Is there anything wrong with a $1,000 per day prescription drug?
Gilead Sciences (GILD) reported earnings after the bell Tuesday and blew through estimates, driven by $2.27 billion in sales for its new $1,000 a day hepatitis C treatment Sovaldi, which is believed to be the best-selling prescription drug launch in history, according to the Wall Street Journal.
The question remains, is the drug's $84,000 price tag for a standard 12-week treatment, which breaks down to $1,000 for each pill taken daily, too steep? It's a question that has been asked on the New York Times editorial pages, in a letter from Rep. Henry Waxman (D-Calif.) and other members of Congress to Gilead Chief Executive John C. Martin, as well as by insurers, Medicaid programs and doctors. In the accompanying video, Yahoo Finance Editor-in-Chief Aaron Task and I debate the issue. Check out the video to see why Task defends Gilead's pricing of the drug.
The company contends Sovaldi's price tag is justified by its higher cure rate, shorter treatment time (not to mention with fewer side effects) and avoidance of costlier services down the line.
Hepatitis C is a liver disease that afflicts more than three million people in the U.S., often without symptoms for years. It can cause fatigue and fever, as well as cirrhosis (a complication of liver disease) or liver cancer.
According to a biotech analyst interviewed by CNBC, the average price for a full course of treatment with traditional drugs is $70,000 for 24 to 48 weeks with a cure rate of 55 percent. Sovaldi's price point is $90,000 to $100,000 for eight to 12 weeks with a cure rate of at least 90 percent. Older drugs cause severe flu-like symptoms, which Sovaldi does not.
That sounds reasonable you could argue, in perspective. But then you consider more information. According to Reuters (and cited in the Waxman letter), some patients must take the drug longer than 12 weeks. And many doctors are requesting a combination of Sovaldi and another hepatitis C drug, Olysio, to get the most effective treatment for patients. This combination comes out to $150,000. What impact does a prescription drug price tag like this have on premiums if private insurance approves the treatment?
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There's also the question of whether Medicare and Medicaid will cover this treatment, putting taxpayers on the line for the high price, especially when the government cannot negotiate drug prices for Medicare. Bloomberg reports Medicaid programs in some states are limiting the drug's use to only the sickest patients, while others report "sticker shock" or are still evaluating the drug. Yet people in Medicaid -- the government healthcare program for the poor that was expanded under the Affordable Care Act -- are prime candidates for the drug. That's because patients with Hepatitis C are more likely to have an average income of less than $23,000 according to a Center for Disease Control and Prevention study.
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According to the New York Times Gilead is looking to bring the drug to India with a price tag of perhaps $2,000 for six months (versus $168,000 in the U.S.), and the company says they might make similar deals in 60 low- and middle-income countries.
The efficacy argument meanwhile has been questioned based on cost-effectiveness by some doctors and experts, with some concluding the drug offers a low value based on the price.
We've reached out to Gilead for more clarity on how they arrived at the price for Sovaldi. We will update this story with any repsonse.
Gilead has said it tailors its price to the market, to a country's ability to pay. What does that say about the U.S. market? Tell us what you think in the comments section below.
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