Politicians add fuel to the firestorm over Gilead's hep C drug pricing

The outcry about Gilead Sciences' $84,000 price for its hepatitis C wonder drug, Sovaldi, just got louder. Rep. Henry Waxman and several Democratic colleagues in Congress wrote Gilead CEO John Martin an excoriating letter on Friday, demanding to know why the drug costs so much--and whether Gilead ($GILD) is doing anything to make sure that poor patients get access to it.

"The costs are likely too high for many patients, both those with public insurance and private insurance," the letter stated. Not to mention taxpayers--the bulk of hepatitis C sufferers are either low-income patients on Medicaid, veterans treated by the Veterans Administration, or prisoners, whose care is government-financed.

By itself, the letter might not amount to much. As Reuters points out, the signatories are minority-party types in the House of Representatives. Some industry analysts figure the protestations are a lot of talk that will lead to little action. The facts are these: The FDA has no power over pricing. Attempts to grant Medicare negotiating power have fallen flat. And Gilead is a veteran of the pricing protest, experienced at soldiering forward in spite of the flak.

But the letter isn't on its own. It's just the latest salvo against hepatitis C drug prices, from public officials, healthcare experts, patient advocates and--most importantly--payers. Pharmacy benefits managers, including Express Scripts ($ESRX), have said they're planning to apply cost-effectiveness measures to hep C treatments and even exclude some of the new meds. A California cost-effectiveness board called Sovaldi a "low value" treatment because of its high price and suggested that it be restricted to the sickest patients.

Meanwhile, some state Medicaid plans even say they'll hold off on the expensive drugs till patients have already suffered liver damage. That's a pledge that only makes logical sense as a negotiating ploy but illustrates the desperation of cash-strapped payers faced with broad use of an ultraexpensive drug.

The latest payer news came Friday from WellPoint, which said the new round of treatments, which includes Sovaldi, may be supereffective, but they're too superexpensive. WellPoint's commercial business is working with regulators and drugmakers to get prices down to a "reasonable" level, Reuters reports. And on the Medicaid side, the company is working with states to determine whether to exclude Sovaldi from its Medicaid managed care plans altogether.

Gilead figures that Sovaldi is a breakthrough cure and well worth the price. Preventing liver-disease complications will save the healthcare system money, EVP Gregg Alton told the NYT. "We think the price is fair," Alton said.

But one problem is that hepatitis C affects millions of patients. Very expensive cancer drugs, on the other hand, are targeted at far fewer people. "The worry is that the volume is just going to overwhelm the system," Deutsche Bank analyst Robin Karnauskas said (as quoted by The New York Times). "What is really scaring folks is the volume," ISI Group analyst Mark Schoenebaum noted last week (as quoted by Reuters). Schoenebaum himself figures this year's Sovaldi sales will mount to at least $7 billion and perhaps as high as $12 billion. Those stratospheric numbers beg the question of how much is enough--or too much.

As the NYT points out, some people with hep C would never experience serious liver complications even if untreated. The nonprofit Institute for Clinical and Economic Review studied the issue and determined that treating all patients with Sovaldi rather than older drugs wouldn't save any money even over 20 years. Restricting treatment to those with more advanced liver scarring would, however, save money over a couple of decades, the institute found.

Several analysts suggested that prices might come down once rival drugs from AbbVie ($ABBV), Bristol-Myers Squibb ($BMY) and others hit the market. Payers certainly hope to use the competitive threat as leverage to push prices down. Whatever happens, larger questions remain: What responsibility do drugmakers bear for their pricing in a "rich" country like the U.S.? Should Gilead (and its forthcoming competitors) consider the size of the market--and the burden on taxpayers and other payers--when setting prices? And can the "rich" U.S. afford to eschew the sort of price-negotiation that other countries routinely engage in?

- see the Reuters news
- get more from the NYT

Special Report: The FDA's drug approvals of 2013 - Sovaldi: Gilead hits pay dirt with a breakthrough hep C drug