Merck's EU launch of Zepatier faces delay from contractor's run-in with regulators

Merck ($MRK) is doing surprisingly well with its third to market hepatitis C drug, Zepatier, which was launched last quarter and has already disrupted sales of Gilead Sciences and AbbVie hep C meds. But Merck has hit a speed bump on its way to rolling it out globally, with the launch in the European Union potentially being delayed by manufacturing issues.

Execs said on the company’s earnings call Thursday that EU approval is pending the resolution of regulatory concerns by a contract manufacturer that could delay the EU launch to the end of this year or even the early 2017.

In an emailed statement Merck, known as MSD in Europe, said, “In the course of our European review for Zepatier, the European Medicines Agency cited Merck's third-party manufacturer for issues largely related to inadequate record-keeping and the need for improvement in their quality management systems.”

Merck, which would not identify the manufacturer, said it does not believe that the problems identified at its third-party manufacturer affect the safety, efficacy, or quality specifications of the product. It said it takes manufacturing quality seriously and is working with regulators to resolve these issues as quickly as possible. 

Merck Thursday reported that Zepatier, which was approved in January, was off to a good start in the U.S. with $50 million in sales in its first weeks on the U.S. market. That beat the Street’s forecast by about $5 million. Both Gilead and AbbVie indicated in their earnings reports recently that they have felt some impact from its entry to the market.  

Merck put a list price of $54,600 on Zepatier, well below the $83,319 charged by the AbbVie for its Viekira Pak before discounts, or the $94,500 charged by Gilead for its combo med Harvoni. AbbVie believes Merck's pricing move is aimed at going after “medical exceptions,” and has been “somewhat successful” in that regard AbbVie CEO Richard Gonzalez acknowledged last week. It also has offered deeper than expected discounts to Veterans Administration, a federal program which is working to get more patients on hep C drugs after initially limiting access because of the cost of the new drugs.

Gilead has acknowledged that it had to “increase a little bit of discount to some payers” to keep Harvoni on formularies and with full access, after the Zepatier launch.

The potential delay in the EU is particularly unfortunate given that Merck might expect to do pretty well with aggressive pricing in a market where government paid health plans are notoriously stingy.

- here’s a Reuters brief 

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