US Senate committee takes the lid off Gilead's internal pricing discussions for Sovaldi

No immediate legislative action arises from 18-month study

There is talk among Presidential candidates of requiring pharma companies to be open about their pricing deliberations, and if that idea comes to pass (which at this point is highly unlikely), the US Senate’s just-released, 18-month study of internal Gilead Sovaldi (sofosbuvir) documents will be the source material for what that inside view could be like. The report’s major conclusion: that Gilead Sciences “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”—is less than surprising, given the enormous attention that accompanied Sovaldi as it entered the market in December 2013. The report notes that the company has generated some $26.6 billion in net revenue from Sovaldi (and Harvoni, the follow-on treatment) through September 2015.

The 133-page report reads almost like a thriller novel, with texts of emails flying back and forth, high-profile internal meetings and conference calls and vociferous public reactions when the product was launched. One object lesson is how carefully Gilead’s pricing committee looked at the many ramifications of the product launch and price: competitor positioning; planned discounting after introduction; promotional programs; cross-border pricing effects with other countries; even the patient populations of the major PBMs and how that could affect both the discounting strategy and the financial outcomes of each negotiation. Some other nuggets: the “cost of goods” to manufacture sofosbuvir (not including the clinical trials and approval process) is estimated by internal documents at $1 per pill. R&D costs, including clinical studies, personnel and overheads, were estimated at $880 million during 2012-14, while Pharmasset (the company that invented the drug and was acquired by Gilead in 2012) spent tens of millions more. Gilead hired IMS Health along the way to perform studies including surveys of purchasing directors to provide input to the pricing deliberations.

In an earlier era, the entry of Solvaldi—by most accounts, a near-complete a cure for hepatitis C, a lingering, devastating illness for many patients—would have been hailed as a humanitarian triumph. Instead, the focus of the drug’s commercialization has been on its cost and the effects on overall healthcare budgets for insurers, states and the federal Medicare and Medicaid programs. It could also be said to have intensified the surge for pharma mergers and IPOs that the industry has experienced in the past two years, creating higher expectations of financial gains from the industry. “America needs cures for cancer, Alzheimer’s, diabetes and HIV,” said Finance Committee ranking member, Ron Wyden (D-OR), in a statement. “If those cures are unaffordable and out of reach to millions who need them, Congress will not have met its responsibilities to the American people.”

The report concludes with a set of “findings” (not, it should be noted, recommendations for future legislation) that will surely come up again in policy debates:

1) What are the effects of a breakthrough, single source innovator drug on the marketplace?

2) Do the payers in the programs have adequate information to know the cost, patient volume, and increases in efficacy of a new treatment regimen?

3) What role does the concept of ‘‘value’’ play in this debate, and how should an innovative therapy’s value be represented in its price?

4) What measures might improve price transparency for new higher-cost therapies while maintaining incentives for manufacturers to invest in new drug development?