Express Scripts Raises Pressure on Gilead to Cut Drug Price

Apr 08, 2014 4:16 pm ET

(Updates with closing stock price in fourth paragraph.)

April 8 (Bloomberg) -- Express Scripts Holding Co., a pharmacy benefit manager that handles more than 1 billion prescriptions a year in the U.S., is ratcheting up its effort to force Gilead Sciences Inc. to cut the $84,000 price of its new hepatitis C pill Sovaldi.

Express Scripts plans to ask clients, composed of national employers, health insurance plans and government agencies, to join a coalition that would stop using Sovaldi once a rival medicine is approved for the U.S., expected next year, said Steven Miller, chief medical officer of the St. Louis-based company. Express Scripts said in December it may block reimbursement for Foster City, California-based Gilead’s pill once other new hepatitis C therapies are on the market.

“What they have done with this particular drug will break the country,” Miller said in a telephone interview. “It will make pharmacy benefits no longer sustainable. Companies just aren’t going to be able to handle paying for this drug.”

Gilead shares fell 3.1 percent to $70.01 at the close in New York. The shares have gained 48 percent in the past 12 months.

Gilead, in an e-mail from a spokeswoman, declined to comment on Miller’s remarks. The company has previously justified the price for Sovaldi by saying it would pay for itself by avoiding future complications from the virus.

Rising Costs

Sovaldi costs $1,000 per pill with a regular course of treatment set at one pill a day for 12 weeks. The price is just one example of a wave of skyrocketing costs to come from new medicines, Miller said. Express Scripts’s annual Drug Trend Report released today found spending on specialty drugs rose 14 percent in 2013 and predicted it will leap another 63 percent by the end of 2016 based mainly on prices for new pills to treat the 2.7 million Americans with hepatitis C.

Specialty medicines now account for 28 percent of the total spending on drugs in the U.S., even though they make up less than 1 percent of all prescriptions. Treatment for inflammatory diseases, including rheumatoid arthritis, and for multiple sclerosis and cancer are responsible for 60 percent of the cost. Diabetes drugs generated the most spending for traditional medicines in 2013, the report found.

Data gathered during the first quarter suggests Sovaldi may generate $10 billion in 2014, according to Andrew Berens and Thomas Smith, Bloomberg Industries analysts based in Skillman, New Jersey. If everyone with hepatitis C was treated with Sovaldi, the cost would exceed $300 billion -- more than the U.S. currently spends on all prescription drugs, Miller said.

Breakthrough Treatment

Hepatitis C is a viral infection that can lead to liver damage or failure and liver cancer. Gilead’s drug was approved last year as a breakthrough treatment for the disease. The medicine offers higher cure rates and fewer side effects than older treatments. Its high cost has attracted resistance from insurers, pharmacy benefit managers and public-health advocates.

U.S. lawmakers last month asked Gilead, the world’s largest biotechnology company by market value, to explain how the company set the drug’s price and what it is doing to ensure low- income patients can get it. The price is keeping many state-run Medicaid programs for the poor from making the drug available to its members, a group hard-hit by the virus.

Middle Men

Pharmacy benefit managers such as Express Scripts serve as middle men, managing drug benefits for insurers and employers. Express Scripts is hoping it can force Gilead to make a choice: a reasonable price and years of Sovaldi use, or its high price and a market that disappears as soon as the Food and Drug Administration approves an alternative.

“Gilead could have a great year this year and lose all its market share a year from now,” Miller said. “The FDA has fast- tracked several other medications and we believe early 2015 is when there will be competitors in the marketplace.”

AbbVie Inc. said it will file for FDA approval of its hepatitis C combination therapy in the second quarter after a study found it cured 99 percent of patients after 12 weeks. Bristol-Myers Squibb Co. yesterday filed for FDA approval of two experimental drugs used in combination for hepatitis C.

Miller said he hopes companies selling hepatitis C drugs in the future will talk to payers before setting a price.

“The companies that will be second and third to the market here will have to play catch up,” Miller said. “We could shift the market share as soon as a competitor comes out. We need to start a national debate on fairness in drug pricing.”