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Senate investigation exposes Gilead’s greed while KFF report shows Part D impact

Wyden-Grassley Sovaldi Investigation Finds Revenue-Driven Pricing Strategy Behind $84,000 Hepatitis Drug

18-Month Investigation Reveals a Pricing and Marketing Strategy Designed to Maximize Revenue with Little Concern for Access or Affordability

Senator Ron Wyden, Press Release, December 1, 2015

Senate Finance Committee Ranking Member Ron Wyden, D-Ore., and senior committee member Chuck Grassley, R-Iowa, today released the results of an 18-month investigation into the pricing and marketing of Gilead Sciences’ Hepatitis C drug Sovaldi and its second-wave successor, Harvoni. Drawing from 20,000 pages of internal company documents, dozens of interviews with health care experts, and a trove of data from Medicaid programs in 50 states and the District of Columbia, the investigation found that the company 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. Building on that price, Harvoni was later introduced at $94,500. Fostering broad, affordable access was not a key consideration in the process of setting the wholesale prices.

“Gilead pursued a calculated scheme for pricing and marketing its Hepatitis C drug based on one primary goal, maximizing revenue, regardless of the human consequences. There was no concrete evidence in emails, meeting minutes or presentations that basic financial matters such as R&D costs or the multi-billion dollar acquisition of Pharmasset, the drug’s first developer, factored into how Gilead set the price. Gilead knew these prices would put treatment out of the reach of millions and cause extraordinary problems for Medicare and Medicaid, but still the company went ahead. If Gilead’s approach to pricing is the future of how blockbuster drugs are launched, it will cost billions and billions of dollars to treat just a fraction of patients,” Senator Wyden said.

“The Finance Committee has tremendous responsibility in overseeing the federal programs paying for prescription drug coverage,” Senator Grassley said.  “With that responsibility, the committee should know how the costs to the public programs and private insurance companies of a single innovative drug entering the market without competition can have major effects on which patients get the new drug and when.  This report sheds light on one example of the pricing decisions made by one company with a new prescription medicine that entered the market without competition in high demand.”

Additional major findings from the investigation include:

*  Gilead justified Sovaldi’s high price point based on price-per-cure

*  Gilead set a high price for Sovaldi with an eye toward ensuring a future high price for Harvoni

*  Gilead underestimated the degree of access restrictions that it expected would result from its pricing decision

*  Despite significant access restrictions, Gilead refused to significantly lower the net price

*  The burdens on Medicare, Medicaid, and the Bureau of Prisons were significant

The press release includes links to the Executive Summary and 144 page report:
https://www.wyden.senate.gov/news/press-releases/wyden-grassley-sovaldi-investigation-finds-revenue-driven-pricing-strategy-behind-84000-hepatitis-drug

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It Pays to Shop: Variation in Out-of-Pocket Costs for Medicare Part D Enrollees in 2016

By Jack Hoadley, Juliette Cubanski, and Tricia Neuman
Kaiser Family Foundation, December 2, 2015

Medicare Part D drug plans differ considerably in the drugs they list on their formularies, their use of formulary tiers, and the level and structure of cost sharing applied to those tiers. Plan premiums and the use of deductibles also vary widely. Plan decisions affect different beneficiaries in different ways, depending on the drugs they use. The financial consequences for Part D plan enrollees can be substantial. In this brief, we focus on out-of-pocket drug costs for Part D enrollees in 2016 for specialty, brand, and generic drugs.

Part D enrollees can expect to pay thousands of dollars out of pocket for a single specialty drug in 2016, even after their drug costs exceed the catastrophic coverage threshold

From Figure 1:

Median on-formulary out-of-pocket costs in 2016:

Sovaldi  $6,608

Harvoni  $7,153

Part D enrollees’ out-of-pocket costs for many specialty drugs are substantial at the start of the year, and continue even after spending exceeds the catastrophic coverage threshold

Out-of-pocket costs are substantially higher—often ten times higher or more—for specialty drugs when they are not listed on formulary by a Part D plan

http://kff.org/medicare/issue-brief/it-pays-to-shop-variation-in-out-of-...

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Comment:

By Don McCanne, M.D.

Gilead’s heartless strategy in deciding to price their hepatitis C drugs well above what any reasonable market would tolerate demonstrates yet another detrimental consequence of our health care financing model, perpetuated and expanded by the Affordable Care Act. Gilead assumed that they could get away with it since they figured that most of the costs would be covered by the drug plans in the various public and private insurance programs. Well, they pushed too hard.

The extensive investigation by the staffs of the Senator Ron Wyden and Senator Charles Grassley confirmed that the pricing of Sovaldi and Harvoni was based on pure greed, ignoring completely the human consequences.

The other report released today by the Kaiser Family Foundation demonstrates the consequences that these egregious pricing behaviors have on Medicare beneficiaries enrolled in the Part D drug program -- a program supposedly designed to improve value by leveraging market forces. Even when the preferred drug -- Harvoni -- is included in the Part D formulary, the median out-of-pocket cost for the Medicare beneficiary is $7,153! There goes the food and the rent and a whole lot more.

The Kaiser Foundation report is particularly helpful in demonstrating how deficient the Medicare Part D program is. They suggest shopping, but who knows what outrageously priced drugs will be prescribed next year? How can you shop drug formularies for drugs you have not yet been prescribed?

Single payer advocates understand that none of this would be tolerated in a well designed national health program. You would simply receive the drugs you need, when you needed them. Gilead would be compensated fairly for their products. It’s just too bad that their current executives will not end up in jail, where they belong.