Wyden-Grassley Findings Could Punish Gilead

Gilead’s GILD Sovaldi/Harvoni HCV regimen has been saving lives and that’s a good thing. After Senator Bernie Sanders’ HCV rant in March over veterans’ inability to afford the drug, Gilead’s pricing has been in the spotlight. Recent findings from the Wyden-Grassley report will likely keep Gilead in the spotlight. Senator Wyden (Oregon) and Senator Grassley’s (Iowa) 18-month investigation into the pricing and marketing of Gilead’s HCV regimen highlighted the following:

“Drawing from 20,000 pages of internal company documents, dozens of interviews with health care experts, and a trove of data from Medicaid programs in 50 states and the District of Columbia, the investigation found that 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. Fostering broad, affordable access was not a key consideration in the process of setting the wholesale prices.”

GILD was down nearly 1% in mid-day trading; this came after falling nearly 2% on Monday. Below are other findings from the report and my interpretation:

Wyden-Grassley

“In the 18 months following Sovaldi’s approval, Medicare spent nearly $8.2 billion before rebates on Sovaldi and Harvoni. Over that same span, Medicare’s monthly spending on Hepatitis C treatments increased more than six-fold. In 2014 alone, Medicare and Medicaid combined to spend more than $5 billion on Sovaldi and Harvoni before rebates. That total is projected to climb in 2015. 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.”

Shock Exchange Interpretation:

The $8.2 billion spent by Medicare highlights that the government is a major buyer of Gilead’s HCV regimen. A buyer of this size typically wields a lot of power over vendors. Medicare/Medicaid may be able to extract deeper discounts for Gilead going forward.

The six-fold increase in spending on HCV treatments indicates that a larger part of government spending has gone for HCV treatments, of which Gilead is a direct beneficiary. HCV sales of $20.6 billion – after rebates – illustrates that Gilead is indeed making money. If anyone gripes about the government’s attempt to punish Gilead politically, Wyden-Grassley need only refer to the $20.6 billion sales figure for cover.