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鈥檚 stock and underscores the challenge for all health care payers in covering Sovaldi, an expensive new pill for hepatitis C.
鈥淲e鈥檝e been surprised on the volume 鈥� the pent-up demand across all three businesses鈥� 鈥� commercial insurance and private Medicare and Medicaid plans, said Daniel Schumacher, chief financial officer of UnitedHealth鈥檚 insurance wing. Schumacher and other executives discussed the company鈥檚 first-quarter results on a call with financial analysts.
Made by Gilead Sciences, Sovaldi costs and is seen as highly effective against hepatitis C, a chronic virus infection that often leads to liver failure. But the high cost, and , is straining budgets for the聽government-financed Medicare and Medicaid programs as well as for private insurers that had not priced the drug into this year鈥檚 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.
鈥淭he price is exceptionally high,鈥� and use 鈥渉as accelerated very quickly鈥� since it was approved in December, said聽Gail Boudreaux, chief executive of the company鈥檚 insurance operation.
The drug鈥檚 expense has prompted about costs and benefits of specialty drugs and whether there are some pills the country can鈥檛 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鈥� expectations. Other insurer stocks also fell. Gilead鈥檚 stock price rose about 1 percent.