Gilead’s Milligan Says New Hepatitis C Drug Attracts Payers

Feb 12, 2014 4:06 pm ET

(Updates shares in fourth paragraph.)

Feb. 12 (Bloomberg) -- Gilead Sciences Inc., the world’s largest maker of HIV medicines, said insurers have responded favorably over coverage of its new hepatitis C drug, which has a price tag of $84,000 for a 12-week course of treatment.

The medicine’s ability to cure patients, cutting the lifetime cost of care, makes it an appealing proposition for payers, said John Milligan, chief operating officer of the Foster City, California-based drugmaker.

“We’ve been approached by some big plans and some big HMOs about making sure that they can get access early and they’ve already engaged with us on negotiations,” Milligan said yesterday in an interview at Bloomberg News in New York. “To date, without exception, those conversations have been very productive.”

Gilead rose less than 1 percent to $82 at the close in New York. The shares have doubled in the last year.

The medicine, Sovaldi, was approved by the U.S. Food and Drug Administration on Dec. 6, and drew $139.4 million in sales by Dec. 31. Its cost has drawn scrutiny from some patient advocacy groups, who say it could prohibit people from getting the treatment, and raised questions about whether insurers would pay for it. Milligan said that some state Medicaid plans for the poor, including those in New Jersey and New York, have adopted coverage very quickly.

3.2 Million

The most common chronic bloodborne infection in the U.S., hepatitis C affects about 3.2 million people in this country, according to the Centers for Disease Control and Prevention. While it can lie dormant for many years, in its end stages the illness can cause liver cirrhosis and cancer. It’s the most common cause for liver transplants in the U.S., according to the CDC. Globally about 150 million people are chronically infected with the virus, according to the World Health Organization.

Gilead’s drug was shown in clinical trials to reduce patients’ viral load to undetectable levels, essentially curing them of the disease. That makes the drug a valuable option for insurers, Milligan said.

“When you talk to them about the long-term benefits, they recognize they’re not going to have to worry as much about liver transplants and other care they’re going to have to give,” Milligan said, noting the cost of a liver transplant in the U.S. is about $300,000, not including the price of additional medicines and care. “For most of these plans, the risk/benefit seems to be positive, based on our conversations.”

$4 Billion

Analysts estimate Sovaldi will generate $4 billion in revenue this year, and more than $10 billion in 2017. With that extra cash, Gilead may consider paying a dividend, Milligan said today. That would make it only the second large biotechnology company to do so, after Amgen Inc. started paying a dividend in 2011.

Internal discussions about that possibility wouldn’t even begin to happen at Gilead until next year, as the company spends 2014 paying off debt from its $11 billion purchase of Pharmasset Inc., Milligan said. Gilead acquired Sovaldi in that deal, which closed in 2012. Additionally, the company would want to make sure it has enough long-term visibility into its business that paying a dividend makes sense.

“A dividend is forever,” Milligan said.

--With assistance from Drew Armstrong in New York. Editors: Angela Zimm, Bruce Rule