Biggest Insurer Shocked With Hepatitis C Costs

UnitedHealth Group spent $100 million on hepatitis C drugs in the first three months of the year, much more than expected, the company said Thursday. The news helped drive down the biggest insurance company’s stock and underscores the challenge for all health care payers in covering Sovaldi, an expensive new pill for hepatitis C.

“We’ve been surprised on the volume — the pent-up demand across all three businesses” — commercial insurance and private Medicare and Medicaid plans, said Daniel Schumacher, chief financial officer of UnitedHealth’s insurance wing. Schumacher and other executives discussed the company’s first-quarter results on a call with financial analysts.

Made by Gilead Sciences, Sovaldi costs more than $80,000 per treatment and is seen as highly effective against hepatitis C, a chronic virus infection that often leads to liver failure. But the high cost, and what increasingly looks like high demand, is straining budgets for the¬†government-financed Medicare and Medicaid programs as well as for private insurers that had not priced the drug into this year’s premiums.

UnitedHealth bosses discussed other pressures on first-quarter profits, especially from customers who renewed 2013 policies for 2014. To avoid premium increases associated with Affordable Care Act rules that became effective this year, many customers extended their plans late last year.

President Obama also expanded the ability of policyholders to keep their plans. The result is that UnitedHealth has many more customers than expected on older plans at lower rates, squeezing profits.

But discussion of Solvaldi and hepatitis C treatment dominated the phone call.

“The price is exceptionally high,” and use “has accelerated very quickly” since it was approved in December, said¬†Gail Boudreaux, chief executive of the company’s insurance operation.

The drug’s expense has prompted numerous conversations about costs and benefits of specialty drugs and whether there are some pills the country can’t afford.

UnitedHealth shares fell as much as 5 percent in early Thursday trading even though the company reported first-quarter profits that slightly exceeded analysts’ expectations. Other insurer stocks also fell. Gilead’s stock price rose about 1 percent.