 hepatitis C drug Sovaldi :
* Commercial insurers and Medicare Part D providers such as Express Scripts accounted for 90 percent of the more than $2 billion spent on Sovaldi in the United States during the first quarter, according to Gilead.
* Commercial insurers either manage pharmacy benefits themselves or subcontract to pharmacy benefit managers like Express Scripts for their employer-based healthcare and individual plans. They received few discounts on the drug.
* The government's Medicare health plan for the elderly is prohibited by U.S. law from negotiating drug prices for patients who receive them through the fee-for-service program. However, most oral medications, including Sovaldi, are often covered through Medicare Part D, which is run by private benefit managers like Express Scripts and Humana Inc. Those companies are able to negotiate on price.
* Medicaid, a state-by-state program for the poor jointly funded by state and federal budgets, has spent the least of these three groups on Sovaldi. That is due to two factors: each individual state Medicaid office determines its own policy for drug use, and many states have limited use of the drug as they determine their reimbursement policy.
Medicaid receives at least a 23 percent discount to the market price of a drug by law. Each state can in turn negotiate an extra, or "supplemental" discount. Private insurers subcontracting for Medicaid can also get those discounts.
* The U.S. Department of Veterans Affairs can pay less than Medicaid. Those contracts are negotiated separately, as are those of the federal prison system and state prison systems, and can dip below Medicaid levels by law. When they are able to guarantee a certain amount of volume, the VA can secure low prices on drugs. Because the VA and prison systems cover large populations of people infected with hepatitis C, they are expected to get discounts for Sovaldi.
(Reporting by Caroline Humer; Editing by Michele Gershberg)