Senate Report Criticizes Gilead's Pricing Strategy for Sovaldi

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By Bronwyn Mixter

Dec. 1 — Gilead Sciences Inc.'s pricing and marketing strategy for the hepatitis C drug Sovaldi was designed to maximize revenue with little concern for access or affordability, according to a report released Dec. 1 by Sens. Ron Wyden (D-Ore.) and Charles E. Grassley (R-Iowa).

Wyden, the ranking member of the Senate Finance Committee, and Grassley released the results of an investigation into the pricing and marketing of Sovaldi and its second-wave successor, Harvoni. The investigation found the company pursued a marketing strategy and final wholesale price of Sovaldi—$1,000 per pill, or $84,000 for a single course of treatment—that it believed would maximize revenue. Building on that price, Harvoni was later introduced at $94,500 for a single course of treatment, the report said.

Fostering broad, affordable access wasn't a key consideration in the process of setting the wholesale prices, the senators said.

Grassley emphasized during a press briefing that the report is just a case study and not a policy document, but said “policy makers should begin a discussion of what to do next.”

He said one area that policy makers should look at is how to give the marketplace transparency so that payers can anticipate the arrival of a blockbuster drug on the market. Grassley said payers have limited opportunity to know the price of a new drug, the volume of patients that will use the drug and how much a new drug advances the standard of care.

Meanwhile, Gilead said in a statement provided to Bloomberg BNA that it stands behind the pricing of its therapies because of the benefit they bring to patients and the significant value they represent to payers, providers and the entire health-care system by reducing the long-term costs associated with managing chronic hepatitis C virus (HCV).

Medicare, Medicaid Spending

In the 18 months following Sovaldi's approval, Medicare spent nearly $8.2 billion before rebates on Sovaldi and Harvoni, the report said. Over that same span, Medicare's monthly spending on hepatitis C treatments increased more than sixfold.

In 2014 alone, Medicare and Medicaid combined spent more than $5 billion on Sovaldi and Harvoni before rebates, and that total is projected to climb in 2015, the report said. Meanwhile, Gilead's recent financial statements show U.S. sales of Sovaldi and Harvoni, including through public programs and private payers, totaled $20.6 billion after rebates in the 21 months following Sovaldi's introduction, according to the report.

“Gilead pursued a calculated scheme for pricing and marketing its Hepatitis C drug based on one primary goal, maximizing revenue, regardless of the human consequences. There was no concrete evidence in e-mails, meeting minutes or presentations that basic financial matters such as R&D costs or the multi-billion dollar acquisition of Pharmasset, the drug's first developer, factored into how Gilead set the price,” Wyden said in a statement. “Gilead knew these prices would put treatment out of the reach of millions and cause extraordinary problems for Medicare and Medicaid, but still the company went ahead. If Gilead's approach to pricing is the future of how blockbuster drugs are launched, it will cost billions and billions of dollars to treat just a fraction of patients.”

Other Findings

The report also said Gilead set a high price for Sovaldi to ensure a future high price for Harvoni.

The documentation shows that Gilead considered a number of factors in determining a price point for Sovaldi, including costs for the existing standard of care for hepatitis C treatment and setting a high baseline for the next wave of drugs, such as Harvoni, the report said.

In addition, the report said Gilead underestimated the degree of access restrictions that would result from its pricing decision. The company set a price as high as it thought the market would bear before significant access restrictions would be imposed, but the company's analyses were ultimately incorrect as many payers adopted substantial access restrictions at the price of $84,000, the report said.

When confronted with the widespread initiation of access restrictions, Gilead refused to offer substantial discounts and didn't significantly modify its contracting strategy to improve patient access, the report said. For example, Gilead offered Medicaid programs supplemental rebates of up to 10 percent; however, its offer came with the precondition that states had to drop some or all of their access restrictions. For states already facing a steep financial burden, accepting that precondition in most cases would have increased the budgetary impact rather than easing it, the report said.

Market Competition

The report said that even though a competing drug entered the market, AbbVie Inc.'s Viekira Pak, and prices responded, there are still significant concerns.

Three days following the approval of Viekira Pak on Dec. 19, 2014, Express Scripts Holding Co., the nation's largest pharmacy benefit manager, announced that it would make Viekira Pak its preferred treatment for hepatitis C genotype 1 and would no longer cover Sovaldi and Harvoni for these patients (246 HCDR, 12/23/14), the report said. Gilead responded in January and February 2015 by entering into discounting agreements for Harvoni and Sovaldi with CVS, Anthem, Humana, Aetna and UnitedHealth Group. Cigna struck agreements with Gilead for Harvoni only.

Even as competition lowered prices for therapies, concerns remain, particularly in the public payer community, about high costs for treating millions of people in the U.S. infected with hepatitis C, as well as the budgetary effects of a future single source innovator drug that might not face competition as quickly, the report said.

Policy Considerations

“The evidence collected for this report presents the Senate Finance Committee with a warning for critical policy areas under its jurisdiction,” the report said. “It is true that aspects of the system worked, in this case, because AbbVie came to the market with a competitor drug roughly a year after Sovaldi's release. However, only looking at that one event in a vacuum ignores the impact of the efforts that Gilead had undertaken to change the HCV market as a whole.”

The report said that while it is premature to make specific legislative recommendations, several specific questions warrant public discussion:

• What are the effects of a breakthrough, single source innovator drug on the marketplace?
• Do payers have adequate information to know the cost, patient volume and increases in efficacy of a new treatment regimen?
• What role does the concept of ‘‘value’’ play in this debate, and how should an innovative therapy's value be represented in its price?
• What measures might improve price transparency for new higher-cost therapies while maintaining incentives for manufacturers to invest in new drug development?
• What tools exist, or should exist, to address the impact of high cost drugs and corresponding access restrictions, particularly on low-income populations and state Medicaid programs?


In a statement issued after the press briefing on the report, Marilyn Tavenner, president and chief executive officer of America's Health Insurance Plans (AHIP), said “this investigation underscores the disconnect between drug company rhetoric and reality. Gilead and its defenders claim pricing is based on value, but the findings from Sen. Grassley and Sen. Wyden show a pricing strategy that disregards patients and the unsustainable cost burden on health care.”

“It's time for drug companies to be held to the same access and affordability standards that apply to the rest of the health system, and that starts with greater transparency in drug pricing,” Tavenner said.

Gilead's Response

In a Dec. 1 statement provided to Bloomberg BNA, Gilead said it appreciates the importance of making health-care accessible for all Americans and believes it was cooperative and transparent in its response to the investigation.

“While we appreciate the Senate Finance Committee's attention to this issue, we respectfully disagree with the conclusions of their report,” the company said. “Around the world, more than 600,000 individuals have been treated with Gilead's HCV medications since their introductions in 2013 and 2014. Gilead responsibly and thoughtfully priced Sovaldi and Harvoni. The products were initially priced in line with the previous standards of care. With the rebates and discounts now in place, the prices today are less than the cost of prior regimens, even though our therapies have significantly higher cure rates and very few side effects.”

Gilead also said its innovation to reduce the duration of therapy even further to only eight weeks has resulted in another one-third reduction in price (on top of the rebates and discounts) for many patients.

“We stand behind the pricing of our therapies because of the benefit they bring to patients and the significant value they represent to payers, providers, and our entire healthcare system by reducing the long-term costs associated with managing chronic HCV,” Gilead said. “Enabling patient access to Sovaldi and Harvoni is a top priority for Gilead. We have programs in place to help uninsured individuals and those who need financial assistance to access our therapies, and we will continue our efforts to make the medications available to people in need in the United States and around the world.”

Generic Drug Prices

Meanwhile, the Healthcare Supply Chain Association (HSCA) Dec. 1 urged Congress to address price spikes in the generic drug market by granting the Food and Drug Administration authority to expedite review and approval of abbreviated new drug applications (ANDAs) for products where there are two or fewer manufacturers, or in instances where there have already been price spikes.

The HSCA said it recently sent letters to the Senate Special Committee on Aging and the Senate Health, Education, Labor, and Pensions (HELP) Committee encouraging Congress to take specific action to help ensure a healthy generic market and safeguard patient and provider access to essential medications. The group said its members have recently seen price spikes for many widely used generic drugs.

“Significant recent price spikes in the generic drug market are an enormous risk to public health and are jeopardizing patient access to affordable healthcare,” HSCA President and Chief Executive Officer Todd Ebert said in a statement. “HSCA and its member group purchasing organizations are committed to lowering costs and increasing competition in the healthcare marketplace. We urge Congress to give FDA authority to expedite review and approval for new generic drugs that have the potential to mitigate price spikes and help ensure access to critical medications for health-care providers and the patients they serve.”

The current backlog of ANDAs at the FDA is compounding the problem of price spikes, the group said. Since the Generic Drug User Fee Amendments (GDUFA) were negotiated in fiscal year 2011, the FDA's backlog has continually risen along with its median review time for product approval. A private sector survey revealed that prior to GDUFA, review time for ANDAs was 30 months. In FY 2013, that time had risen to 36 months, and in FY 2014 was estimated to be 42 months, the group said.

A wait time of three to four years stifles the ability of some manufacturers who want to reintroduce competition to the generic market, the HSCA said.

GDUFA was enacted as part of the Food and Drug Administration Safety and Innovation Act of 2012 (131 HCDR, 7/10/12). Under GDUFA, generic manufacturers pay fees to the FDA for quicker reviews of their applications.

To contact the reporter on this story: Bronwyn Mixter in Washington at

To contact the editor responsible for this story: Janey Cohen at