Provided by FiercePharma
November 12, 2013 | By Tracy Staton
he next generation of hepatitis C treatments has investors excited--not to mention doctors, patients and drug company executives. But if the past is any indicator, those newfangled drugs are likely to be dear. Hep C is a devastating disease, curing it saves payers money in the long run, and plenty of insured patients are ready to step up.
But even before the first of these breakthrough meds hits the market, patient advocates like Doctors Without Borders are raising a red flag on prices. As Pharmalot reports, they've gained some ammo from a production cost analysis by some academics at Liverpool University. Under their model, making the Gilead Sciences ($GILD) drug sofosbuvir--closest to approval with a Dec. 7 FDA review deadline--would cost an estimated $68 to $136 for a 12-week supply of a 400-mg dose.
There are plenty of things wrong with this number. The Liverpool researchers made a set of assumptions about production based on the cost to make HIV drugs, pegging hep C manufacturing at one to 10 times the cost of common HIV meds, depending on complexity and so forth. Whether that includes the capital required to build plants and ramp up production--which Gilead is doing now on sofosbuvir--isn't clear. Whether it includes the cost of R&D seems highly unlikely at that rate.
So, comparing that $136 on the high side to the many thousands sofosbuvir is likely to cost is something of a false comparison. But Doctors Without Borders does have a point about pricing. Drug companies naturally want to sell their products to as many people as possible, at as high a price as possible. Isn't that what a maximizing-shareholder-value company is supposed to do? But drugmakers have found that sometimes, it pays to pump up the volume--even at the expense of prices.
GlaxoSmithKline ($GSK) and Sanofi ($SNY), for instance, have cut prices on certain drugs to gain market share in the developing world. GSK says it's making more money in some places that way. Plus, some flexibility on pricing can win public-image points, and Big Pharma can always use help in that department.
Consider the vaccines deals companies have made with charities intent on spreading immunizations in Africa and other poor countries. GSK and Merck ($MRK) both cut the prices on their HPV vaccines and got big-volume contracts in exchange--plus lots of publicity that didn't involve layoffs, federal investigations or any other negative news.
And as Doctors Without Borders points out, working with poor countries on pricing could fend off threats of compulsory licensing, a work-around for developing countries to facilitate cheap knockoffs of patent-protected drugs. In fact, the group is urging countries to consider patent moves if companies don't come through with lower prices on their own, Pharmalot reports.
"We urge companies expected to bring these drugs to market soon to price new hepatitis C regimens at below $500 in developing countries," Doctors Without Borders' Manica Balasegaram said (as quoted by Pharmalot), "and for countries affected by the disease to consider ways to overcome patent barriers to allow the production of more affordable generic versions."
India singled out Bayer's Nexavar for a compulsory license two years ago, touching off price cuts for other drugs and calls for more drugs to get the same treatment. Indian drugmakers pushed hard on cheap versions of HIV pills. China recently yanked the patent on Gilead's own HIV pill Viread. Would hep C be any different?
Gilead is no stranger to patient advocates and their pricing demands. As a leading purveyor of HIV drugs, it's constantly in the line of fire on prices. When it rolled out its "quad" pill Stribild last year, politicians joined the mix of critics beefing about the hefty $28,000 price. Last year, Gilead teamed up with three generics makers to teach them how to turn out its HIV treatments and even fund production improvements, aiming for high-volume, low-cost production that can support lower prices.
Of course, this was years after the included drugs were first approved, so Gilead had time to recoup its up-front investments (and generate plenty of profits). With the new hep C drugs on the cutting edge, such movement is far from likely immediately unless drugmakers find a competitive reason to make a pricing move--or activists find one for them.
- read the Pharmalot story