US lawmakers allege Gilead used "revenue-driven" pricing model for hepatitis C drugs

A report released Tuesday by US Senators Ron Wyden and Charles Grassley claims that Gilead Sciences priced the hepatitis C treatments Sovaldi (sofosbuvir) and Harvoni (ledipasvir/sofosbuvir) with the sole goal of maximising revenue. The report was based on an investigation of 20 000 pages of internal company documents, dozens of interviews with healthcare experts and data from Medicaid programmes in all 50 states and the District of Columbia.

"Gilead pursued a calculated scheme for pricing and marketing its hepatitis C drug based on one primary goal, maximising revenue, regardless of the human consequences," Wyden remarked, adding "there was no concrete evidence in emails, meeting minutes or presentations that basic financial matters such as R&D costs or the multi-billion dollar acquisition of Pharmasset, the drug’s first developer, factored into how Gilead set the price."

Specifically, the report alleges that Gilead pursued a marketing strategy and set a wholesale price of $1000 per dose for Sovaldi, or $84 000 for a course of treatment, to maximise revenue following its approval in December 2013. The investigation also concluded that Gilead utilised "cost-per-cure" calculations that resulted in greater revenue per treatment than previous direct acting antiviral therapies despite being in a position to create savings for payers. "Over the eight months Gilead spent determining the price of Sovaldi, the company repeatedly made clear its primary focus was outmaneuvering potential competitors to ensure its drugs had the greatest share of the market, for the highest price, for the longest period of time,” investigators said.

The probe also states that the drugmaker set the price of Sovaldi to ensure that a similarly high price could be charged for Harvoni. The latter therapy was launched at a cost of $94 500 after being cleared in October 2014. The report indicated that Gilead sought to raise the price floor for all future hepatitis C treatments, including its own future products as well as those of its competitors.

The report additionally explained that despite substantial access restrictions, Gilead refused to provide meaningful discounts for its hepatitis C treatments. The report noted that Gilead offered Medicaid programmes supplemental rebates of as much as 10 percent, provided states dropped some or all of their access restrictions. The investigation found that only five state Medicaid programmes entered into agreements to receive supplemental rebates from Gilead last year.

According to the report, Medicare spent about $8.2 billion before rebates on Sovaldi and Harvoni in the 18 months following the approval of Sovaldi in December 2013, while monthly spending by Medicare on hepatitis C treatments surged more than six-fold over that period. In 2014, Medicare and Medicaid spent more than $5 billion on Sovaldi and Harvoni prior to rebates, with the figure expected to rise this year.

"This report sheds light on one example of the pricing decisions made by one company with a new prescription medicine that entered the market without competition in high demand," commented Grassley, continuing "this might be an example that received the most attention in some time, but it won't be the last."

Commenting on the news, Bloomberg Intelligence analyst Asthika Goonewardene suggested that the senators' analysis was flawed because it assessed the list price of the medicines before negotiated discounts were considered and placed too much emphasis on the amount paid when the drugs were first launched. "I foresee a bit of headline risk coming out of it if they say, ‘We need to control drug prices’ often enough," Goonewardene remarked, adding "maybe a bit bigger headline risk if [US presidential candidates Hillary Clinton and Bernie Sanders] jump on the bandwagon."

Earlier this year, Clinton announced a proposal to combat "outrageous" price gouging in the specialty drug market. For related analysis, see ViewPoints: Clinton's tough talk on drug prices causing some notable about-faces and ViewPoints: Assessing the risks to industry from Clinton's 'new' plan to combat rising drug prices.

The report comes as a number of drugmakers have received scrutiny over pricing decisions for drugs. Last month, the US Senate's Special Committee on Aging unveiled plans to launch an investigation into drug pricing practices of four drugmakers, including Valeant Pharmaceuticals. For additional analysis on drug pricing, see FirstWord Lists: Framing the US drug pricing debate – the key flashpoints.

For related analysis, see ViewPoints: Of course Gilead plays the pricing game, but new report on Hep C franchise misses critical points.

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