‘Nominal pricing’ can help prisons and jails treat hepatitis C without breaking the bank

Across the United States, about 1 of every 7 individuals in jail or prison has chronic hepatitis C. In some states, such as New Mexico, it’s closer to 1 in 3. With approximately 9 million people spending time in prison or jail over the course of a year, more than 1.2 million incarcerated individuals have chronic hepatitis C.

Left untreated, this viral disease can cause serious and costly health problems, including cirrhosis, liver cancer, liver failure, and even death. Once a difficult-to-treat infection, chronic hepatitis C can now be cured by taking a regimen of daily pills for eight to 12 weeks that act directly against the virus. But there’s a hitch: This cure costs $25,000 or more per person.

Although treating every incarcerated individual with chronic hepatitis C is the right thing to do for several reasons (more on that in a minute), doing it would exceed the health care budgets of jail and prison systems.

We believe there’s a solution that won’t break the bank. It’s called nominal pricing. This pricing mechanism provides deep discounts of at least 90 percent on drugs to so-called safety-net facilities. (By law, the nominal price of a drug must be less than 10 percent of its average market price.) These include hospitals and clinics that treat many patients without insurance or who are homeless. Because of the high markup on hepatitis C drugs, a nominal price is still well above the cost to manufacture the pills.

Nominal pricing permits manufacturers to sell drugs to safety-net facilities at a low price without disrupting the Medicaid market. Offering a discount to one customer usually triggers a similar discount on any drugs sold in the Medicaid program. Nominal pricing provides a way to prevent this from happening, and so can entice drug manufacturers into offering substantially lower prices to safety-net facilities that otherwise may not be able to afford certain drugs.

As we and colleagues from Brown University, the Alaska Department of Corrections, and the law firm of Powers, Pyles, Sutter, and Verville wrote in the Journal of Correctional Health Care, extending nominal pricing to correctional facilities could drastically cut the cost to cure hepatitis C in prisons and jails.

When we first drafted a strategy to use nominal pricing in prisons in 2017, Gilead Sciences’ hepatitis C treatment ledipasvir/sofosbuvir (Harvoni) cost about $70,000 per patient course. Other companies had similar prices for their hepatitis drugs. Since then, drug manufacturers have reduced the price of a full course of treatment to below $25,000. Even at that price, however, the cost of treating all inmates isn’t affordable without making deep cuts elsewhere, such as in prison drug treatment programs, which would be a counterproductive move.

Not all incarcerated individuals with hepatitis C stay long enough in prison or jail to complete the eight-to-12-week course of treatment. At the current price, treating approximately 10 percent of them would cost $3.3 billion. At the nominal pricing discount, the cost would be $337.5 million, saving U.S. taxpayers approximately $3 billion.

Prisons and jails represent an untapped market for drug company sales. Nominal pricing is a strategy that can close the gap between treatment demand and supply. With nominal pricing, companies can sell their hepatitis C drugs above the production price and still make a profit.

Treating all incarcerated individuals who have chronic hepatitis C makes sense for several reasons. Hepatitis C isn’t spread much inside prison — most individuals acquired their infections before being incarcerated. But those incarcerated for injecting drugs are likely to contact others at risk for infection once they leave prison. Treating people in prison would reduce the spread of hepatitis C in the community.

By providing treatment to everyone in prison with hepatitis C, society would gain in terms of reduced costs and deaths prevented. Treating the consequences of unchecked hepatitis C infection — liver cancer and end-stage liver disease — is extremely costly for both prisons and society as a whole. For individuals with long-term incarcerations, this could include the cost of a liver transplant. Using nominal pricing to expand access to hepatitis C treatment could thus be a win-win situation for drug manufacturers as well as society.

The nominal pricing mechanism could also be applied to other drugs used frequently by the penal system. One is injectable penicillin for syphilis, which Pfizer sells to correctional systems at a price 300 times higher than what it charges public health clinics. For budgetary reasons, some jails are substituting less-expensive doxycycline for penicillin, even though it is not the CDC-recommended treatment for syphilis and the length of stay in a jail (on average, about 15 days) rarely permits completion of the 30-day treatment course of this substitute medication.

Another potential beneficiary of nominal pricing is intranasal naloxone (Narcan), a drug that can quickly reverse an opioid overdose. It typically retails at $130 per box of two 4-milligram doses. Reducing the cost with nominal pricing to near $10 would permit small jails to stock the medication for ready access.

Do correctional facilities qualify as safety-net providers? We believe they do. The Institute of Medicine defined safety-net providers as health care facilities that offer access to care regardless of a patient’s ability to pay and whose patient population includes a substantial share of uninsured, Medicaid, and other vulnerable patients. That’s an apt description of correctional facilities.

How to treat the large number of incarcerated individuals with chronic hepatitis C without busting prison budgets is a conundrum for most states in the country. To date, 15 states have been sued to expand hepatitis C treatment in prisons, though none of those suits have offered insightful solutions for how to pay for this treatment. We believe that extending nominal pricing to prisons and jails can significantly expand hepatitis C treatment — which is the right thing to do — in a fiscally responsible way.

Anne Spaulding, M.D., is an associate professor of epidemiology at Emory University’s Rollins School of Public Health and the former medical director of the Rhode Island Department of Corrections. Jagpreet Chhatwal, Ph.D., is an assistant professor at Harvard Medical School and a senior scientist at the Massachusetts General Hospital Institute for Technology Assessment. Spaulding has served on an advisory board for AbbVie; has received funding through her institution from Gilead; and has received honoraria for speaking engagements from various professional organizations whose conferences were funded by Merck, Gilead, and/or AbbVie. Chhatwal has served on the scientific advisory board of Gilead and Merck; has received research grants through his institution from Gilead and Merck; and has received consulting fees from Gilead and Merck.