U.S. lawmakers want Gilead to explain Sovaldi's hefty price

(Reuters) - U.S. lawmakers have asked Gilead Sciences Inc to explain the $84,000 price tag of its new hepatitis C drug Sovaldi, which is encountering resistance from health insurers and state Medicaid programs.

The news pushed shares of Gilead down as much as 6 percent on Friday and sparked a sell-off among other leading biotech names on concerns they may have a harder time pricing new medicines. Biogen Idec fell 8 percent, Amgen Inc dropped 3 percent and Celgene Corp lost 3.7 percent.

Some health insurers, including the government’s Medicaid program for the poor, are holding off on authorizing use of Gilead’s new hepatitis C drug. While the treatment has been shown to cure many patients, the payors are balking at the prospect of covering the therapy for millions of people at a cost in the billions of dollars.

Separately on Friday, Gilead confirmed that it had agreed to supply the new drug in Egypt - which has the world’s highest prevalence of the virus due to use of contaminated needles in the 1970s - at around $900 for a 12-week course of therapy, or about 1 percent of the U.S. price.

The company has proposed a system of worldwide tiered pricing based on a country’s per capita gross national income. Sovaldi’s U.K. price is about $57,000, while the price in Germany is around $66,000, Gilead has said.

A letter to Gilead from Democrats in the House Energy & Commerce Committee, including ranking member Henry Waxman, asks for information on the company’s pricing methodology and its impact on public health.

Sovaldi is seen as a breakthrough in the treatment of the serious liver disease. It has been shown to raise cure rates and cut treatment duration with fewer side effects than older medicines, but critics maintain that a price of $1,000 each is too high for an easy-to-make pill needed by millions.

Gilead, in an emailed statement, said it has been working with a number of stakeholders, including federal and state officials, and looks forward to meeting with members of Congress to address concerns about Sovaldi.

The drug, approved by the Food and Drug Administration late last year, is expected to post record-breaking sales in its first year on the market.

“What is really scaring folks is the volume,” ISI Group analyst Mark Schoenebaum said on a conference call, referring to the fact that more than 3 million Americans are believed to be infected with the hepatitis C virus. He said sales of Sovaldi will total between $7 billion and $12 billion this year alone.

The head of commercial business at health insurer WellPoint Inc said the company is working with regulators and drug manufacturers to bring prices for hepatitis C drugs down to a “reasonable” level.

“Our concern is that a treatment will not cure patients if they cannot afford it,” the committee letter, addressed to Gilead Chief Executive John Martin, said. It asked that the company provide a briefing no later than April 3.


The letter cited a Reuters report noting that doctors are combining Sovaldi with a newly approved drug from Johnson & Johnson called Olysio, raising the treatment cost to $150,000.

“The costs are likely too high for many patients, both those with public insurance and private insurance,” the letter said. It added, “The extraordinarily high cost of your drug raises additional concerns because of the role of the federal government in speeding up its approval.”

Sovaldi was approved on an expedited basis by the FDA after being designated as a “breakthrough therapy.”

Answers being sought by committee Democrats include the methodology used by Gilead to establish Sovaldi’s price and the public health impact of insurers’ and public health programs’ decisions not to cover Sovaldi for all patients with hepatitis


Sovaldi is the first in a wave of expected new all-oral treatment regimens for the hepatitis C virus that have shown impressively high cure rates, well in excess of 90 percent, in clinical trials.

The likely launch over the next two years of drugs similar to Sovaldi, under development at companies like AbbVie, Bristol-Myers Squibb Co and Merck & Co, could trigger cost competition, Schoenebaum said.

“We are going to go from a monopoly to seven or eight players,” he said. “In my mind that is what will drive pricing down.”

These new drugs are meant to replace older treatment regimens that include the injected drug interferon, which causes miserable flu-like symptoms that have led thousands of patients to delay treatment and wait for the newer medicines.

The older drugs cure about 75 percent of those treated and take 24 to 48 weeks of treatment. The new drugs have been shown to cure patients in 12 weeks or less.

JP Morgan analyst Geoff Meacham noted that there was no such outcry from Congress following the last wave of new hepatitis C treatments that could cost about $100,000, cured fewer patients and came with far worse side effects.

“Given the very high cure rates with Sovaldi, Gilead is in position to ‘guarantee a cure’ to payers, thereby dramatically reducing the downstream economic burden of a liver transplant, risk of liver cancer or cirrhosis,” Meacham said in a research note.

Gilead shares fell $3.46, or 4.6 percent, to close at $72.07 after being down as much as $70.85 earlier in the day. Over the past year the stock has gained 70 percent.

Additional reporting by Michele Gershberg and Deena Beasley; Editing by Michele Gershberg, David Gregorio, Andrew Hay and Bernard Orr