Academic Literature

The "Netflix Model" of Financing Hepatitis C Treatment

An alternative payment model is proposed to support a population-level payment paradigm.
Download Report


Originally published on 11/20/2018 in JAMA Viewpoint

Drug prices in the United States remain the highest in the world. New payment approaches are needed, a point illustrated by the new treatments for hepatitis C virus (HCV) infection that are highly effective but also very expensive, at least from the view of many payers, physicians, and patients.

The current per prescription model for financing treatment is insufficient to pay for this high cost treatment. An alternative payment model is proposed here to support a population-level payment paradigm. By treating HCV on the population level, you treat every patient possible with as much speed as is possible. Doing so would reduce the health consequences for those infected, generate the most future savings from improved health, and help decrease future transmission of HCV from person to person.

Read the full article here.


How would a state engage manufacturers to participate in the Netflix model?

A state can issue an RFP for bids on the exclusive rights to a subscription model, in which the state would pay an annual or quarterly payment to the contracted provider over a pre-determined period of time in exchange for access to as much of that company’s HCV drugs as the state needs to treat its residents during that time frame. Bidding manufacturers could also be required to provide screening and patient outreach programs for treatment eligible beneficiaries and patients. The state may also consider including bonus payments or other incentives for reaching specific target numbers of patients treated.

How would a state administer this project?

The way states deliver and pay for healthcare vary widely, which means that the implementation of the Netflix model would probably look different depending on where you go. Some important factors are whether Medicaid is administered directly by the state, or contracted out to health plans. It also depends on who provides treatment to patients. For example, some states already contract with 340B qualifying hospitals to treat prisoners. This also allows them to purchase drugs at a discounted rate for their prison population, a pre-existing arrangement that could be extended to a broader effort by centralizing the purchasing and distribution of HCV treatment through such a hospital. Still other states may have existing programs to screen for HCV and other infectious diseases in their communities, which may offer a means of outreach and care delivery not available in other states.

What patients would the Netflix model include?

The optimal strategy would target all of a state’s residents with HCV, including those receiving state-funded care (Medicaid, prison, state employees), those covered by commercial and union plans, Medicare, the VA, and the uninsured, including at-risk populations. Although this approach would be the most effective way to eliminate the disease statewide, it is likely that budget constraints and logistics/access challenges will require an initial focus on a more targeted population that falls directly under the purview of state government – Medicaid and prisons.

How many patients can realistically be reached with this approach?

Currently, a relatively small percentage of eligible infected patients with either Medicare or commercial coverage seek treatment for their disease. As such, it will be important to consider whether (and how) the state would ensure participation and compliance beyond such level, and what the manufacturers role would be in supporting these efforts.

It is also important to consider that the treatment of HCV, even with the more convenient and tolerable profile of the latest generation products, requires specialized medical supervision and monitoring. Historically, this has restricted treatment to providers focused on hepatology and gastroenterology, and providers in these specialties are not scaled to handle the anticipated volume of patients. To avoid this bottleneck, primary care providers can be trained to diagnose, prescribe, and monitor treatment. (1,2)

Can the state favor one manufacturer’s drugs over another’s?

All Medicaid programs are bound by law to cover the drugs of those manufacturers who commit to the Medicaid Drug Rebate Program (MDRP), which ensures that Medicaid programs pay Best Price (e.g., the lowest price in the market for each drug. Although states may avoid this mandate by choosing not to offer pharmacy benefits at all, this is not a practical decision.

In order to explicitly exclude the drugs of the non-winning bidders, the state would have to apply to CMS for a waiver that permits blocking them from their preferred drug list. Alternatively, the state could also avoid the need for a waiver by preferring the winning bidder’s drug, requiring prior authorization for the use of non-preferred drugs, and requiring that patients try the winning bidder’s drug before using another. Either approach would also include an appeals process for patients who for clinical reasons cannot use the winning bidder’s drug.

Doesn’t the Netflix model approach violate Best Price?

Manufacturers are not required to factor Medicaid pricing into their Best Price calculations, so it is unlikely that this would create a problem if the model were applied only to Medicaid. Some states may also draw upon their hospitals with 340B status to act as purchasing entities, similarly allowing them to avoid this route. For commercial populations, however, drug manufacturers are required to report best price to CMS and must report this information at the unit price level. The unlimited nature of the Netflix model would make this unit-level reporting difficult and a waiver or other exception may be needed to allow for reporting that is not unit-based.

1. Mitruka K, Thornton K, Cusick S, et al. Expanding primary care capacity to treat hepatitis C virus infection through an evidence-based care model–Arizona and Utah, 2012-2014. MMWR Morb Mortal Wkly Rep. 2014;63(18):393-8.
2. Arora S, Thornton K, Murata G, et al. Outcomes of treatment for hepatitis C virus infection by primary care providers. N Engl J Med. 2011 Jun 9;364(23):2199-207. doi: 10.1056/NEJMoa1009370.


How a “Netflix Model” Can Help States Pay for Hepatitis C Treatment

Read Impact Story

Research & Insights

We conduct non-partisan, independent research, and make our work accessible and informative to policymakers and the general audience alike. Browse our featured research or explore our work by article type.

The U.S. Government Should Buy Gilead for $156Bn to Save…
At $500 per pill, buying Gilead could lower hepatitis C drug costs per patient to one-third their current level, making it affordable to rapidly treat the 2.7 million Americans that have HCV.
Forbes 01/17/2017
Xeljanz, the FDA, and nine years of patient harm
Quantifying population-level adverse events in the near decade between when safety concerns were identified and FDA action
Drug Pricing Lab 05/31/2022
Atypical antipsychotics: Decades of use, unfathomable harms
Using attributable risk calculations to quantify how many premature deaths resulted from atypical antipsychotic use in the elderly
Drug Pricing Lab 05/31/2022
Medicare Part B Premium Dynamics Explained
The Drug Pricing Lab commissioned Milliman to prepare a report exploring the impact of changes in Medicare Part B program costs on beneficiaries’ premiums and Social Security payments. This report focuses on the 2022 Part B premium for beneficiaries with various income levels to illustrate the payment dynamics and discusses the implications for related programs.
Milliman 12/23/2021
Comparing Factors that Influence Pharmaceutical Pricing and Access in the…
Drug prices in the United States are some of the highest in the world, which has triggered several policy proposals aimed at adopting pricing strategies used by other countries.
Drug Pricing Lab 12/20/2021
Biosimilars in Medicare Part D: pricing dynamics and considerations
The Drug Pricing Lab engaged Milliman to prepare a report summarizing the pricing dynamics affecting utilization of biosimilars in the current Medicare Part D marketplace and under the proposed Part D benefit design in the Build Back Better Act.

This report was commissioned by the Drug Pricing Lab.
Milliman 12/14/2021
Evaluating Industry’s Drug Pricing Claims
A closer look at three of PhRMA’s most cited talking points.
Drug Pricing Lab 11/18/2021
Mapping conflict of interests: scoping review
A scoping review of the literature to identify all known ties between the medical product industry and the parties and activities in the healthcare ecosystem.
Drug Pricing Lab 11/03/2021
Production Plus Profit Pricing (P-quad) FAQ
What A Waste! The National Academy Of Medicine’s Report On…
Why Congress should not follow the National Academy of Science, Engineering, and Medicine’s recommendation to remove the JW modifier.
Health Affairs Blog 07/09/2021
Medicare Must Study Unproven, Expensive Alzheimer’s Drug
Medicare cannot indiscriminately cover the cost of Aduhelm for the treatment of Alzheimer's disease without first evaluating whether it truly works.
Bloomberg Opinion 06/15/2021
Value-Based Management of Specialty Drugs: Practical Considerations and Implications for…
Not all approaches are suited to meeting policy makers and health plans’ goals of managing specialty drugs based on their value. Researchers conducted a qualitative study with Blue Cross Blue Shield plans interested in implementing value-based specialty pharmacy management to observe the plans’ objectives, strategies, and factors influencing their ability to execute on these strategies.
AJMC 05/13/2021

Stay up to date on our work and news