Gilead's $84,000 Sovaldi pricing goes to court with payer-led class action suit

In what could be a test case for future payer lawsuits, the Southeastern Pennsylvania Transportation Authority (SEPTA) has sued Gilead Sciences ($GILD) over "exorbitant" pricing for its hepatitis C drug Sovaldi.

The class action claims that Gilead's patent protection--and the monopoly it affords--shouldn't be enough to justify a $84,000 price per treatment course. The company's "limited rights as a patent holder do not translate into a license to price-gouge consumers," the lawsuit states, citing U.S. antitrust law. Since the drug was approved late last year, SEPTA has spent $2.4 million on Sovaldi for its employees.

Meanwhile, the Gilead drug quickly soared to blockbuster levels, with $8.5 billion in sales for the first three quarters of 2014--its first on the market. The launch broke all previous records. There's good reason for that: Sovaldi boasts a cure rates of 90% or more for some patients, when combined with other hep C fighters. And Sovaldi-based treatment is much easier to tolerate than older drug cocktails that include interferon.

The other reason for the huge sales is, of course, Sovaldi's high price. Payers and patient advocates have stirred up a firestorm of criticism for Gilead, pointing out that the cost is unprecedented for a treatment aimed at a patient population of millions, rather than thousands. Hepatitis C affects between 2.7 million and 5.2 million people in the U.S., with 185 million infected worldwide.

Gilead says Sovaldi--and its combo-pill follow-up Harvoni, priced at $94,500 for 12 weeks of treatment--are worth the high prices because they cure most patients and prevent very costly hep C complications such as liver transplants. The company is testing shorter treatment courses--as short as four weeks in some patients--which would cut treatment costs considerably.

Like payers such as pharmacy benefits manager Express Scripts ($ESRX), the SEPTA lawsuit claims that Gilead's pricing could bankrupt the U.S. healthcare system. Like patient advocacy groups, the suit says the high cost has essentially priced many consumers and government programs out of the Sovaldi market.

State Medicaid programs have certainly raised red flags about pricing for Sovaldi and Harvoni. Some Medicaid providers have demanded that states shell out additional funding simply to cover the huge--and unexpected--cost of treating hep C patients this year.

Medicaid programs and private payers have been trying all sorts of schemes to limit patient access to the drugs, aiming to hold down costs until competitors like AbbVie ($ABBV), Merck ($MRK) and Bristol-Myers Squibb ($BMS) roll out their hep C fighters. Their hope is that competition will help bring down prices as drugmakers trade discounts and rebates for exclusive formulary access.

Meanwhile, even the discounted prices overseas are giving government health systems pause. U.K. cost-effectiveness watchdogs approved Sovaldi in September, but behind the scenes, National Health Service officials were saying that the cost was too much for the system to bear. France proposes to tax drugmakers for hep C treatment costs that run over a set annual target.

And Gilead has been willing to wheel and deal internationally. It recently inked a pricing deal with France that puts a 12-week course at about $51,000--even lower if treatment volumes hit certain targets. France gets its money back if and when Sovaldi doesn't work. In return, the country agreed to fund the drug at 100%, with no patient copays. In developing countries, U.S.-based Gilead has set up partnerships to provide Sovaldi at a small fraction of its cost in the States.

- see the story in the Pennsylvania Record

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