|Gilead's Sovaldi--Courtesy of Gilead|
No price war on hepatitis C drugs? That would be a disappointment to payers worried about the cost of treating millions of patients with super-expensive, yet highly effective drugs. But to investors, that reassurance sounds really good.
As Barron's points out today, Bernstein analysts issued a report to assuage fears of an all-out pricing competition when Gilead Sciences' ($GILD) Sovaldi is joined on the market by new treatments from AbbVie ($ABBV), Bristol-Myers ($BMY), and Merck ($MRK).
"One of the near-term bear arguments is the expected approval of a competitive all-oral HCV regimen from AbbVie, and the potential for aggressive pricing tactics by AbbVie," Bernstein's Geoffrey Porges and Wen Shi wrote in a note to investors.
Obviously, major undercutting of Sovaldi's notorious $84,000-per-treatment-course price could either force Gilead to slash the cost of its own meds, or relinquish market share to AbbVie. And as the analysts point out, payers are encouraging AbbVie and its fellows to do just that.
"However, we believe the risk of a price war hurting Gilead's HCV revenue in the next 1-2 years is overblown," they wrote.
For three reasons, basically. Even if AbbVie's regimen is cheaper, payers have "limited tools" to use to restrict access to Gilead's therapy, which will probably include a new combo pill by year's end. AbbVie has said--and recently--that it's not interested in a price war. That sort of competition isn't necessarily a good move in the hep C market, where awareness is growing and diagnosis is expected to increase, which means the entire pie is bigger for everyone.
And besides, if Gilead were to face lower-priced rivals, the company "has counter strategies to mitigate the impact of any potential price war by AbbVie on a payer-by-payer basis," the analysts write. Behind-closed-doors negotiations, maybe?
- read the Barron's post