By Deena Beasley
LOS ANGELES Wed Apr 2, 2014 3:41pm EDT
(Reuters) - Kaiser Permanente, the biggest U.S. health maintenance organization, said it is using Gilead Sciences' new hepatitis C drug, Sovaldi, even though its $84,000 treatment price is "outrageous."
The medication is widely viewed as a breakthrough that can cure a majority of hepatitis C patients, often within 12 weeks. Analysts project 2017 sales of $9.1 billion, according to Thomson Reuters Pharma.
But Gilead has come under fire, from insurers and Congress, for Sovaldi's $1,000-a-pill price at a time when U.S. healthcare spending is under scrutiny and President Barack Obama's Affordable Care Act aims to make health coverage accessible to everyone.
The company says Sovaldi should create huge savings for the healthcare system over time by preventing complications from liver disease and transplants, but declined requests for evidence to back up those claims. A Gilead executive told Reuters last week that it had an agreement to discount the drug for the Kaiser network, based on their recognition of the long-term benefits.
In an interview, Kaiser officials disputed that view. Kaiser is using Sovaldi "not because we see this as a high-value, cost-effective approach," said Dr. Sharon Levine, associate director of the Permanente Medical Group. "It's because this is a therapy that represents a substantial improvement over existing therapies ... It's an outrageous price for a therapy that has huge public health implications."
She called Kaiser's discount on Sovaldi "modest" and said state Medicaid programs and private health insurers "are going to have to make very serious tradeoffs just based on a single manufacturer's decision on pricing a drug because they can."
Gilead officials declined to comment.
Hepatitis C, estimated to infect about 3.2 million Americans, is a blood-borne virus that can cause severe liver damage.
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Democratic lawmakers in the House of Representatives, led by California's Henry Waxman, have asked Gilead to explain Sovaldi's pricing. The company said it met with committee staff on Monday.
The public call to Gilead from Congress has sent shock waves through the biotech investment community, raising concerns that other leading drugmakers could face pressure on pricing new medicines. Over the past month the Nasdaq Biotechnology Index has fallen more than 8 percent.
Insurers and state officials running the Medicaid health program for the poor fear a multibillion-dollar tab from Sovaldi alone.
Investment bank Leerink Partners estimates the drug's cost could trim as much as 10 percent from the earnings of publicly traded health insurers.
Kaiser, a nonprofit, said Sovaldi will be a material portion of its drug budget - a cost ultimately born by members and employers who pay insurance premiums.
"It comes back to the question of who benefits at a time when there is enormous pressure to ensure that the cost of healthcare, the cost of providing access to cures doesn't bankrupt all of the rest of the investments that the country needs to make," Levine said.
(Reporting by Deena Beasley; Editing by Michele Gershberg and Prudence Crowther)