After getting beaten up last week over the pricing of its hepatitis C treatments in the United Kingdom, Gilead Sciences (GILD) is going on the offensive. The drug maker, which has sustained intense criticism over complaints that its prices have strained payer budgets, fired back at a report in an influential medical journal and declared that “we stand behind our pricing.”

Although Gilead has never been entirely mute when confronted with criticism, the drug maker is generally circumspect about addressing specific developments. But the report in BMJ seems to have hit a nerve, since the journal wrote that England’s National Health Service was forced to take several controversial steps to delay coverage of Gilead’s medicines, and it came at the expense of patients.

And so, a Gilead executive wrote a letter to BMJ to defend its pricing decisions, which were also skewered late last year by a US Senate Finance Committee investigation, which spent 18 months reviewing voluminous Gilead documents before concluding that the company placed profits before patients in setting prices for its Sovaldi treatment, the first of three Gilead hepatitis C drugs now available.

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To wit, Gregg Alton, a Gilead executive vice president, who oversees what the company calls commercial and access operations, wrote that Gilead did not set the price for Sovaldi based solely on “internal deliberations.” The pill, we should note, was priced at $84,000, or $1,000 a day, for a 12-week regimen, before any rebates were negotiated with payers. Sovaldi was launched in early 2014.

“Gilead conducted extensive research with a broad group of private and public payers to determine a fair and reasonable price,” Alton wrote. He then noted that the existing treatment at the time — a combination of ribavirin and interferon — cost $94,000, and that Sovaldi provided “significant improvements over the prior standard of care, in terms of cure rates, safety, and duration of therapy.”

Alton then attempted to explain how Gilead came to charge more than the initial price for Sovaldi that was projected by Pharmasset, the company that developed the treatment and Gilead bought for $11 billion five years ago. The BMJ report noted that Pharmasset had initially considered pricing Sovaldi at $36,000, but he wrote that this is “misleading.”

He maintained the final version of a document plan BMJ referenced had a range of $36,000 to $72,000. “Pharmasset assumed that when [Sovaldi] was launched, the regimen price would remain at $72,000. Therefore, if Sovaldi was approved for use as monotherapy, it would cost $72,000. If [it] was approved for use with other [drugs], Pharmasset assumed Sovaldi would merit at least 50 percent of the regimen’s value at a minimum cost of $36,000, while an additional $36,000 would cover the use of other (drugs).

“In other words,” he wrote, “Pharmasset used the exact same methodology as Gilead for creating a pricing model.”

Alton also took the BMJ report to task for failing to mention that Gilead “took a considerable risk” by acquiring Pharmasset. At the time of the deal, Pharmasset only had data from Phase 2 studies in patients with two strains of the disease, but no data on genotype 1 patients, who account for 60 percent of those infected and are, “by far, the biggest opportunity to cure the most patients.” He also maintained Sovaldi was discovered without government support.

Of course, Gilead would not have taken such a risk, presumably, if its team did not foresee an acceptable rate of return which was predicated on pricing. While it is true that was a risk, it was a calculated risk. Shareholders will likely say the company should be commended for making that bet, but it may not have succeeded to the extent that later pleased these investors without a certain level of pricing. [UPDATE: We should note Appendix 2 on page 24 of this report lists National Institutes of Health grants to Pharmassset and its former chief executive before the sale to Gilead].

Alton closed by pointing to efforts to work with health care systems to ensure access. He noted Gilead set a price in the United Kingdom that met a threshold set by the government’s cost-effectiveness watchdog, and the firm is willing to continue talks with the National Health Service. The NHS, by the way, called the BMJ report “naive” for suggesting it had the ability to handle a large volume of hepatitis C patients quickly.

“However, drug pricing cannot be looked at in isolation, but rather must be placed in the context of a country’s health care system, the cost incurred to the healthcare systems with no treatment or inferior treatment, and how countries successfully incentivize and allocate research and development costs to spur pharmaceutical innovation,” Alton wrote.

All of this may be true, and Sovaldi was a superior option, which explains why so many physicians began writing prescriptions so quickly. The problem, however, has been that the drug created a pharmaceutical surge that payers — both public and private — were unprepared to accommodate. Expensive health care costs may be saved down the road, but budgets were challenged immediately.

This is a difficult balancing act that letters to the editor, while good for discussion, are unlikely to solve.

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  • Gilead & Mr. Alton all have blood on there greedy hands. They should go to prison. So many people could get cured but there greed wont allow it. Go to hell Gilead….

  • Defending the indefensible. Wilfully deciding hundreds of thousands of people will die this year so they can get even richer. I had this financial threat to my life when I needed treatment and luckily was able to legally source generic hep C medication through a buyers club. I used fixhepc, which has a clinical trial presented at AASLD.

  • Look, it doesn’t matter how good a treatment is if no one can afford it. Also – Please get the facts straight. Gilead didn’t develop Sofosbuvir (Sovaldi), they bought it, just like the wall street creep who bought an $11 per pill HIV drug, and marked it up to $750 per pill. Shameful!

  • They set a new standard, or a new low, on the price of a life and everyone should be very afraid. It puts participation in drug research, both by researchers and patients, into disrepute and threatens all development and patents because we will not lay down and die, as this price ensures. 1000 per day die, that could be saved, and the same profit could have been achieved through volume because it is a top 5 infectious disease and there are so many of us. It is a marginalised, stigmatised patient group so they have got away with it until now, but it will be other illnesses soon, they are testing what the market will stand. It won’t stand this, as we have seen as people all over the world are now accessing generic hepatitis c treatments through buyers clubs.

  • there are lots and lots of examples of unethical pricing of pharmaceuticals. I submit that this is NOT one of those. This is a major advance that delivers a high rate of CURE for a major public health issue. This is not maintenance therapy. How much do you think a liver transplant costs?
    Gilead is at fault because NHS doesn’t have the budget? The UK is a very affluent place. As the article says, they just didn’t adjust for the surge of costs, however that is a political and budgetary issue, not Gilead’s fault. And the savings over the next 20 years will be significantly more than the cost of a course of treatment. The NHS will save $ long term by treating more patients.
    Pharma is not a not-for-profit venture. If it were, we wouldn’t have 1/10th the great drugs we do.

  • So, Gikead took a risk. Big deal. The risk was extremely minimized with final results. So we should pay for the calculated risk and not the actual final results? Absurd.

    • it requires some strong mental gymnastics to understand what he’s saying, but he’s saying that gilead shouldn’t charge so much because, although there was a very high risk of failure during the developmental/clinical phases, the drug didn’t fail… so gilead should price the drug like it didn’t cost billions of dollars and who knows how many man-hours to bring it to market.
      it’s a selfish, coward-ish way of thinking to be honest

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