Last week a federal judge issued a preliminary injunction requiring the Health Care Authority (HCA) to cover hepatitis C drugs for all Medicaid clients with the disease — regardless of the drug's cost or how ill the patients are.

As the Seattle Times notes, there is a relatively new hepatitis C drug that costs about $95,000 for a 12-week treatment. It is apparently very effective at treating the disease, but the HCA's policy has been to limit coverage to those patients who are the sickest. According to the Times, about 28,000 people on Medicaid have hepatitis C.

The judge writes that he issued the preliminary injunction because plaintiffs are likely to succeed on the merits and suffer irreparable harm, the balance of equities is in plaintiffs' favor, and it is in the public interest.

Federal law requires Medicaid agencies to provide medically necessary treatment. But, apparently the HCA's Chief Pharmacy Officer 

identified fiscal concerns as the sole basis for the WHCA’s exclusionary policy, adding, “we have received funding only based on the criteria that we gave for F3 [the fibrosis score that indicates how sick the patient is] . . . It’s out of our hands. None of us would argue that we should not expand it, that it’s not the right thing to do, but we live in a political environment as a state that I have to operate within the resources and the rules around those resources that have been given to us.” 

In terms of the balance of equity and public interest questions, the injunction notes:

The Ninth Circuit holds that “the balance of hardship favors beneficiaries of public assistance who may be forced to do without needed medical services over a state concerned with conserving scarce resources.”

Washington is not alone in facing this issue. Bloomberg notes, "Many state Medicaid programs . . . have similar restrictions over which patients can receive the drugs . . . ."

At The Incidental Economist, a health care economics blog, Nicholas Bagley writes,

A similar lawsuit has already been brought against Indiana’s Medicaid program, and I expect the outcome to be the same. The legal question here is not remotely difficult: under federal law, Medicaid beneficiaries diagnosed with Hepatitis C are entitled to a cure. The states may be under fiscal pressure, but that doesn’t make the drugs any less medically necessary. (Other cases have been brought against state prison systems for withholding the drugs, including in Pennsylvania. Those cases present somewhat different legal questions.)

The impacts of this injunction (and a potential future ruling for the plaintiffs) on the state budget will be significant. According to the injunction,

The WHCA argues that the injunction would double the State’s Medicaid outpatient Pharmacy budget and cause them to reduce Medicaid enrollments, benefits, or provider rates to compensate for the increased expenditure in [hepatitis C] treatment.

(Emphasis added.) Meanwhile, in September, the HCA's Medicaid director wrote to the U.S. Senate Finance Committee that Washington expected to spend $242 million in FY 2016 to treat Medicaid clients with hepatitis C. (Of that, $60.7 million would be paid by the state; the rest would be covered by federal funds.) The letter notes,

HCA's current pharmacy budget including Fee for Service and Managed Care is a little over $1 billion. If HCA were to pay for hepatitis C treatment for all Medicaid clients infected with hepatitis C, the cost would be three times the current total pharmacy budget.

(Emphasis added.) Whatever the final fiscal impact to the state of covering hepatitis C drugs, the injunction adds another wrinkle to next year's budget negotiations.