December 22, 2014
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Market analysts are digesting the news that behemoth benefits provider Express Scripts will make AbbVie‘s ‘s newly approved Viekira Pak the exclusive treatment option for patients in their plans with hepatitis C, excluding blockbusters Gilead Sciences, Inc.‘s ‘s Sovaldi and Harvoni (and their high price tags) in the process.
The formulary decision will start on Jan. 1, 2015 and will be “multi-years,” though a precise time period has not yet been outlined.
The news has some biotech bears worried that a loss of massive profits traditionally coveted by biotech investors in a raging market could be coming to an end, as payers press large companies to keep their costs well in line. A 12-week course of Harvoni costs around $94,500, while a similar course of Sovaldi will run as much as $84,000. Those price tags have had insurers and public health plans like Medicaid balking at backing the treatment or offering reimbursement.
“For the 25 million Americans that Express Scripts directly covers (whose employers contract directly from Express Scripts) and who have hepatitis C (specifically GT1, around 75 percent of hepatitis C), Express Scripts will only pay for ABBV’s just-approved hepatitis C regimen Viekira,” wrote Mark Schoenebaum, a medical doctor and biotech analyst for ISR/Evercore.
“Express Scripts in exchange will receive a discount from ABBV on Viekira, the extent of the discount not disclosed” he said “The WSJ article reports that Express Scripts also indirectly covers another 65 million [or so] Americans (the 25M Americans represent around 28 percent of the 90 million total) and that Express Scripts will encourage the other customers to decision a similar.”
For some, the discount AbbVie had to offer in order to lock in exclusivity for its own hepatitis C product may have had it experiencing a “Pyrrhic victory” on Monday, “gaining more share with this one (arguably large) payer but having to essentially cut their price and profitability in half.”
“We have said before that a price war in the HCV market, with only two major competitors, Gilead and AbbVie, does not make sense for either competitor or for the future market potential of the category. However, it appears that AbbVie has indeed chosen to start a price battle. AbbVie is likely to have had to pay dearly for the privilege of exclusive access plus no restrictions based on fibrosis scores,” wrote Geoffrey Porges, a biotech analyst with Sanford Bernstein, in a note.
Various industry contacts have indicated that AbbVie would be expected to pay 40 to 50 percent rebates for such a position given the clinical preference likely to Gilead’s Harvoni.
“Such a high level would be needed to entice payers to 1) grant the AbbVie regimen exclusivity (despite clear evidence and guidelines suggesting Harvoni is a superior regimen), 2) greatly expand the eligible patient population, and 3) agree to a multi-year deal,” said Porges. “From the AbbVie perspective, the deal with Express Scripts may be a pyrrhic victory, gaining more share with this one (arguably large) payer but having to essentially cut their price and profitability in half.”
