Gilead Sciences shares sank after the biggest drug-benefit manager in the U.S. chose a pill from AbbVie Inc. to be the sole hepatitis C treatment approved for many patients, as insurers seek to rein in the rising cost of medicine.
Express Scripts Holding Co., which helps insurers and large employers provide drug coverage, opted to narrow doctors’ treatment options in exchange for lower prices. On its most widely used list of approved drugs, Express Scripts will include AbbVie’s Viekira Pak for patients with genotype 1, the nation’s most common form of hepatitis C.
The move is likely to escalate the tension between drugmakers and insurers over climbing costs. More than 300,000 Americans are now taking combinations of prescription drugs that cost $50,000 or more a year, based on Medicare data and estimates by Milliman Inc.
Express Scripts has waged a campaign all year against Gilead’s hepatitis C drugs, calling their price of more than $1,000 a pill part of an unsustainable trend of surging expenses for medicine designed to treat complex health conditions. Gilead’s Sovaldi and Harvoni will be left off Express Scripts’ list, which covers about 25 million people, starting Jan. 1 for most patients.
“We have asked pharma companies to work with us closer and demonstrate good judgment,” Express Scripts Chief Medical Officer Steve Miller said. “AbbVie heard our concerns and they came to the table in a very creative way.”
Gilead’s Sovaldi costs $84,000 for a 12-week course of treatment, and a course of the company’s Harvoni, which combined Sovaldi with another medication in a single pill, costs $94,500. Viekira Pak, approved last week by the Food and Drug Administration, sells for $83,319 before any negotiated discount. AbbVie offered a “significant discount” in exchange for exclusivity, Miller said.
While AbbVie’s drug has proven effective in trials, it requires more pills than Gilead’s and sometimes must be taken with another medication with unpleasant side effects. That means the Express Scripts deal will probably stir controversy about whether the company’s push to rein in rising drug prices is also limiting patients’ treatment options.
“Gilead has been negotiating in good faith with Express Scripts and other payers to ensure patients and health care providers have access to our medications and can make informed treatment decisions,” Gilead said in a statement.
Gilead, based in Foster City, Calif., slid 14 percent, the most since 2001, to close at $92.90. Bank of America Merrill Lynch analyst Ying Huang downgraded his recommendation to underperform from buy, and lowered the price target to $87 from $130.
The deal with AbbVie is for multiple years, Miller said, without providing further information. He declined to disclose the discount Express Scripts is getting for offering Viekira Pak exclusively. Gilead had been privately offering a discount of about 8 percent for its drugs to prescription benefit managers, Miller said.
In exchange for its discount, AbbVie gets a guaranteed market for its drug without limitations on the extent of liver damage patients must have before Express Scripts will approve coverage. In addition to specialists, primary-care doctors will be able to prescribe Viekira Pak under the agreement, broadening the market for AbbVie.