The nation's Medicaid programs could find themselves on the hook for more than $55 billion to pay for breakthrough hepatitis C treatments like Sovaldi, which costs $1,000 a day for a 12-week treatment, a new study says.
That's even with a 23 percent Medicaid plan discount for the drug, pharmacy benefits firm Express Scripts said in its state-by-state analysis that estimated the staggering costs of the treatment.
"These states are saying 'What is it we're supposed to do?'" said Dr. Steve Miller, Express Scripts medical director. "This is just unimaginable for state budgets today."
Nationally, Express Scripts estimated that more than 750,000 Medicaid patients and prisoners now covered under state health programs suffer from chronic hepatitis C, a viral infection that can lead to deadly liver cancer.
With one of the nation's largest Medicaid populations, California faces $6.7 billion in hepatitis C spending, while Texas' tab could top $5.3 billion. Florida and New York could see nearly $4 billion each in hep C spending.
Miller calls it a massive tax for state health systems. The fact that Sovaldi is a breakthrough drug—an effective, well-tolerated cure for a degenerative disease that impacts more than 3 million Americans—will put health officials in a difficult position.
"Should the states be compelled to pay for everyone?" he said. "You're going to have to figure out if you're going to have to go back to your voters and ask for more funding."
Some states have looked to follow the lead of commercial insurers like UnitedHealth Group, which restricted approval for Sovaldi to patients with advanced hep C-related liver disease, after it incurred $100 million in drug costs during the first quarter. But some Medicaid officials are not sure states can be as restrictive as private insurers.
"You can put those policies in place, but are those legally defensible?" said Matt Salo, executive director of the National Association of Medicaid Directors. "Within the public health community, many don't think so."
Salo said that the Centers for Disease Control and Prevention and other public health advocates have undertaken outreach campaigns to get Americans to undergo testing for the virus, which many people may not know they have. He expects awareness will serve to boost demand.
"Hep C is an infectious disease. It is a public health scourge," he said. "Because of that, denying treatment is unacceptable."
Gilead, the maker of Sovaldi, has argued that its drug will actually save on health costs in the future by effectively curing hep C patients and saving them from costly liver failure, which runs in the hundreds of thousands of dollars. Still, federal officials have begun to push back at Gilead. This month, the Senate opened an investigation into the drug's pricing. The drugmaker said it was cooperating with the probe.
Sovaldi is now prescribed in the combination with ribavirin, which costs roughly $1,200 for a course treatment, or Johnson & Johnson's Olysio, which is priced at more than $60,000. Gilead is expected to gain approval for a single-pill version of Sovaldi next October.
"The concern in the marketplace is that Solvadi will come out with the new product at $100,000 and say it's a 30 percent discount on the combination in the market today," Miller said.
—By CNBC's Bertha Coombs