(Adds more details on hepatitis c, analyst comment)
By Caroline Humer
April 17 (Reuters) - UnitedHealth Group Inc, the largest U.S. health insurer, said it spent more than $100 million to cover a pricey new hepatitis C drug from Gilead Sciences Inc in its first three months on the market, an amount that was "multiple" times what it had expected.
UnitedHealth is the first insurer to quantify its costs to cover patients using Gilead's new Sovaldi treatment, whose $84,000 price tag has spurred a national outcry over the rising costs of specialty medicines.
UnitedHealth shares fell nearly 4 percent on Thursday and shares of rivals WellPoint Inc and Aetna Inc fell 3.8 percent and 3.4 percent, respectively, as investors weighed what their potential costs could be as well.
The disclosure indicates that industry-wide, insurers spent $1 to $1.5 billion on treatments in the first quarter, Goldman Sachs analyst Matthew Borsch said in a research note.
U.S. drug regulators approved Sovaldi in December, the first of a handful of ground-breaking hepatitis C treatments that are expected to be on the market in the next few years.
Sovaldi has been shown to cure most patients of the liver-wasting virus with few side effects, but health officials, insurers and Medicaid directors are balking at the cost. The national cost of treating even two-thirds of the estimated 3.2 million people with the virus could reach $200 billion.
This has focused scrutiny on U.S. drug prices, which outstrip the rest of the world. Biotechnology shares were already in the midst of a selloff when U.S. lawmakers asked on March 21 for Gilead Sciences to explain the price for the Sovaldi treatment.
Since then, shares of Gilead have lost more than 7 percent as investors feared that regulators and insurers would pressure the company to restrain prices. It pulled other biotech stocks down in tandem and the Nasdaq Biotechnology Index has dropped nearly 14 percent since March 20.
Some doctors and health officials say the drug's cost must be viewed in comparison to spending on treating liver disease or on liver transplants, which can be more expensive and may not prevent a relapse in hepatitis C.
Daniel Schumacher, chief financial officer of the group's UnitedHealthcare division, said the spending on Sovaldi could begin to moderate after the first big wave of patients are treated with the drug.
He did not disclose what it had anticipated spending on the hepatitis C drug but said the cost "is a multiple of what we had expected."
Because Sovaldi is widely viewed as a breakthrough in treating the liver-wasting virus in typically as few as 12 weeks, many doctors had waited for the drug before prescribing treatment to patients.
"What we're seeing is ... higher pent-up demand as there were more patients that were warehoused leading up to the launch," Schumacher said.
UnitedHealth saw increased spending levels due to Sovaldi in its Medicaid, Medicare and commercial businesses during the first quarter of 2014, he said. A Gilead spokeswoman declined to comment.
Schumacher said the company is working with state Medicaid directors, whose agencies could bear much of the cost because they cover a disproportionate share of people with the virus, and expects to be reimbursed at some point.
State Medicaid directors are pushing Gilead for discounts, but it so far has refused to give much ground. Medicaid receives at least a mandatory 23 percent discount from pharmaceutical makers, but states can negotiate for more cuts. Some insurers, such as pharmacy benefit manager Express Scripts Holding Co , has said it will use anticipated products from AbbVie Inc and Merck & Co as price leverage with Gilead.
UnitedHealth said its quarterly profit was cut by 35 cents a share due to costs and taxes related to President Barack Obama's healthcare law, more formally known as the Affordable Care Act, and government cuts to private Medicare funding.
The hepatitis C cost is one of several new pressures UnitedHealth said it has an eye on this year including commercial premium prices in several markets. In New York, which is also a large market for WellPoint, it said new competitors were underpricing at unsustainable levels.
"This is really the first look of anyone operating under the full brunt of ACA-mandated cuts and sequestration and you have to revise your thinking a little bit," CRT Capital analyst Sheryl Skolnick said.
UnitedHealth, a small player on the Obamacare exchanges created by that reform law in 2014, said that it had a "bias" towards expansion in 2015. Insurers must submit new plans and rates to the federal government by the end of June if they want to participate.
The company's quarterly results slightly beat analyst expectations. UnitedHealth said net profit was $1.1 billion, or about $1.10 per share, compared with $1.2 billion, or $1.16 per share a year earlier. Analysts had expected first quarter profit of $1.09 per share, according to Thomson Reuters I/B/E/S.
UnitedHealth stuck by its previous forecast for 2014 earnings of $5.40 to $5.60 per share and said it sees revenue growth of about 5 percent to $128 billion to $129 billion.
(Reporting by Caroline Humer; Editing by Michele Gershberg, Chizu Nomiyiama and Cynthia Osterman)