Watch out for a two-front hep C price war when Merck's combo hits

Think we've seen a hepatitis C drug price war? Think again. This first round of pay-to-play formulary deals may pale in comparison to what's coming next year, as Merck & Co. ($MRK) gets closer to launching its two-drug combo pill.

The U.S.-based company regained a breakthrough tag for its hep C regimen, lost earlier this year after AbbVie ($ABBV) and Gilead ($GILD) won approval for their combo therapies. Merck's new breakthrough designation covers just two small subpopulations, but in any case, it puts the grazoprevir/elbasvir combo one step closer to approval.

With the FDA likely to add Priority Review on top of that, Merck's pill could launch before year's end, Bernstein analyst Tim Anderson said in a Wednesday note. And that would set Merck up to compete all next year, he adds.

That's good news for Merck, but just how good remains to be seen. It's bad news for AbbVie, whose less convenient multi-pill regimen "could get shunted to the side," Anderson wrote.

Merck's challenge, when approval comes, will be grabbing market share, and that's likely to depend on cost. As The Street notes, Merck will probably need to offer up big payer discounts to get access to patients--and if the company does, then that means more pricing pressure on the current players.

AbbVie's Viekira Pak is the more vulnerable of the combo regimens now on the market. Gilead's Harvoni is full steam ahead toward megablockbuster status, just as its sister drug Sovaldi was last year. Gilead has done its own discounting, to be sure, but if Merck has to offer big price breaks to grab market share, then AbbVie may be the one that has to fight back most aggressively.

- read the story at The Street

Special Reports: Top 15 pharma companies by 2014 revenue - Merck & Co. - AbbVie - Gilead | Biopharma posts a chart-topping 41 new drug approvals in 2014 - Harvoni - Viekira Pak