Industry watchers have long been speculating on how Merck would take on heavyweights Gilead ($GILD) and AbbVie ($ABBV) when it priced its new hep C regimen. And now, they have their answer: Undercut them. Big-time.
The New Jersey pharma giant, which won FDA approval for its combo pill, Zepatier, late on Thursday, announced it would set the drug's list price at $54,6000 for a 12-week regimen, a move it said it expected to "help broaden and accelerate patient access to treatment and move us closer to our shared goal of reducing the burden of chronic HCV in the U.S."
With a green light to treat patients with genotypes 1 and 4, Merck's product will go up against Gilead's Harvoni--which boasts a price tag of $94,500--and AbbVie's Viekira Pak, which sells for $83,319. As part of a pricing war, both companies have struck deals with payers that offer substantial discounts, and Merck said it believes its newcomer is "in the range" with those products when it comes to their net price.
Of course, there's room for Merck to do its own discounting, too, which Barclays analyst Geoff Meacham estimated could come in somewhere in the 5% to 10% range. A 10% discount would bring monthly pricing to $16,400, compared with estimated prices of $18,900 for Harvoni and $16,700 for Viekira.
"At this assumed price, Zepatier could offer specialty pharmacies a margin that splits the difference between Sovaldi and Viekira, which could be the initial means onto commercial formularies," he wrote.
Going up against such hefty competition still won't be an easy task. Harvoni has broken the launch records Gilead set with component drug Sovaldi--which rolled out the year prior--on its way to racking up billions in sales. And Viekira, though it's struggled lately in the U.S., still managed to crack the blockbuster barrier in 2015, and AbbVie predicts it can churn out close to $2 billion in worldwide sales for 2016.
But Merck has its own blockbuster ambitions--analysts have pegged 2020 sales at $2 billion-plus--and it's own plans for setting itself apart. The company has been talking up Zepatier's strengths in particular hep C niches, including patients with kidney problems. And Targeting those unmet hep C needs may be Merck's best path forward, one game theory expert predicted earlier this year.
And with its experience with interferon and Victrelis, Merck is no stranger to the hep C marketing landscape, either. The company knows "this market, and we know the players, and we know the managed care organizations very, very well," company president of global human health, Adam Schechter, said on Merck's Q3 conference call. "We intend to be serious about coming into this market strong, and we think there's a real opportunity for us."
- read the release
Special Reports: Top 15 pharma companies by 2014 revenue - Merck - AbbVie - Gilead | Biopharma posts a chart-topping 41 new drug approvals in 2014 - Harvoni - Viekira Pak