Hepatitis C wonder-drug Sovaldi is still selling at breakneck pace. And at this rate, it could break some insurers. At $84,000 per 12-week treatment course, Sovaldi's quick uptake is threatening payers' earnings, analysts say--and the drug's stellar efficacy profile leaves them with few options.
As The Wall Street Journal reports, thanks to Sovaldi's sales--which some analysts say could reach $9 billion in 2014 and unseat Vertex's ($VRTX) Incivek for fastest drug launch ever--a slew of insurers could see their EPS hacked down by double-digit percentages this year. According to Wells Fargo analyst Peter Costa, treatments for hepatitis C, which affects about 3.2 million people in the U.S., will cost the 10 largest publicly traded insurers $798 more than they did last year.
And with Sovaldi boasting a cure rate of 90% of patients, who, if left untreated, would likely develop liver cancer or require a transplant, payers have little recourse. The med works too well to try to restrict access, despite its "enormous price tag," Fallon Health's VP of clinical programs and pharmacy services, Leslie Fish, told the WSJ.
And so payers are getting creative. Pharmacy benefits manager Express Scripts ($ESRX), which promised to pit treatments against one another and exclude the unnecessarily expensive from its national formulary, has asked doctors whether some of its hep C patients can wait until Sovaldi challengers reach the market and push down costs, the Journal reports. Fallon is working with doctors to make sure members issued prescriptions keep up with their treatment, in turn cutting down on wasted spending.
States looking to contain Medicaid costs may have the roughest time, the WSJ notes; with federal law requiring them to cover every approved drug, their hands are tied. Molina Healthcare, which covers 2.1 million Medicaid beneficiaries in 11 states, could see earnings slide 18% if Sovaldi sales reach $6 billion, Wells Fargo says. Earlier this month, the company asked state Medicaid programs to cover Sovaldi reimbursement above and beyond their current contract payments to the company.
Of course, new entrants on the market will help payers with their plight as competition forces prices down. AbbVie ($ABBV) has a promising three-drug cocktail in the works, and Bristol-Myers Squibb ($BMY), Merck ($MRK) and Vertex are also in the race. But AbbVie won't submit its combo to the FDA until next quarter, hoping for a launch by year's end; the others, the WSJ says, aren't expected to grab the agency's green light until next year.
Until then, payers will just have to resort to those few tools they have, reimbursement consultant Rhonda Greenapple told the paper. Until more next-gen hepatitis C treatments gain approval, "there's nothing they can do."
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