News of potential federal budget cuts impacting HIV drugs in the U.S. was quickly reflected in a dip in share prices for top HIV drug maker Gilead Sciences last week. But, according to analysts at Jefferies, investors may be making a mountain out of a molehill.
Gilead’s HIV portfolio likely won’t feel too big of an impact from potential reductions in the U.S. government’s HIV prevention budget, the analysts said. Changes to the government’s Medicaid spending bill, however, may be something to watch out for.
Rumblings of potential HIV prevention funding cuts at the Robert F. Kennedy Jr.-led Department of Health and Human Services (HHS) emerged March 18. As reported by The Wall Street Journal, the cuts could affect the Centers for Disease Control and Prevention's (CDC’s) PrEP initiative, which is a young program that provides free pre-exposure prophylaxis (PrEP) medication that helps prevent HIV.
Considering that Gilead’s upcoming twice-yearly PrEP option lenacapavir is being set up to “redefine” the PrEP market, any federal changes to PrEP distribution and access could form cracks in the company’s plan. While Gilead’s shares took a slight 2.5% hit after the news dropped, Jefferies analysts don’t see a reason to fret—about the CDC cuts, at least.
That’s because the CDC budget doesn’t have a direct impact on drug payments and reimbursements through the Centers for Medicare & Medicaid Services (CMS) nor on the ability for commercial payers to pay for the PrEP drugs, the analysts explained in a March 18 note to clients. Commercial payers already make up the majority of PrEP coverage.
The CDC budget for HIV prevention centers more on testing and screening, disease surveillance, syringe services and community-based prevention initiatives as opposed to drug distribution, the Jefferies team noted.
More of a concern to Gilead products would be potential cuts to Medicaid budgets and programs under that umbrella, including the 340B AIDS Drug Assistance Program (ADAP), the analysts flagged in a March 23 note to clients.
The recently House-passed budget proposal calls for $2 trillion in spending cuts, $880 billion of which could impact Medicaid. While the plan specifically asks that the House Committee on Energy and Commerce chops off the $880 billion over the next decade, it’s near impossible to get to that number without impacting Medicaid, as the program takes up the vast majority of the committee’s funding.
Gilead’s blockbuster HIV treatment Biktarvy holds a top spot on the Medicaid spending list, coming in second to AbbVie’s Humira in 2022, Jefferies analysts noted. The company’s products have around 25% Medicaid exposure, meaning a 10% Medicaid budget cut would result in a roughly 2%-to-3% hit to Gilead’s HIV business or around 1% to 2% of the company’s total revenue, according to the analysts.
As the world’s best-selling HIV med, Biktarvy on its own regularly makes up the majority of Gilead’s HIV sales, contributing $13.4 billion in 2024.
That being said, it’s still unclear “what if ANY of this would be cut” since Republican lawmakers are “not big on cutting” across Medicaid, the analysts emphasized. Still, it’s something to look out for, as are potential federal cuts to the ADAP.
The program, which provides free treatment to low-income people with limited or no health insurance under the federally funded Ryan White AIDS/HIV program, “needs to be watched” under the Trump administration and the Elon Musk-lead Department of Government Efficiency, the analysts noted.
The ADAP’s advocacy arm already warned of “looming budget cuts” to HIV-related programs earlier this year, citing previously proposed cuts that ultimately didn’t make it to legislation.
It’s not clear how much exposure Gilead has to ADAP, but it “could be small” given the array of HIV generics that could be covered instead of Gilead’s branded options.
Meanwhile, the HIV drug maker is gearing up to launch its lenacapavir with an FDA decision slated for this summer. The long-acting PrEP, along with seven other new treatment options Gilead hopes to introduce throughout the next decade, should buoy the company when Biktarvy dives off the patent cliff in 2033.