Background: A previous blog post elaborated on the time and costs associated with bringing a single drug to market in the pharmaceutical industry. If a company could not recoup its investment costs, in addition to making a profit, the incentive to innovate quickly disappears. This is seen in the lack of research being done to develop new antibiotics even though there is a great need (Herper, 2014). On the other hand, more research is being put into oncology drugs than treatment for any other disease (Herper, 2014). Antibiotics are cheap; cancer drugs are not. For drug markets on the more expensive side, the burden is much greater for Medicare, insurance companies, and patients (payers). Some drugs can justify the high prices better than others, but this is certainly a controversial issue that continues to receive attention. The dilemma revolves around how ethical it is to market a drug at so high a price that it cannot benefit the very people who need it.
To provide a reference point for drug pricing, one can look to the market differences between prevalent diseases and orphan diseases (rare diseases that affect smaller numbers of people). The Orphan Drug Act of 1983 was passed exactly because of the reasoning stated above. Due to the small amount of people affected by orphan diseases, a pharmaceutical company may conclude that it would not be able to earn back the money that was spent developing the drug (Food and Drug Administration, 2014). In order to facilitate research for such diseases, the federal government of the United States (US) passed the Orphan Drug Act to provide pharmaceutical companies who invest in orphan drugs certain benefits. These benefits include a 7 year exclusivity period after FDA approval (independent of current patent status, certain tax credits), and federal grants (Waxman). Orphan drugs costs much more than drugs for other disease (including the aforementioned pricy cancer drugs), but this is usually justified in light of the smaller proportions of people affected by any given orphan disease (Miller, Oct 2014).
Introduction: About 3.2 million people in the US (Miller, Sep 2014) and about 170 million people in the world (Saab et al., 2014) are infected with hepatitis C. Gilead Science’s Sovaldi (sofosbuvir) was the first drug of a new class of oral treatments. The cost for 12 weeks of treatment is $84,000 or $1,000 per pill (Staton, Oct 2014). Despite being a breakthrough drug in the treatment of Hepatitis C with an impressive cure rate (>90% [Miller, Sep 2014]), it is well known that Gilead has come under fire for the hefty price tag it has placed on Sovaldi. To add fuel to the flame, Gilead has also rolled out Harvoni (sofosbuvir and ledipasvir), its next blockbuster drug for the treatment of Hepatitis C genotype 1 (Miller, Oct 2014), with at an even greater price. About 2.4 million people in the US have genotype 1 (Miller, Oct 2014), and the cost for 12 weeks of Harvoni treatment is $94,500 or $1,125 per pill (Staton, Oct 2014). However, Harvoni represents another undeniable, true improvement as far as treatment goes, with some patients being cured in 8 or 4 weeks (Staton, Oct 2014).
Steve Miller, MD is the CMO of Express Scripts, and has been a strong voice of disapproval over Gilead’s pricing of Sovaldi. His objections over Harvoni follow suit. Dr. Miller’s primary argument is that Gilead is charging orphan drug prices for drugs that do not treat orphan diseases, and with so many people infected with hepatitis C, the high drug costs are not sustainable (Miller, Oct 2014). To make his point, Dr. Miller compiled a list of the most expensive drugs in the US (cost per 30 days of treatment), and even though Sovaldi and Harvoni rank at number 26 and number 18, the hepatitis C population is a staggering 48 times larger than the second most prevalent indication listed (Miller, Oct 2014). Gilead, however, insists that its breakthrough medications will prevent hepatitis C complications down the road, which will save the healthcare system more money in the long run (Staton, Oct 2014).
Issue: Is Gilead’s pricing of Sovaldi and Harvoni justified?
Rule: Gilead’s pricing of Sovaldi and Harvoni are justified if:
- the benefit to patients is significantly improved from prior standard therapies
- the drugs will contribute significantly to a reduction in healthcare costs over time due to the decrease in costly hepatitis C complications
- the majority of patients can reasonably afford it
Analysis: The advent of Sovaldi and Harvoni ushered in a new age of treatments for hepatitis C. Just 4 years ago, the standard therapy cost up to $34,000, lasted up to 48 weeks, had lasting, severe side effects, and cured less than 50% of patients (Miller, Sep 2014). Sovaldi and Harvoni exhibited a game-changing increase in safety and efficacy. Today, therapy with drugs like these can cost more than $100,000 but lasts up to only 12 weeks, has short-term, well-tolerated side effects, and cures more than 90% of patients (Miller, Sep 2014). Going back to Dr. Miller’s list, it should be pointed out that Sovaldi and Harvoni will cure a high percentage of patients in 12 weeks or less, while most of the other drugs on the list need to be taken for life. Quick calculations would reveal, though, that this still does not quite balance the scales. Nevertheless, it is without question that the benefit of Sovaldi and Harvoni to patients with hepatitis C is significantly improved as compared with prior standard therapy.
According to Younossi et al. (2014), hepatitis C “has been associated with tremendous clinical, economic and quality of life burden” (p. 518), and “chronic [hepatitis C virus] independently and significantly increases health care costs” (p. 526). Complications of hepatitis C include liver cirrhosis, hepatocellular carcinoma, and liver transplantation (Younossi, 2014). A review paper by Gordon et al. (2013) concluded that “[a]nti-[hepatitis C virus] therapy was associated with lower follow-up US health care costs, and these savings were independent of baseline patient comorbidities and stage of disease” (p. 784). It appears that Gilead’s claim of saving the healthcare system more money in the long run has legitimate substance to it. This is a very compelling argument on behalf of Gilead, and may appear to close this case, but one would not have to look very deeply in order to realize that this does not mean that the high prices for Sovaldi and Harvoni are sustainable.
The data on the population of Americans that need hepatitis C treatment is also compelling. Since hepatitis C progresses slowly and older drugs were difficult to tolerate, physicians had been “warehousing” patients, advising them to wait for breakthrough drugs like Sovaldi and Harvoni (Miller, Sep 2014). A study by Express Scripts revealed that in 2013, only 8% of the 3.2 million hepatitis C patients who saw a physician were taking hepatitis C drugs (Miller, Sep 2014). Furthermore, even prior to the introduction of Sovaldi, the total prescription drug expense was half the total medical and pharmacy cost to treat hepatitis C patients (Miller, Sep 2014). Again, that’s prescription drugs taking up 50% of the total treatment costs when only 8% of patients were actually taking prescription drugs, and before Sovaldi even hit the market! A lot of people need access to Sovaldi and Harvoni.
The price tag of Sovaldi and Harvoni indicate that only the wealthiest or best insure patients will have access (Wapner, 2014). Many Americans who have hepatitis C are poor or incarcerated (Wapner, 2014), and Dr. Miller says that the cost “forces patients to decide between medications and other staples like food or rent” (Miller, Oct 2014). Physicians, insurance companies, and Medicare groups have all expressed outrage over Gilead’s pricing. The latest data to be analyzed were by CVS Health, showing that in comparison to patients in clinical trials, 4 times as many patients in the real world are coming off hepatitis C treatments due to the high costs (Staton, Sep 2014). If each pill costs $1,000 and patients do not finish therapy because they cannot afford it, they lose the clinical benefit and waste a substantial amount of money (Staton, Sep 2014). Payer groups have managed the high costs thus far by giving the drugs only to the sickest patients, advocating for financial assistance from state health agencies, and even appealing to Congress (Helfand, 2014). It is difficult to deny the reality that most patients will not be able to afford these new hepatitis C drugs. It has further been noted that the high costs of Sovaldi and Harvoni will actually cause an increase in immediate healthcare costs, particularly driving up health plan hepatitis C cost burdens by 40% in 2015 (on top of an already record-breaking increase in costs seen this year) (Helfand, 2014). One thing payers are hoping for is that other pharmaceutical companies, such as AbbVie and Merck, will be able to help drive prices down by marketing their own hepatitis C drugs and creating more competition (Staton, Oct 2014).
Conclusion: Gilead should seriously consider reducing the price of Sovaldi and Harvoni. These have already proven to be the unrivaled best therapies on the market, so even if the prices were significantly reduced, Gilead would not even have to worry about major competition at this point. In addition, if substantially more patients are able to afford these drugs, Gilead’s profits may be minimally affected. Most importantly, Gilead would be making good on its ethical responsibility of making these groundbreaking hepatitis C treatments available to more patients, for what good are these miracle drugs if they are being kept out of the hands of the very people they were meant to help? Sovaldi and Harvoni have left little doubt that they are significant improvements to the prior hepatitis C standard therapies, or that they will contribute significantly to a reduction in healthcare costs over time due to the decrease in costly hepatitis C complications. The problem is the economic burden they present to patients in the present, and how it severely restricts patient access to these life-saving drugs.
- Herper, M. (2014). '60 Minutes' Just Attacked High Drug Prices. Here's What You Should Know. Retrieved from http://www.forbes.com/sites/matthewherper/2014/10/05/60-minutes-just-attacked-high-drug-prices-heres-what-you-should-know/
- Food and Drug Administration. (2013). Orphan Drug Act. Retrieved from http://www.fda.gov/regulatoryinformation/legislation/federalfooddrugandcosmeticactfdcact/significantamendmentstothefdcact/orphandrugact/default.htm
- Waxman, H. Orphan Drugs. Retrieved from http://waxman.house.gov/orphan-drugs
- Miller, S. (Oct 2014). Harvoni: Orphan-Drug Pricing for a Non-Orphan Drug. Retrieved from http://lab.express-scripts.com/insights/specialty-medications/harvoni-orphan-drug-pricing-for-a-nonorphan-drug
- Miller, S. (Sep 2014). New Data Warns of Looming Hepatitis C Medication Costs. Retrieved from http://lab.express-scripts.com/insights/specialty-medications/new-data-warns-of-looming-hepatitis-c-medication-costs
- Saab, S., Gordon, S. C., Park, H., Sulkowski, M., Ahmed, A., & Younossi, Z. (2014). Cost-effectiveness analysis of sofosbuvir plus peginterferon/ribavirin in the treatment of chronic hepatitis C virus genotype 1 infection. Alimentary Pharmacology & Therapeutics, 40(6), 657-675.
- Staton, T. (Oct 2014). Orphan drug pricing for non-orphan meds? Express Scripts is looking at you, Gilead. Retrieved from http://www.fiercepharmamarketing.com/story/orphan-drug-pricing-non-orphan-meds-express-scripts-looking-you-gilead/2014-10-28
- Younossi, Z. M., Kanwal, F., Saab, S., Brown, K. A., El-Serag, H. B., Kim, W. R., … Gordon, S.C. (2014). The impact of hepatitis C burden: an evidence-based approach. Alimentary Pharmacology & Therapeutics, 39(5), 518-531.
- Wapner, J. (2014). The Solid-Gold Wonder Drug. Scientific American, 311(3), 32-34.
- Staton, T. (Sep 2014). Real-world hep C patients drop off pricey Sovaldi, CVS study finds. Retrieved from http://www.fiercepharma.com/story/real-world-hep-c-patients-drop-pricey-sovaldi-cvs-study-finds/2014-09-18
- Helfand, C. (2014). Payers hit back at Gilead for $94,500 price tag on brand-new hep C combo pill. Retrieved from http://www.fiercepharma.com/story/payers-hit-back-gilead-94500-price-tag-brand-new-hep-c-combo-pill/2014-10-13?utm_medium=nl&utm_source=internal
Rowan Valenzuela is a regulatory medical writer for a contract research organization based in New Jersey. He earned a bachelor of arts in biology from Rutgers University and is currently a graduate student in the Biomedical Writing program at the University of the Sciences in Philadelphia. Rowan’s professional career allows him to combine his passions for both healthcare and writing. He is also involved with different aspects of the arts and religion, being a strong advocate of creative expression and critical thinking.