Yes, Gilead put superhigh prices on hep C drugs, but what can you do? Senators ask

After 18 months spent slicing and dicing 20,000 pages of Gilead Sciences ($GILD) documents and emails, a Senate investigation concluded that the drugmaker put very high price tags on its hep C cures Sovaldi and Harvoni, knowing full well that would keep some patients in need from affording them. Now the Senate sponsors of the inquiry are asking payers and public, based on what was learned, just what can the government do to discourage untenable drug prices without stepping all over pharma innovation.

The letter from Republican Sen. Charles Grassley and Democrat Sen. Ron Wyden points out that taxpayers should have a say on drug prices since much of the cost of paying for the drugs falls to taxpayer-paid programs which have been strained by their high prices. They are seeking "thoughtful feedback" by March 4 to questions in which they generally asked:

  1. What is the impact on the market when you have a single source for a breakthrough drug?

  2. Are payers getting all the info they need to gauge what the costs and patient volume will be and what the potential improvement a therapy will provide?

  3. Where does the concept of "value" play into the debate on drug pricing?

  4. How can more price transparency be achieved without deterring innovation?

  5. And finally, what tools exist or are needed to address high drug costs, particularly for low income patients, and Medicaid programs?

For its part, Gilead does not agree with the characterization and the conclusions of the Senate report, saying last month that it "responsibly and thoughtfully priced Sovaldi and Harvoni." The company said that 600,000 patients have been treated by Sovaldi or its higher-priced follow-up Harvoni and that it has programs to help uninsured patients get the drug.

But the impact on public programs was significant, the report points out. In the first 18 months after Sovaldi's FDA approval, Medicare spent nearly $8.2 billion before rebates on Sovaldi and Harvoni, and monthly spending increased more than sixfold, it says. Some state Medicaid programs, faced with huge budget overruns, drastically limited whom they would allow to get the hep C treatments, paying for just 2.4% of more than 700,000 Medicaid patients who might have benefited. Once AbbVie ($ABBV) brought out its competing treatment, Viekira Pak, some states followed the lead of some private payers and struck exclusive deals with AbbVie in exchange for deeper discounts.

And the report illustrated the widely known secret in the industry, that the cost of research and development, often thrown up by the industry as the driver of costs, is not the top consideration in deciding on a price of specialty drugs.

The Senate report is part of a broader debate that has built in the last year over high prices specialty drugs, and the penchant of drugmakers to continually raise the prices on both branded and generic meds as a way to improve bottom lines. Market researchers at Truveris recently reported that branded prescription drug prices went up 14.5% last year overall and specialty drugs went up by 9.2%.

And despite the reports and Senate testimony of pharma execs, analysts point out, the outcry so far has not resulted in changed habits. They scouted out hundreds of double-digit price hikes that kicked in at the beginning of the year.

- here's the letter