The news pushed shares of Gilead down as much as 6
percent on Friday and sparked a sell-off among other leading biotech
names on concerns they may have a harder time pricing new medicines.
Biogen Idec fell 8 percent, Amgen Inc dropped 3 percent and Celgene
Corp lost 3.7 percent.
Some health insurers, including the government's Medicaid program
for the poor, are holding off on authorizing use of Gilead's new
hepatitis C drug. While the treatment has been shown to cure many
patients, the payors are balking at the prospect of covering the
therapy for millions of people at a cost in the billions of dollars.
Separately on Friday, Gilead confirmed that it had agreed to supply
the new drug in Egypt — which has the world's highest prevalence of
the virus due to use of contaminated needles in the 1970s — at
around $900 for a 12-week course of therapy, or about 1 percent of
the U.S. price.
The company has proposed a system of worldwide tiered pricing based
on a country's per capita gross national income. Sovaldi's U.K.
price is about $57,000, while the price in Germany is around
$66,000, Gilead has said.
A letter to Gilead from Democrats in the House Energy & Commerce
Committee, including ranking member Henry Waxman, asks for
information on the company's pricing methodology and its impact on
Sovaldi is seen as a breakthrough in the treatment of the serious
liver disease. It has been shown to raise cure rates and cut
treatment duration with fewer side effects than older medicines, but
critics maintain that a price of $1,000 each is too high for an
easy-to-make pill needed by millions.
Gilead, in an emailed statement, said it has been working with a
number of stakeholders, including federal and state officials, and
looks forward to meeting with members of Congress to address
concerns about Sovaldi.
The drug, approved by the Food and Drug Administration late last
year, is expected to post record-breaking sales in its first year on
"What is really scaring folks is the volume," ISI Group analyst Mark
Schoenebaum said on a conference call, referring to the fact that
more than 3 million Americans are believed to be infected with the
hepatitis C virus. He said sales of Sovaldi will total between $7
billion and $12 billion this year alone.
The head of commercial business at health insurer WellPoint Inc said
the company is working with regulators and drug manufacturers to
bring prices for hepatitis C drugs down to a "reasonable" level.
"Our concern is that a treatment will not cure patients if they
cannot afford it," the committee letter, addressed to Gilead Chief
Executive John Martin, said. It asked that the company provide a
briefing no later than April 3.
COMBO DRUG RAISES
The letter cited a Reuters report noting that doctors are combining
Sovaldi with a newly approved drug from Johnson & Johnson called
Olysio, raising the treatment cost to $150,000.
[to top of second column]
"The costs are likely too high for many patients, both those with
public insurance and private insurance," the letter said. It added,
"The extraordinarily high cost of your drug raises additional
concerns because of the role of the federal government in speeding
up its approval."
Sovaldi was approved on an expedited basis by the FDA after being
designated as a "breakthrough therapy."
Answers being sought by committee Democrats include the methodology
used by Gilead to establish Sovaldi's price and the public health
impact of insurers' and public health programs' decisions not to
cover Sovaldi for all patients with hepatitis C.
Sovaldi is the first in a wave of expected new all-oral treatment
regimens for the hepatitis C virus that have shown impressively high
cure rates, well in excess of 90 percent, in clinical trials.
The likely launch over the next two years of drugs similar to
Sovaldi, under development at companies like AbbVie, Bristol-Myers
Squibb Co and Merck & Co, could trigger cost competition,
"We are going to go from a monopoly to seven or eight players," he
said. "In my mind that is what will drive pricing down."
These new drugs are meant to replace older treatment regimens that
include the injected drug interferon, which causes miserable
flu-like symptoms that have led thousands of patients to delay
treatment and wait for the newer medicines.
The older drugs cure about 75 percent of those treated and take 24
to 48 weeks of treatment. The new drugs have been shown to cure
patients in 12 weeks or less.
JP Morgan analyst Geoff Meacham noted that there was no such outcry
from Congress following the last wave of new hepatitis C treatments
that could cost about $100,000, cured fewer patients and came with
far worse side effects.
"Given the very high cure rates with Sovaldi, Gilead is in position
to 'guarantee a cure' to payers, thereby dramatically reducing the
downstream economic burden of a liver transplant, risk of liver
cancer or cirrhosis," Meacham said in a research note.
Gilead shares fell $3.46, or 4.6 percent, to close at $72.07 after
being down as much as $70.85 earlier in the day. Over the past year
the stock has gained 70 percent.
(Additional reporting by Michele Gershberg and Deena Beasley;
editing by Michele Gershberg, David Gregorio, Andrew Hay and Bernard
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.