In 2015, when executives at Gilead started negotiating with China’s drug authorities on the price of its hepatitis C blockbuster Sovaldi in that country, the company was enjoying a leading position in the emerging market for antivirals that wipe out the disease in most patients. Fast forward two years and Gilead finds itself in quite a different position: Sovaldi is now approved in China, but it’s facing competition there from Bristol-Myers Squibb and AbbVie, and a rival drug from Merck is on the way. What’s more, pressure from payers around the world has brought Sovaldi’s average price way down from its widely criticized $84,000-per-course launch price in the U.S.
No doubt all of those challenges played into Gilead’s decision to price the drug at 58,980 yuan ($8,939) in China. The price, reported by a Chinese financial media service, is estimated to be one-fifth of the current cost of Sovaldi in the U.S., which has fallen precipitously since its 2013 launch.
It was expected that Gilead would deeply discount Sovaldi for the Chinese market, but the reported price is still much higher than in other emerging markets where it has licensed the drug to generics makers. In early 2015, while facing severe backlash for a U.S. list price that equated to $1,000 per pill, Gilead formed manufacturing and marketing licenses that slashed the price to $10 per pill in India and many other emerging markets. But that arrangement didn’t include China, even though it is the largest hep C market, with an estimated 10 million people fighting the virus.
Gilead did not immediately respond to a request for comment.
Gilead needs every market it can nab for Sovaldi and its follow-up hep C treatments, Harvoni and Epclusa. In 2016, sales of its hep C products plunged 32% to $8.4 billion, impacted largely by falling prices. The company reported that its list price for Harvoni was $31,500 per bottle in the U.S., but the average net price was discounted and rebated down to $15,000. The average Medicaid price was just $10,000. Gilead has been aggressively pursuing emerging markets. In China, it is working towards gaining approvals for Harvoni and Epclusa.
Still, the company has faced some challenges overseas. In Japan, where Sovaldi and Harvoni were introduced in 2015, hep C product sales fell 77% in the fourth quarter of 2016 to $314 million. The company blamed a decline in new patients, as well as new competition from a rival drug. It didn’t help that the country imposed a 32% mandatory price reduction on Gilead’s hep C treatments in March of last year.
Just how Gilead’s hep C treatments will be received in China remains to be seen. During the third-quarter earnings conference call in October, Gilead’s chief operating officer, Kevin Young, said the company is planning a “staged” launch of Sovaldi in China. The country’s drug regulators, he said, are “very, very motivated” to get anti-viral therapies on the market there, but Gilead missed the opportunity to apply for national payment authorization in 2017, so it will have to settle for private-pay patients to start. Next year, Gilead plans to apply for provincial reimbursement, and then national reimbursement, Young said.
Still, as one analyst on the call pointed out, even if only 10% of China’s 10 million HCV patients are able to pay out-of-pocket for Gilead’s hep C drugs, that still represents a lucrative opportunity—equal to one-third of the total U.S. market for products to treat the disease. Replied Young, “we want to walk before we can run. But there's no doubt that our antivirals are much needed for the infection rates in China.”
To prepare for the expansion of its hep C franchise into China, Gilead hired Rogers Luo, Roche’s former VP of corporate affairs in that country, last September. It’s also building a new manufacturing plant outside of Shanghai. And Gilead isn’t just banking on hep C: The company has filed for approval in China of Vemlidy to treat hepatitis B, and it is planning several filings for its HIV products there, too.