(Adds analyst quote, Gilead declines comment and background)

By Caroline Humer

April 11 (Reuters) - Texas is reconsidering whether to impose strict limits on Gilead Sciences' $84,000 hepatitis C treatment for patients on the state's Medicaid health plan for the poor, at the urging of outside advisers, a state official said on Friday.

The Texas Health and Human Services Commission, which oversees Medicaid, had proposed a policy to allow the drug, Sovaldi, to be used mainly for sicker patients such as those whose hepatitis C had developed into advanced liver disease, according to state documents reviewed by Reuters.

As with most state Medicaid programs, an outside committee of pharmacists and doctors in Texas meets quarterly to review new drugs and recommend policies to the program's director. The agency had been planning to begin offering coverage in July if the committee recommended the policy at its Thursday meeting.

"The board asked state staff to meet with stakeholders, including gastroenterologists, about the criteria, whether it was too strict, and the prior authorization process," Texas Health and Human Services Commission spokeswoman Stephanie Goodman said. In the interim, Medicaid patients in Texas will still not be prescribed the drug.

"We're looking at our options and how that will affect our timeline to get the drug covered," Goodman said.

A Gilead spokeswoman declined to comment.

The deliberations in Texas, one of the most populous states and home to a relatively large number of hepatitis C patients, underline the difficulties of state health officials in deciding how to cover the Gilead treatment. It would have been the first major state to craft a policy. Discussions are continuing in California, Colorado and Virginia among others.

The Texas move has also tabled a plan that the state had hoped could be in place by July in which it would make supplemental payments to insurers to help offset the high cost of the drug.

Texas is among states including California and Florida asked by insurers who manage Medicaid plans to pay for the treatments directly, a move they said was needed because they would otherwise lose money on their contracts.

Leerink managed care analyst Ana Gupta said that the Texas per-use payment could be a viable approach to compensating insurers in other states.

"It covers the use of the drug while still potentially limiting the utilization only where medically necessary," Gupta said. She said the price tag to insurers may be $8 billion for eligible patients in Medicaid and similarly structured plans such as those sold on the Obamacare exchanges.

Sovaldi has become the focal point for a global outcry over the price of novel medicines, attracting criticism from the World Health Organization, doctors' groups, state officials and insurance industries. Sovaldi is the first drug to provide a true cure for most patients who take it, but its cost could reach more than $200 billion if widely used in the United States, posing huge risks to state budgets and insurers' financial results.

Gilead Sciences received U.S. regulatory approval for the treatment in December. Many patients are prescribed the drug in combination with another new drug, Johnson & Johnson's Olysio, pushing the treatment cost to around $150,000.

Gilead shares, which have been hit by questions over Sovaldi's price in recent weeks, rose as much as 4 percent on Friday. The company reported new data on a combination therapy including Sovaldi.

CARVING OUT THE DRUG

One of the country's largest insurers, WellPoint Inc , told investors last month that it was in talks with state Medicaid agencies about these high costs.

"Our view is pretty simply it either needs to be covered in the rates and covered quickly or you have to take it out of managed care and put it into fee for service and pay for it that way," said Richard Zoretic, president of WellPoint's government business division.

Some patient advocates prefer the second approach because it could encourage better access to the drug.

"There is this basic bar in Medicaid where they do have to cover the drug. The question is who is going to get it and what will the rules around that be," said Anne Donnelly, director of healthcare policy at Project Inform based in San Francisco.

For instance, Texas' policy on use of the drug this year appears to be stricter than the policy adopted in Oregon. Its pharmacy committee has recommended limiting the use of Sovaldi to patients who have moderate to severe fibrosis of the liver whereas Texas was targeting advanced liver disease.

State Medicaid programs, funded by both state and federal government, set the policy for drug use in their fee-for-service programs. Coverage can differ because the vast majority of patients are in plans managed by private insurers that heed the state's recommendations but may also have their own practices.

(Reporting by Caroline Humer; Editing by Jonathan Oatis and Grant McCool)