The largest U.S. pharmacy benefit manager said on Monday it has lined up a cheaper price for AbbVie Inc's newly approved hepatitis C treatment and, in most cases, will no longer cover Gilead Sciences Inc's treatments after trying for nearly a year to win a deeper discount.
Express Scripts' move reignited investor concerns that pharmaceutical companies will have to bow to pricing pressure from U.S. insurers and lawmakers over novel medications whose cost can reach hundreds of thousands of dollars for some diseases.
Gilead shares dropped 13 percent, or about $14.54, in Monday trading to $93.88, though it was still far above the $65 level reached in April, when insurers launched a major outcry over its multibillion-dollar hepatitis C business. Shares in major biotechnology companies such as Amgen, Biogen and Celgene fell more than 2 percent.
Express Scripts opposed the $84,000 price tag of Gilead Sciences' Sovaldi treatment since its approval a year ago. It said the $1,000-a-day pill, shown to cure hepatitis C in most patients, was unaffordable.
Private insurers generally receive discounts of as much as 20 percent, but Gilead has resisted, bringing in $3 billion in quarterly revenue for Sovaldi this year. The company maintains that Sovaldi, and a next-generation version called Harvoni that was approved in October, will save the U.S. healthcare system the costs of caring for advanced liver disease in many patients.
Gilead spokeswoman Cara Miller said on Monday in an e-mailed statement that the company is continuing to negotiate with Express Scripts.
AbbVie's Viekira Pak drug was approved on Friday by U.S. regulators and the company set a list price of $83,319.
But it has agreed to a significantly lower price than Gilead for Express Scripts' National Preferred Formulary, a list of approved and covered drugs for 25 million Americans, Express Scripts Chief Medical Officer Steve Miller said in an interview.
"This is unprecedented," Miller said, explaining that the pricing on specialty drugs of this type tend to be much closer even when a competitor enters the market. He did not provide a specific dollar figure, but said AbbVie had narrowed the price gap to resemble what Western European countries pay for Sovaldi, which runs from $51,373 in France to $66,000 in Germany.
An estimated 3.2 million people in the United States have hepatitis C. Most insurance plans have paid for Gilead's drugs only for patients with advanced liver disease to limit their exposure to its cost. Express Scripts said the AbbVie agreement will allow it to extend treatment to all hepatitis C patients.
Dr. Camilla Graham, co-director of the viral hepatitis center at Beth Israel Deaconess medical center in Boston, said she is hopeful other insurers will follow suit.
"My first thought when I saw this was 'Finally, we have a solution to this public health crisis,'" Graham said.
A significant portion of patients with hepatitis C receive medical care through government-paid programs, including Medicare for the elderly and disabled, Medicaid for the poor and the U.S. Department of Defense.
State Medicaid agencies have also limited access to Gilead's Sovaldi, saying it is too expensive even after they receive a legally mandated 23 percent discount.
Matt Salo, executive director of the National Association of Medicaid Directors, said he is "hopeful but cautious" about the state agencies' ability to extract further rebates on top of the discount from Gilead and AbbVie.
America's Health Insurance Plans, the insurance industry's largest lobbying group, also hopes to see Gilead's prices drop now that there is competition in the market, said spokesman Brendan Buck.
EXCEPTIONS MADE FOR SOVALDI
The AbbVie regimen consists of a cocktail of anti-viral drugs to be taken as three pills in the morning and one in the evening. The regimen requires some patients also to take ribavirin. The U.S. Food and Drug Administration approved the regimen for patients with genotype 1 form of the virus, the most common type of hepatitis C and the most difficult to treat.
Express Scripts said starting Jan. 1, 2015, it would pay for the AbbVie drug only for patients who have genotype 1. Express Scripts will no longer cover Gilead's Harvoni, a one-pill treatment for patients with genotype 1 that costs $94,500 for a 12-week course. It will cover Sovaldi in cases where patients have other types of the disease.
The AbbVie regimen is also not recommended for patients whose livers are not functioning and in people who have not benefited from using older treatments. An Express Scripts spokesman said the company will make exceptions for those patients to allow them to take Gilead's medications.
Mario Molina, chief executive officer of Molina Healthcare Inc., a small Medicaid insurer in California that has criticized Gilead's high prices, said on Monday that he sees more competition on drug prices ahead.
"I think that this is the beginning," Molina said, describing the move as "a harbinger of things to come."
(Reporting by Caroline Humer; Editing by Michele Gershberg, Meredith Mazzilli and Dan Grebler)