The massive revenue streams created virtually overnight by Gilead’s and AbbVie’s new Hepatitis C drugs have stimulated a feeding frenzy across the US drug channel and a new set of competitive dynamics.
PBMs, distributors, and health plans are finding innovative ways to do deals with one or both of the two drug manufacturers that leave them with a bigger slice of the billions of dollars being generated as sales explode. This is going to be a case study in reimbursement competitive dynamics that the whole market needs to track and understand what lessons can be learnt.
At the end of 2013 Gilead launched Sovaldi at $1,000 a pill, or $84,000 for the full treatment course. They then followed this in October 2014 with Harvoni, a combo of Sovaldi and a NS5A inhibitor, ledipasvir, at $94,500 for a 12-week course. They have justified these prices by arguing these drugs cure patients of a disease that, for 75% to 85% of patients, can become chronic and potentially cause liver failure and death.
Providers and patient advocacy groups reacted badly to these prices; Express Scripts (ESI) refused to put either on its formulary unless the patient had a prior authorization note. Instead, ESI cut an exclusive deal with AbbVie, putting on their formulary the competing therapy, Viekira Pak, which was launched in December 2014. Not surprisingly, this allowed ESI’s main competitor, CVS/Caremark, to do the opposite through an exclusive deal with the now jilted Gilead recommending coverage of both Sovaldi and Harvoni. The net result was that both major PBMs struck exclusive deals with one of the two manufacturers through unpublished discounts, allowing them to increase their rebates while reducing the price to the patient and the profit to both Gilead and AbbVie.
Out of the two deals, AbbVie appears to have come off the winner as ESI has 28% market share of covered lives within the managed market world compared to CVS/Caremark with only 22%. However, now Gilead has secured an exclusive with the largest health plan, UnitedHealth, and their 45 million members, plus deals with Anthem, Humana, Aetna, and Harvard Pilgrim, while Prime Therapeutics, the sixth largest PBM in the country, has done a deal with both.
There are rumors that these deals have led to discounts as high as 30%, if not higher. With CVS/Caremark reporting global sales of Sovaldi at $8.6 billion for the first three quarters of 2014 and the uptake of Harvoni at 2.5 times that of Sovaldi in its first four months since launch, Hepatitis C is turning into an amazing money pot. No wonder AmerisourceBergen is pointing to the launch of these new innovative therapies as being the reason for their revenues being up by 15% quarter-on-quarter for the end of 2014.
What is important is to understand how this story will play out, who the ultimate winners will be, and whether this will be repeated. We might have expected the traditional “one-of-two” formulary deal from these two competing drug originators with both being content to gain access and then to fight for a slightly better formulary position plan by plan. However that is clearly not the case. The Chief Medical Officer of ESI has already indicated that other high-priced indications like diabetes and cancer are where future exclusive deals are also possibilities.
So it could be well worth the time and effort to watch how the competitive dynamics of today’s Hepatitis C market unfold, as such knowledge could be invaluable to building the right launch and reimbursement strategies for the next high-priced drug launch.