Two years ago, James Luongo was thrilled to hear about the first new drugs that could rid his body of hepatitis C. The virus had been silently circulating in his blood for years and would likely cause liver disease, perhaps cancer. But he still felt fine.

The drugs seemed like a good thing until his Medicaid insurer denied coverage of the treatment. Twice.

"They said, 'You're not sick enough,' " said Luongo, who is staying with his ailing mother in Northeast Philadelphia. "How do they tell somebody you've got a disease that's deadly, that's going to kill you, but you're not sick enough for the cure?"

The answer, most everyone agrees, is that the drugs are so expensive that states and their Medicaid contractors have felt forced to gamble. They bet that patients' disease will progress slowly. They wager that pharmaceutical companies will gradually lower prices in the face of more competition. They take a chance that people with hepatitis C will not infect others.

And they hope, critics say, that they can get away with neglecting a stigmatized population. Hepatitis C can strike anyone - more than one percent of the U.S. population is infected - but is more frequent among low-income people who have injected drugs.

"A disenfranchised, vulnerable community was one where they could draw the line," said Robert Greenwald, a Harvard law professor and coauthor of a study last year that found most states were rationing hepatitis C treatment. "A person with Alzheimer's on Medicaid would have family who would not tolerate not getting the cure," he said, if one became available.

That attitude is starting to change. Faced with a dozen protesters, an advisory committee that rarely sees public discord voted last week to make treatment available to all infected patients on Medicaid in Pennsylvania. If approved by Department of Human Services Secretary Ted Dallas, the state would join a half-dozen others that have eased restrictions.

New Jersey, typically more progressive on social-services issues, remains among the most restrictive on hepatitis C coverage. The state leaves decisions up to its managed-care contractors, which generally require evidence of severe fibrosis - a score of F-3 on the scale of 0 to 4 that is used to measure liver damage from hepatitis. Standard medical guidelines recommend treatment beginning with a score of F-0; they are followed by Medicare and most private insurers, although some require hefty co-pays.

Wait longer, pay more

"It is better to get treated [earlier] and pay for it rather than wait until somebody gets sick and gets a liver transplant," said Ashraf Malek, a liver specialist with Lourdes Medical Associates, who sees more than 400 hepatitis C patients a year, half of them in New Jersey's Medicaid program. And while the treatments can be highly successful at any stage of hepatitis C, they won't fix the cirrhosis or cancer that it caused, leading to higher costs overall.

Many aspects of hepatitis C are unusual; in combination, they are unique:

The numbers are huge. About 3.5 million Americans are infected. The Centers for Disease Control and Prevention said three weeks ago that more people die from hepatitis C than from 60 other infectious diseases combined.

Organ damage can take decades to develop. Although two-thirds of those infected will eventually develop chronic liver disease, most have not yet had symptoms and don't know they have the virus.

People who are most contagious are least likely to be treated. Those born between 1945 and 1964, who were exposed through transfusions before blood was screened, or through drug use and other risky behavior, account for 75 percent of cases. The CDC four years ago called for all baby boomers to be tested.

But current drug abusers now are the fastest-growing group. Many are young adults who became addicted to prescription painkillers and moved on to heroin. They spread the virus by sharing drug paraphernalia and are more likely to have multiple sex partners and be infected with HIV, both risk factors for hepatitis C. And if they have insurance, it is more likely to be Medicaid.

Suddenly, there is treatment. After decades in which the only treatments had middling success rates and often intolerable side effects, drugs introduced in recent years require just one pill a day with cure rates above 90 percent in three months, with little or no side effects.

The new drugs are phenomenally expensive: List prices initially were $80,000 to $120,000 for a three- or four-month course, although Medicaid programs get mandatory rebates and can negotiate additional discounts. Pennsylvania pays between $31,000 and $58,000 for 12 weeks. Prices may drop further with the expected approval next month of a new treatment from Gilead.

Caught in the middle

Pharmaceutical companies blame the high cost of research and development. Critics say the industry is seeking excessive profits - and is enabled by the U.S. government's failure to regulate drug prices as other nations do. States' Medicaid officials say the cost, combined with the potentially huge market, has boxed them in.

"There is really no analogous condition," said Walid Gellad, a physician and pharmaceutical-policy researcher at the University of Pittsburgh.

A year ago, when the state Medicaid program first considered a policy change, Gellad estimated that 30,000 people on Medicaid in Pennsylvania had been diagnosed with hepatitis C and at least 10,000 more were infected but didn't know it.

"You could treat everybody today and it would be better, but there could be consequences," he said in a recent interview. "You raise taxes, cut teachers; you'd have to do something."

With his numbers in hand, the state last year lowered by a notch the disease severity level that would qualify a patient for treatment. It also dropped a requirement that patients be clean and sober, with blood and urine samples to prove it, for at least six months.

The sobriety rule, still used in many states, including New Jersey, was intended to avoid treating patients who were more likely to become reinfected. That is the wrong approach, said Stacey B. Trooskin, an infectious-diseases physician at Drexel University College of Medicine.

"You should be prioritizing individuals who are actively using drugs, because those are the folks who are most likely to transmit the infection," said Trooskin, pointing to guidelines issued last year by the Infectious Diseases Society of America and the American Association for the Study of Liver Diseases.

About 1,400 Medicaid patients statewide were treated for hepatitis C in the six months after the state's updates, compared with around 600 during the previous six months, according to the Department of Human Services.

The opioid effect

James Luongo, the patient in Northeast Philadelphia, was denied again after the rules were tweaked.

He thinks he got the infection in the early 2000s. He had gotten a tooth pulled and the dentist prescribed Percocet for pain. When the prescription ran out, the withdrawal symptoms - headaches, chills, vomiting - sent him out on the street looking for more. "I felt terrible," he said. He eventually crushed and injected pills, then heroin.

Luongo, 46, said he has been sober for two years and had health insurance for a time while working as a clerk for Dollar Tree. Then he lost his job.

The PHMC Care Clinic on Callowhill Street enrolled him in Medicaid so he could be treated for hepatitis, to no avail. He said his doctor planned to seek coverage a third time, hoping the state will at last help all patients with hepatitis C.

The Veterans Administration announced in March that it would treat all veterans. The federal Centers for Medicare and Medicaid Services sent a pointed reminder to states in November that Medicaid programs, run and funded jointly with the federal government, are required to meet accepted medical standards. CMS also told drug companies that they should offer the lowest possible rates.

Harvard's Center for Health Law & Policy Innovation is pursuing a class-action lawsuit against Washington state for withholding treatment. Its litigation director made some of the same points in testimony before Pennsylvania's advisory committee in Mechanicsburg on Tuesday.

Some of its members, providers, and managed-care organizations clearly felt trapped between sick patients, strapped taxpayers, and profit-seeking drug companies.

The manufacturers "are holding the providers and the patients hostage," state pharmacy director Terri Cathers said after the meeting, for "care that they should be getting without question."

Cathers expressed no such opinions while chairing the public session, which resulted in a 10-7 vote, with 2 abstentions, to lift the coverage restrictions in Medicaid's fee-for-service program. State policy and federal law requires managed-care organizations, which cover most patients, to provide no less.

The advocacy role had been taken up by Gene Bishop, a retired Philadelphia internist and longtime member of the usually obscure Pharmacy and Therapeutics Committee. Hepatitis C was the "most difficult discussion and decision we've ever had to make," Bishop said.

Imagining herself in the place of a physician seeing a patient, she wondered aloud "what it must feel like to say, 'You have to get sicker in order to get treatment.' "