Gilead fires back at medical journal report critical of its pricing

After getting beaten up last week over the pricing of its hepatitis C treatments in the United Kingdom, Gilead Sciences 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.

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.