A Solution to Help Prisons Pay for HCV Drugs: Nominal Pricing

Posted Oct 17, 2018

Journal of Correctional Health Care coverResearchers from Emory, Harvard and Brown universities and the Alaska Department of Corrections have proposed a solution to help correctional facilities pay for hepatitis C virus treatment while also saving money for society. Development of the strategy was aided by 340B expert William von Oehsen JD, who was a coauthor on the publication. A paper describing the proposal has been published in NCCHC’s Journal of Correctional Health Care.

The current cost of providing HCV treatment to all inmates can exceed the overall health care budget of a prison. Therefore, only a fraction of HCV patients in prisons get treatment. The researchers propose use of the little-known federal law on nominal pricing. Nominal pricing permits manufacturers to sell drugs to correctional systems at a low price without disrupting the Medicaid market. “This approach could cut the cost to cure HCV in prisons drastically,” says lead author Anne Spaulding, MD, MPH, CCHP-P, associate professor of epidemiology and medicine at Emory.

When the strategy was first drafted in 2017, HCV treatment cost about $70,000 per patient course. At this price point, nominal pricing would cut spending from $3.3 billion to $337.5 million, saving U.S. taxpayers approximately $3 billion. HCV drug manufacturers have since reduced the cost of a full course of treatment to as low as $25,000. However, the budget needed to treat all eligible inmates still remains unaffordable without making deep cuts elsewhere, such as in drug treatment programs, a counterproductive move.

“By providing treatment to everyone in prison who needs it using nominal pricing, society will gain in terms of reduced costs, lower disease transmission and more deaths averted,” says coauthor Jagpreet Chhatwal, PhD, assistant professor at Harvard.

A Win-Win for Prisons and Manufacturers
The paper’s authors suggest that using a nominal pricing mechanism even at a price point of $25,000 will still allow drug companies to sell the drug above production price and make a profit. According to federal laws, the nominal price of a drug must be less than 10% of the average market price. Since many prisons still cannot provide enough HCV treatment even at $25,000 per patient, they remain an untapped market for drug company sales. Nominal pricing is a strategy that will help close the gap between drug demand and the affordability of treatment.

The nominal pricing mechanism could also be used for other drugs, such as injectable penicillin, which is currently sold to correctional systems at a price greater than 300 times the price for public health clinics.

The paper was published "Online First" and will appear in the April 2019 issue of JCHC. Find the paper here » 

Pharmaceutical companies and correctional systems interested in partnering with Dr. Spaulding's group to explore nominal pricing for drugs should contact her at Aspauld@emory.edu.