With its hepatitis C franchise tumbling, Gilead plots knockoffs of its own drugs

Gilead
Gilead unveiled a new plan to launch authorized generics to Harvoni and Epclusa. (Gilead China)

More than a decade before Gilead’s patents expire for blockbuster hep C drugs Epclusa and Harvoni, the company is actually launching authorized generics at one-third the list price—or less.

To say this is an unusual step would be an understatement—drugmakers usually fight generics for as long as possible. It's true that Gilead will reap the revenue, through a subsidiary, but the copies will no doubt siphon off sales from its brands.

The subsidiary, Asegua Therapeutics, will sell authorized knockoffs at a list price of $24,000, an enormous discount from Epclusa's $74,760 sticker price, as well as Harvoni's $94,500.

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But Gilead's hep C franchise is in an unusual—and painful—situation. After roaring out of the gate in 2014 and 2015, its first two hepatitis C-fighters took repeated hits from new competition and discount-seeking payers playing hardball. After pumping out billions in sales in their first few years on the market, Gilead's drugs have dwindled, thanks to net prices that spiraled downward by 60% over the past five years, CEO John Milligan wrote in a post explaining the move Monday. And because the drugs cure the disease, the hepatitis C patient pool has become smaller as competition increased.

Meanwhile, with more patients shouldering a bigger share of their medication costs, and that share dependent on list prices, the burden on patients has mushroomed.

RELATED: Gilead notches FDA approval for first all-genotype hep C med, Epclusa 

And in the end, Gilead may in fact increase hep C sales. The generics will yield about the same amount per patient as the brands now do after discounts. What the generics will accomplish is help lower patients' out-of-pocket costs, Milligan wrote. Patients could save up to $2,500 in out-of-pocket costs per treatment course through the program. 

The generic price will also allow government payers to more easily afford the drugs, Milligan wrote. Gilead expects the program will “open up access to our medications for people insured by Medicaid, by offering substantial savings to state managed Medicaid plans that do not currently benefit from negotiated rebates.” 

RELATED: AbbVie blows hepatitis C forecasts out of the water as Mavyret snaps up share 

In a note detailing the move, Evercore ISI analyst Umer Raffat said Gilead’s market share in Medicaid has been “very low” leaving AbbVie’s competing Mavyret free to “dominate” in the channel because of its low list price. Gilead's' new generics could “move market shares around meaningfully in Medicaid,” but he expects a response from AbbVie.  

“It's possible that this starts another round of pricing flux in this market,” he wrote, “which basically means that it’s hard to take 2019 HCV estimates up … especially in the face of declining patient starts.”

Gilead's Epclusa brought in about $1 billion in the first half of 2018, down from $2 billion during the same period last year. Overall, hep C sales for Gilead were $1 billion in the second quarter, compared with $2.9 billion for the period last year.

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