Pricing

Gilead’s storied hep C franchise will now include a generic drug operation

Faced with a dwindling stream of revenue for its hepatitis C franchise amid an ongoing national debate on drug pricing, Gilead has come up with an unconventional plan.

Through a new subsidiary named Asegua Therapeutics, Gilead will sell generic versions of the hepatitis C combo drugs Epclusa and Harvoni at a price of $24,000 — a fraction of the list prices of the drugs, which cost $75,000 and $94,500 respectively for a 12-week regimen.

John Milligan

While providing a painless cure for hepatitis C was a major success in biotech, it turned out to be a bit of a mixed story for Gilead, which saw the huge, profitable market quickly shrink as the patient population got smaller and cheaper rivals emerged from Merck and AbbVie. Chairman John Martin and CEO John Milligan — the duo credited for executing this breakthrough — also endured endless criticism for their aggressive strategy, which triggered a controversy that never really went away.

Neither Milligan nor Martin will oversee the launch of these generic drugs, scheduled for January of 2019, as they are both stepping down at the end of the year. But to hear Milligan tell it, this initiative is an attempt to solve a complex problem they have observed for the past five years: Even though rebates have shaved more than 60% off the average price paid for their hep C cures, these discounts are “effectively invisible” and “access to these cures has been limited.”

Over the past several months, we have searched for a viable path to reduce the list price of our branded HCV medications so that their cost to payers is more easily understood. Unfortunately, existing contracts with insurers, together with laws associated with government pricing policies, make it unacceptably difficult to quickly lower the list price to reflect the discounted cost of our medications.

Setting up their own generic operation, Milligan writes, is “the fastest way to lower list prices for our HCV cures without significant disruption to the healthcare system and our business, as a bridge to longer term solutions aimed at reducing patients’ out-of-pocket medication costs.”

Specifically, this could save Medicare patients up to $2,500 in out-of-pocket costs in the Part D setting, as well as “substantial savings” to state managed Medicaid plans.

Epclusa and Harvoni both contain sofosbuvir, the original hep C medicine that Gilead sells as Sovaldi. In the first half of 2018, their combined sales registered at $1.7 billion, compared with $4.8 billion during the same period in 2017.


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