What Gilead taught pharma about pricing a cure
Debate over about 'how to price a cure' entered the pharma industry lexicon when Gilead Sciences Inc. priced its highly effective hepatitis C drug Sovaldi (sofosbuvir) at $84,000 per treatment course.
The uproar has died down a bit and there's now much less debate about whether Sovaldi was actually cost effective. It has since been shown the drug could save the health system millions by helping to prevent hepatitis C patients from progressing to liver failure.
“Gilead bought a launch-ready drug ... and so they launched very quietly," said Ted Haack, VP at LatticePoint Consulting, during a panel at the BIO CEO & Investor conference in New York on Monday.
"But any analysis that you run shows it's very cost-effective. And I don't think they had to do any discount scheme until after other competitors launched. So one could say that they had a good product and a good story, but they did not tell it."
Gilead has never apologized for how it priced Sovaldi or its subsequent hepatitis C drugs. The Foster City, California biotech has tried to squeeze every dollar out of the franchise before falling new patient starts and competition erodes away its market. All told, the four antiretrovirals Gilead developed on the sofosbuvir backbone have earned the company roughly $55 billion since Sovaldi's approval in 2013.
Michael Werner, partner at Holland & Knight LLP and co-founder of the industry-patient partnership Alliance for Regenerative Medicine, noted that it's not necessarily about what the company did wrong.
"What can a company do? Obviously, you've heard it already, telling the value story of the product, engaging with clinicians or engaging the payers," said Werner. "Telling that story. Getting them to help. Engaging the family. Maybe if they had to do it over, Gilead would've done more of that."
"Let's face it, there have been biotech products that have had six-figure price tags for a long time. So [Gilead] might've underestimated the sort of blowback they were going to get."
To Werner's point, most rare disease and oncology drugs have been priced in the six-figure range for years. Gilead is even in the midst of a new debate after pricing its newly approved CAR-T therapy Yescarta (axicabtagene ciloleucel) at $373,000 per patient. While the cost checks in below Novartis AG's rival cell therapy, both treatments have sparked discussion over how to value clinical progress.
Michael Weiss, partner at Cahill Gordon & Reindel LLP, argued the hardest part of pricing a cure might be coming up against other stakeholders in the system.
"There is an interesting side effect of cures, and it actually has to do with disallocations in the insurance market," Weiss said. "It's where insurers, where there are radically transformative therapies, actually have incentives to not get patients on it until much later so that patients will age out to the Medicare system. From an insurance perspective, it's beneficial to let someone else cover the therapy," he said.
Why it matters
With hepatitis C revenues on the decline, the price of Sovaldi is no longer the hot-button issue it once was. Yet, as new one-time gene therapies enter the market, how to price a cure remains an open question.
Spark Therapeutics Inc. has spurred conversation with the unique payer models the biotech put in place around its gene therapy Luxturna (voretigene neparvovec), recently approved for a rare form of hereditary blindness. The treatment comes at an $850,000 list price, which Spark aims to pair with contracts that tie net price to the treatment's efficacy at certain points in time.
“It's not the promise of the technology — it's there," added Aisling Capital Founder Dennis Purcell. "Gene therapy works. CAR-T works. Gene editing works… But then we have a system that's broken. We're stuck with a system that started fifty years ago [employer-based healthcare], but with technology that is the best thing we've ever seen."
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