Surprise: Gilead's hep C wonder Harvoni costs less in U.S. than in EU, Japan

By Tracy Staton Sep 21, 2016 10:47am

It’s no secret that Gilead Sciences’ ($GILD) slowdown in hepatitis C sales growth has caused consternation among investors, to the point where the company is under intense pressure to make some deals.

It's also no secret that Gilead had to offer some steep discounts to win formulary spots for its blockbuster hep C meds Sovaldi and Harvoni, which initially enjoyed a monopoly on the next-gen hep C market--a key reason for the crimp in their sales growth.

Now, we have some numbers that illustrate just how big Gilead’s discounts are--and how its U.S. hep C prices after those discounts compare with similar figures overseas.

According to a report from the IMS Institute for Healthcare Informatics, the combo drug Harvoni may have made its U.S. debut at a list price of $94,500, but after tough negotiations with payers, its net price comes to $50,400.

Surprisingly, that’s lower than the net price in 5 top European markets, which have each negotiated their own discount deals on the drug. In those countries, the average net price is $52,279. And in Japan, the net price is even higher at $55,517.

For Sovaldi, the single-agent sofosbuvir pill that’s part of a drug cocktail that can include meds made by other companies, the differences are smaller. The U.S. net price is $44,520, compared with $43,000 in Japan, as reported by FiercePharmaAsia last year, and $45,056, on average, in those 5 European countries, IMS Health says.

“Price concessions are evolving rapidly and confidential rebates have been publicly disclosed except in the U.K., where we have made estimates,” IMS said in its report.

Average discounts in the U.K., where list prices start out lower, are 15% to 20%, IMS says, where the percentage off in the U.S. tends to be 45% to 55%, depending upon the payer.

Some countries--such as Italy, where the infection rate is particularly high--have negotiated more aggressive discounts, but they include volume targets. France’s deal with Gilead includes a cap on spending, which effectively reduces net prices if the number of patients treated surpasses a particular threshold. But most countries outside the U.S. have negotiated specific price levels, IMS says.

Patient advocates and industry critics are still taking the company to task for its steep list prices, however, and some payers continue to limit coverage for the drugs to patients at advanced stages of the disease. Gilead argues, rightfully so, that the powerful drugs offer a cure to a disease that often leads to much pricier complications. And, as illustrated by a Bloomberg story this week, Gilead has been active in pushing public payers, such as the Medicaid program in Washington state, to make its drugs available more broadly.

Concerns about spending remain, however, even after new hep C competitors have hit the market and forced U.S. net prices downward. The sheer number of hepatitis C patients means that, even at drastically reduced prices, the U.S. spent an estimated $10.9 billion on treating the disease last year, IMS says. Together, the 8 countries IMS analyzed spent a whopping $25.7 billion on HCV treatments last year.

Of course, some consumer advocates contend that Gilead’s list prices shouldn’t have been so high in the first place. The discount numbers are dramatic, but if stickers had been more in line with the healthcare system’s ability to pay, then the net prices might be even lower now.

But others point to the need for new payment models that can help healthcare budgets absorb the cost of pricey drugs that deliver real results for patients, and, like the obviously effective hep C treatments, save money on complications in the long run.

Novartis ($NVS) has negotiated some results-based deals with payers on its heart failure drug Entresto, while Amgen ($AMGN), Regeneron ($REGN) and Sanofi ($SNY) have pay-for-performance arrangements for their pricey cholesterol fighters Repatha and Praluent. With ultraexpensive gene therapies coming down the pike--and offering lifetime cures--industry experts have suggested radically different payment structures, including annuities that would spread the costs over time.

Drug Prices drug spending payer Gilead Sciences Harvoni IMS Health Sovaldi Marketing Launches