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Even With Sovaldi And ACA Costs, Health Inflation To Rise 'Modest' 6.8% In 2015
The launch of new Hepatitis C therapies like Sovaldi and a flood of new health care consumers, thanks to an improved economy and the Affordable Care Act, will help push health spending up 6.8 percent in 2015, according to a new study. But researchers at PwC's Health Research Institute say employer strategies to shift costs to workers through consumer-directed health plans, savvier health care shoppers generally and the increasing shift away from fee-for-service medicine should keep health inflation from jumping by double-digit percentages common in the late 1990s through much of the early 2000s.
"There are a lot of things happening that are keeping medical cost trend in check," said Rick Judy, Principal in PwC's Health Industries Advisory practice in an interview with Forbes.
Judy called health care providers gaining efficiencies "systemness" whereby they are streamlining administrative functions while improving clinical care by moving away from fee-for-service medicine where doctors and hospitals are paid for each treatment to other models like accountable care organizations (ACOs). Unlike traditional fee-for-service approaches that can lead to excessive or unneeded treatment, accountable care arrangements like ACOs group providers under an umbrella entity that generates finanicial rewards from insurers when doctors and hospitals work together to improve quality.
"Large hospital systems are starting to operate in a more efficient and effective way," Judy said. "The consumer is more cost-conscious."
Different types of health care services are more "value-based," he added. The jury remains out on ACOs but they are starting to "bare fruit" in the form of cost savings that are used to pay extra money to providers.
But there are some unknowns ahead for the U.S. health care system that are adding to health costs, particularly in the area of prescription drugs. PwC's Health Research Institute says new specialty prescription drugs like the Hepatitis C drug Sovaldi sold by Gilead Sciences (GILD) will contribute 0.2 percent to total spending growth next year.
Sovaldi and other Hepatitis C drug coming on the market in the next year from Abbvie (ABBV), the drug division spun off last year from Abbott Laboratories (ABT) and Merck (MRK) are hailed for their effectiveness in treating Hepatitis C, a disease that effects more than 3 million people in the U.S.
But Sovaldi is also expensive at $1,000 a pill, or more than $80,000 for a course of treatment per patient.
"It's just a very interesting dilemma for the industry," Judy said.

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