Just days after Gilead ($GILD) COO John Milligan told investors to expect negotiations for its hep C franchise to unfold very quickly in Europe, Germany has said it has a deal to buy Sovaldi at €41,000 for a 12-week course. That is deeply discounted from the initial price of €56,500 with which the company started.
The agreement was disclosed, Reuters reports, by GKV, the association of Germany's statutory medical insurers, whose members account for 9 of 10 Germans. It is the same price the California company negotiated with France's national health system. France, however, also negotiated for further discounts if volume hits certain targets, as well as for rebates for any patients on which the treatment didn't work.
Milligan, speaking at the Bio CEO & Investor meeting in New York this week, indicated that Gilead was fine with the discounts in exchange for the volume of patients it will get. He said about 17,000 hepatitis C patients were treated in France last year under a temporary utilization program. "This year they will increase that budget allotment fairly dramatically in return for some price/volume concessions. If they commit to certain volumes, we'll commit to certain price concessions," Reuters quoted Milligan as saying.
And he expects deals to be worked out soon in Spain and Italy, which he said have even higher rates of hepatitis C to treat. "Italy has committed to volumes this year that I believe are about three times the volume they have ever treated," Milligan said.
These are all deals for Sovaldi, not Gilead's combo pill Harvoni, which is priced even higher. In the U.S., Sovaldi runs about $85,000 for a 12-week course, and Harvoni, $94,500. Gilead has approval for Harvoni in the EU and is negotiating deals there for it as well, which should continue the momentum the company has been building for its sales. The two drugs had sales of about $12.4 billion last year, helping Gilead more than double its total revenues.
Discounts for the various national health payers are expected in Europe, but Gilead's discounting in the U.S. has made some analysts nervous. In its earnings call, the drugmaker said that it expects discounts to run 46% this year, more than twice the 22% applied last year. The company projected total product sales this year of $26 billion to $27 billion, about $2 billion shy of what analysts had expected.
That is in large part because of a pricing war that AbbVie ($ABBV) initiated when it struck an exclusive deal with Express Scripts ($ESRX) to get its competing hep C treatment Viekira Pak established in the market. Gilead came back with deals with Aetna ($AET), UnitedHealth ($UNH) and CVS Health ($CVS), among others, who gave preferential treatment to Sovaldi and Harvoni in their formularies in return for discounts on the drugs.