The Senate Finance Committee Report on HCV Drug Pricing

Why is sofosbuvir so expensive?

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On Tuesday, December 1, the Senate Finance Committee released its report on Gilead’s pricing strategy for Sovaldi and Harvoni for treatment of hepatitis C. The high initial pricing has generated much concern both among patients and payers (HIGH COST)(OPTIONS IF DENIED).I have taken key excerpts from that report that I feel best reflect the committee’s findings

Key Points

“Senate Finance Committee Ranking Member Ron Wyden, D-Ore., and senior committee member Chuck Grassley, R-Iowa, today released the results of an 18-month investigation into the pricing and marketing of Gilead Sciences’ Hepatitis C drug Sovaldi and its second-wave successor, Harvoni.(FINAL REPORT) Drawing from 20,000 pages of internal company documents, dozens of interviews with health care experts, and a trove of data from Medicaid programs in 50 states and the District of Columbia, the investigation found that the company pursued a marketing strategy and final wholesale price of Sovaldi – $1,000 per pill, or $84,000 for a single course of treatment – that it believed would maximize revenue.

Building on that price, Harvoni was later introduced at $94,500. Fostering broad, affordable access was not a key consideration in the process of setting the wholesale prices.”

  • “Documents acquired during the course of investigation illustrate that Gilead was aware it was in a position to create clear savings for payers, but chose to pursue a “regimen neutral” price justified by “cost-per-cure” calculations that resulted in greater revenue per treatment than previous direct acting anti-virals. Given the increased clinical efficacy of Sovaldi, Gilead believed that it was more than justified in using the cost-per-cure pricing model.
  • While there were extensive discussions regarding return on those investments while Gilead was considering the acquisition of Pharmasset, there is scant evidence that return on these investments played a significant role in determining the pricing of these drugs.
  • Similarly, the cost of manufacturing Sovaldi, which was nominal, played no part in establishing the price.
  • In an interview, Gilead executive Jim Meyers, who played a lead part in making the pricing recommendation did not know the cost of manufacturing the drug
  • In reality, Gilead’s marketing, pricing, and contracting strategies were focused on maximizing revenue—even as the company’s analysis showed a lower price would allow more people to be treated—not only for Sovaldi, but more importantly for its follow-on sofosbuvir-based product pipeline.
  • Significantly, when confronted with the widespread initiation of access restrictions, Gilead refused to offer substantial discounts and did not significantly modify its contracting strategy to improve patient access.
  • Gilead’s goal throughout its pricing decision process appears to have been to identify the price just below the level where payers would place significant restrictions on patient access.
  • Even though Gilead assumed that the final price recommendation of $84,000 would not result in significant patient access restrictions, it quickly became apparent that this assumption was incorrect as many public and private payers quickly reacted and adopted restrictions.
  • Ultimately, these restrictions reduced the number of patients who could have received treatment.
  • Even as competition lowered prices for therapies, this report documents that concerns remain, particularly in the public payer community, about high costs for treating millions of people in the U.S. infected with Hepatitis C, as well as the budgetary effects of a future single source innovator that might not face competition as quickly.
  • The price of Sovaldi constituted a large burden—notably among state Medicaid programs, Medicare, and the BOP—and triggered access restrictions across public and private payers, thus limiting the number of Hepatitis C-infected patients who could access the new treatment options.
    • For example, state Medicaid programs nationwide spent $1.3 billion before rebates on the drug in 2014. Even with that expenditure, less than 2.4 percent of the roughly 700,000 Medicaid enrollees with Hepatitis C were treated with Sovaldi.”

“Despite the increased discounts in 2015, the costs to America’s health system have been dramatic. In the first nine months of 2015, Gilead had $10.1 billion in sales from Sovaldi and Harvoni in the U.S. alone. Already, that is almost more than what was spent on all HCV drug treatment in all of 2014.”

  • “In the 18 months following Sovaldi’s approval, Medicare spent nearly $8.2 billion before rebates on Gilead’s HCV drugs.
  • Medicare Part D spent more on these drugs in the first six months of this year than it did in all of 2014.
  • With respect to Medicaid programs, 29 states said Sovaldi was the most or second most costly pharmaceutical outlay for their programs. The result was treatment for just 2.4% of Medicaid enrollees believed to have HCV in 2014.”

The committee raised the following discussion items at the conclusion of the report:

“1) What are the effects of a breakthrough, single source innovator drug on the marketplace?

2) Do the payers in the programs have adequate information to know the cost, patient volume, and increases in efficacy of a new treatment regimen?

3) What role does the concept of “value” play into this debate, and how should an innovative therapy’s value be represented in its price?

4) What measures might improve price transparency for new higher-cost therapies while maintaining incentives for manufacturers to invest in new drug development?

5) What tools exist, or should exist, to address the impact of high cost drugs and corresponding access restrictions, particularly on low-income populations and state Medicaid programs?”

I hope that this distillation of the report is helpful and offers insight into the process of drug pricing and its effect on health care access (HEPATITIS C THERAPY)(MEDICAL TOURISM).

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