Gilead's hep C pain helps the rest of pharma on drug spending: analyst

Gilead reported a significant slowdown in hep C sales in 2016, a trend that bodes well for the rest of the industry, according to one analyst.

Gilead might not enjoy suffering its recent, severe hep C revenue downfall, but according to one analyst, the rest of biopharma stands to benefit from the trend, at least where drug-spending numbers are concerned.

Bernstein’s Ronny Gal figures Gilead’s problems “help the broader industry on cost trends.” That’s because falling hep C expenses played a big role in curbing prescription cost growth last year, Gal said.

And that's especially important now. Pharma spending trends are always closely watched, but with drug prices front-and-center in the public consciousness, stats on prescription costs are coming in for more scrutiny.

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So, pharma may owe Gilead a big thank you. A “faster than expected” decline for Gilead’s hep C juggernauts Harvoni and Sovaldi is “alleviating some of the pressure on total drug costs,” Gal continued in his Tuesday note.

The Centers for Medicaid and Medicare Services last week reported that U.S. drug spending growth is expected to fall to 5% in 2016, down from 9% the year before, partly because of the hep C slowdown. And leading pharmacy benefit manager Express Scripts recently said prescription drug spending growth was just 3.8% last year.

The downward trend is likely some relief to the many drug execs who have been working to defend the industry’s public image after a year of countless headlines highlighting price gouging by some players in pharma.

At Gilead, though, management isn't as pleased with the shape of things. The company has reported several quarters of underwhelming hep C sales, with CEO John Milligan recently telling analysts Gilead can’t grow without M&A.

Harvoni and Sovaldi sales fell 34% and 24% respectively in 2016, Gilead reported earlier this month. In the U.S., stalwart Harvoni turned in $4.94 billion in 2016, less than half of its 2015 haul of $10 billion.

Gilead guided for total 2017 sales of $22.5 billion to $24.5 billion, significantly under analyst expectations of $27.7 billion.

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