    [Senate Prints 114-20, Part 2]
    [From the U.S. Government Publishing Office]

       114th Congress    }                               {     S. Prt.
                                COMMITTEE PRINT
         1st Session     }                               {     114-20
    _______________________________________________________________________

                             THE PRICE OF SOVALDI
                             AND ITS IMPACT ON THE
                            U.S. HEALTH CARE SYSTEM

                                  PART 2 OF 2

                                   ----------

    Prepared by the Staffs of Ranking Member Ron Wyden and Committee Member
                              Charles E. Grassley

                              COMMITTEE ON FINANCE
                              UNITED STATES SENATE

                            Orrin G. Hatch, Chairman
                           Ron Wyden, Ranking Member

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 DECEMBER 2015

                Printed for the use of the Committee on Finance

       114th Congress    }                               {     S. Prt.
                                COMMITTEE PRINT
         1st Session     }                               {     114-20
    _______________________________________________________________________

                             THE PRICE OF SOVALDI
                             AND ITS IMPACT ON THE
                            U.S. HEALTH CARE SYSTEM

                                  PART 2 OF 2

                                   ----------

    Prepared by the Staffs of Ranking Member Ron Wyden and Committee Member
                              Charles E. Grassley

                              COMMITTEE ON FINANCE
                              UNITED STATES SENATE

                            Orrin G. Hatch, Chairman
                           Ron Wyden, Ranking Member

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 DECEMBER 2015

                Printed for the use of the Committee on Finance

                                    ______

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                              COMMITTEE ON FINANCE

                         ORRIN G. HATCH, Utah, Chairman

    CHARLES E. GRASSLEY, Iowa            RON WYDEN, Oregon
    MIKE CRAPO, Idaho                    CHARLES E. SCHUMER, New York
    PAT ROBERTS, Kansas                  DEBBIE STABENOW, Michigan
    MICHAEL B. ENZI, Wyoming             MARIA CANTWELL, Washington
    JOHN CORNYN, Texas                   BILL NELSON, Florida
    JOHN THUNE, South Dakota             ROBERT MENENDEZ, New Jersey
    RICHARD BURR, North Carolina         THOMAS R. CARPER, Delaware
    JOHNNY ISAKSON, Georgia              BENJAMIN L. CARDIN, Maryland
    ROB PORTMAN, Ohio                    SHERROD BROWN, Ohio
    PATRICK J. TOOMEY, Pennsylvania      MICHAEL F. BENNET, Colorado
    DANIEL COATS, Indiana                ROBERT P. CASEY, Jr., Pennsylvania
    DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
    TIM SCOTT, South Carolina

                         Chris Campbell, Staff Director

                  Joshua Sheinkman, Democratic Staff Director

                                      (ii)

                              INVESTIGATIVE STAFF

    Senate Finance Committee Minority    Senator Charles E. Grassley's
    Staff                                Staff
    PETER T. GARTRELL, Investigator      JASON FOSTER, Chief Investigative
    DAVID M. BERICK, Chief Investigator  Counsel
    ELIZABETH M. JURINKA, Chief Health   RODNEY L. WHITLOCK, Health Policy
    Policy Advisor                       Director
    IAN M. NICHOLSON, Assistant to the   JOSHUA FLYNN-BROWN, Investigative
    Democratic Staff Director            Counsel
    MATTHEW A. KAZAN, Senior Health      JANET TEMKO-BLINDER, Investigative
    Advisor                              Counsel-Detailee
    ANNE M. DWYER, Health Counsel        KATHERINE NIKAS, Investigative
    DOUGLASS V. CALIDAS, Legislative     Counsel
    Fellow                               SAMANTHA BRENNAN, Legal Fellow
    JAMES P. WEISMULLER, Law Clerk
    ADAM L. CARASSO, Senior Tax and
    Economic Advisor
    JOSHUA L. SHEINKMAN, Democratic
    Staff Director
    MICHAEL W. EVANS, Democratic Chief
    Counsel

                                     (iii)

                                C O N T E N T S

                                  ----------

                                                                       Page
    Note on the report...............................................     1

    Introduction.....................................................     1

    Section 1: Hepatitis C, its Human Toll, Treatment, and the Effect
      of ``Warehousing'' on Pharmaceutical Markets...................     5

    Section 2: Gilead's Acquisition of Pharmasset and the Final
      Approval Phase for Sovaldi.....................................    13

    Section 3: The Pricing of Sovaldi................................    29

    Section 4: The Financial Burden of Treating HCV and Resulting
      Access Restrictions............................................    79

    Section 5: Patients' and Payers' Reactions to the Price of
      Sovaldi........................................................    99

    Section 6: A Competitor Drug Enters the Market...................   112

    Section 7: Conclusions and Questions.............................   117

    Timeline of Key Events...........................................   123

    Glossary of Key Terms............................................   126

    Letter from Senators Wyden and Grassley to John Martin, CEO,
      Gilead Sciences, Inc. (July 11, 2014)..........................   129

    Appendix A: Medicaid Spending Data...............................   135

    Appendix B: Medicaid Prior Authorization Data Compiled by Oregon
      Health and Science University..................................   153

    Appendix C: Medicare Spending Data...............................   267

    Appendix D: Correspondence.......................................   273

        Exhibit 1: Email from Ann Walker-Jenkins, Director, Federal
          Government Affairs, CVS Health Corp., to Peter Gartrell
          (Mar. 9, 2015), attaching written response to investigative
          staff......................................................   274

        Exhibit 2: Letter from Darin J. Gordon and Thomas J. Betlach,
          National Association of Medicaid Directors, to Congress
          (Oct. 28, 2014)............................................   283

        Exhibit 3: Email from Eric Kimelblatt to Christopher J.
          Andrews and William Dozier, Re: Sovaldi Data (Apr. 15,
          2014)......................................................   292

        Exhibit 4: Letter from Lynne Saxton to the Honorable Ron
          Wyden and the Honorable Chuck Grassley (Oct. 19, 2015).....   297

        Exhibit 5: Letter from MaryAnne Lindeblad to the Honorable
          Ron Wyden and the Honorable Chuck Grassley (Sept. 23, 2015)   301

        Exhibit 6: Letter from Theodore Dallas to the Honorable
          Ronald L. Wyden and the Honorable Charles E. Grassley (Oct.
          2, 2015)...................................................   305

        Exhibit 7: Letter from Charles M. Palmer to Peter Gartrell
          (Feb. 9, 2015).............................................   310

        Exhibit 8: Letter from Thomas J. Betlach to Peter Gartrell
          (July 17, 2015)............................................   313

        Exhibit 9: Letter from Justin M. Senior to the Honorable
          Orrin G. Hatch and the Honorable Ron Wyden (Oct. 19, 2015).   316

        Exhibit 10: Letter from Samantha McKinley to the Honorable
          Charles E. Grassley and the Honorable Ron Wyden (Oct. 21,
          2015)......................................................   319

        Exhibit 11: Letter from Andy Vasquez to the Honorable Ron
          Wyden and the Honorable Charles E. Grassley (Aug. 14, 2015)   322

        Exhibit 12: Letter from Coy Stout, Vice President, Managed
          Markets, Gilead Sciences, Inc., to Community Partner (July
          1, 2015)...................................................   330

        Exhibit 13: Meeting Agenda, HCV Fair Pricing Coalition
          Meeting (Oct. 3, 2013) (prepared by Cara Miller, Gilead
          Sciences, Inc.)............................................   333

        Exhibit 14: Meeting Agenda, ``FPC Gilead 10-3-13 Meeting
          Agenda (FOR FPC ONLY)'' (Oct. 3, 2013) (prepared by Lynda
          Dee, Fair Pricing Coalition)...............................   335

        Exhibit 15: ``Gilead 12-6-13 Call Notes'' (prepared by Lynda
          Dee, Fair Pricing Coalition)...............................   337

        Exhibit 16: Letter from Murray Penner, Fair Pricing
          Coalition, to Coy Stout, Vice President, Managed Markets,
          Kristie Banks, Senior Director, Business Operations &
          Contract Compliance, Jim Drew, Director, Business
          Operations and Contract Compliance, Amy Flood, Vice
          President, Public Affairs, and Michele Rest, Director,
          Public Affairs, Gilead Sciences, Inc. (Apr. 14, 2014)......   341

        Exhibit 17: Email from William Dozier, Senior Manager,
          National Accounts, Gilead Sciences, Inc., to Douglas M.
          Brown, Senior Director, Pharmacy Pricing & Value Based
          Solutions, Magellan Health Services (May 11, 2014).........   344

        Exhibit 18: Email from Douglas M. Brown, Senior Director,
          Pharmacy Pricing & Value Based Solutions, Magellan Health
          Services, to Matthew D. Lennertz, Magellan Health Services
          (May 19, 2014).............................................   347

        Exhibit 19: Email from Douglas M. Brown, Senior Director,
          Pharmacy Pricing & Value Based Solutions, Magellan Health
          Services, to William Dozier, Senior Manager, National
          Accounts, Gilead Sciences, Inc. (June 5, 2014).............   350

        Exhibit 20: Letter from John B. McCarthy, Director, Ohio
          Department of Medicaid, to Peter Gartrell (Aug. 7, 2015)...   353

        Exhibit 21: Email from Janet Zachary-Elkind to Kacy
          Hutchison, Gilead Sciences, Inc. (Sept. 9, 2014) (attaching
          Sovaldi projections chart).................................   355

        Exhibit 22: Letter from Hon. Henry A. Waxman et al., to Dr.
          John C. Martin, Chief Executive Officer, Gilead Sciences,
          Inc. (Mar. 20, 2014).......................................   358

        Exhibit 23: Troyen A. Brennan et al., CVS Health Corp.,
          Analysis of ``Real World'' Sovaldi' (sofosbuvir)
          Use and Discontinuation Rates, September 2014..............   362

        Exhibit 24: Letter from Diana S. Dooley to the Honorable Ron
          Wyden and the Honorable Charles E. Grassley (Oct. 14, 2015)   369

    Appendix E: Documents Produced by Gilead Sciences, Inc...........   373

        Exhibit 1: Gilead Sciences, Inc., Gilead Liver Disease
          Therapeutics Strategy Overview: October 2011 Board of
          Directors Review (2011) (GS-0019261--GS-0019274)...........   374

        Exhibit 2: Email from John McHutchison to Matthew Young, Re:
          Bristol-Inhibitex (Jan. 7, 2012) (GS-0010634--GS-0010635)..   389

        Exhibit 3: Pharmasset, Inc., Board of Directors Meeting,
          Princeton, NJ (July 21, 2011) (GS-0004488--GS-0004612).....   392

        Exhibit 4: Gilead Sciences, Inc., Gilead to Acquire Harry
          (Nov. 19, 2011) (GS-0009179--GS-0009209)...................   518

        Exhibit 5: Gilead Sciences, Inc., Miscellaneous powerpoint
          slides (2014) (GS-0019034--GS-0019057).....................   550

        Exhibit 6: Pharmasset, Inc., Board of Directors meeting
          packet (July 21, 2010) (GS-0014970--GS-0015065)............   575

        Exhibit 7: Pharmasset, Inc., Board of Directors Memorandum
          (Sept. 16, 2011) (GS-0017760--GS-0017760)..................   672

        Exhibit 8: Pharmasset, Inc., Global Commercialization
          Strategy Update to Pharmasset Board of Directors (2011)
          (GS-0003852--GS-0003857)...................................   674

        Exhibit 9: Pharmasset, Inc., PSI-7977 Phase II Clinical Trial
          Data Review (Oct. 3, 2011) (GS-0011638--GS-0011734)........   681

        Exhibit 10: Gilead Sciences, Inc., Introduction to Project
          Harry (July 21, 2011) (GS-0019211--GS-0019233).............   779

        Exhibit 11: Barclays Capital, Description of Fairness Opinion
          (Nov. 13, 2011) (GS-0011877--GS-0011900)...................   803

        Exhibit 12: Gilead Sciences, Inc., Gilead Liver Disease
          Franchise: BOD Strategic Review (Oct. 2011) (GS-0019275--
          GS-0019298)................................................   828

        Exhibit 13: Gilead Sciences, Inc., Harry Update (Oct. 7,
          2011) (GS-0019236--GS-0019250).............................   853

        Exhibit 14: Email from Schaefer Price to Herb Conrad, et al.,
          ``FW: Forecast Assumptions'' (Nov. 18, 2011) (GS-0018378--
          GS-0018378)................................................   869

        Exhibit 15: Pharmasset, Inc., ``Adjustments to Forecast
          Assumptions, Based on Learnings from AASLD'' (Nov. 18,
          2011) (GS-0018379--GS-0018380).............................   871

        Exhibit 16: Morgan Stanley, Project Royal Discussion
          Materials (Nov. 18, 2011) (GS-0018382--GS-0018403).........   874

        Exhibit 17: Morgan Stanley, Project Royal Discussion
          Materials (Oct. 6, 2011) (GS-0002762--GS-0002773)..........   897

        Exhibit 18: Pharmasset, Inc., Untitled Presentation by
          Pharmasset Executives (Sept. 2011) (GS-0011557--GS-0011636)   910

        Exhibit 19: Barclays Capital, Revenue/Valuation Models:
          Project Harry (Nov. 13, 2011) (GS-0013466--GS-0013479).....   991

        Exhibit 20: Email from John McHutchison to Jonathan Piazza,
          Re: Project Pyramid Assumptions (June 21, 2011) (GS-
          0004809--GS-0004814).......................................  1006

        Exhibit 21: Gilead Sciences, Inc., Project Harry--Model
          Discussion (Aug. 16, 2011) (GS-0005511--GS-0005549)........  1013

        Exhibit 22: Gilead Sciences, Inc., Project Harry--Barclays
          Deck Backgrounder (July 20, 2011) (GS-0000207--GS-0000228).  1053

        Exhibit 23: Gilead Sciences, Inc., Hepatitis C and GS-7977
          Development Update (Nov. 5, 2012) (GS-0019442--GS-0019506).  1076

        Exhibit 24: Gilead Sciences, Inc., 2012-2018 Financial
          Forecast (Nov. 2012) (GS-0019394--GS-0019413)..............  1142

        Exhibit 25: Pharmasset, Inc., Board of Directors Packet (Oct.
          11, 2011) (GS-0017925--GS-0017991).........................  1163

        Exhibit 26: Gilead Sciences, Inc., Harry Update: Board
          Meeting (Oct. 24, 2011) (GS-0019309--GS-0019319)...........  1231

        Exhibit 27: Email from Cara Miller to Gregg Alton (Nov. 22,
          2013) (GS-0020826--GS-0020827).............................  1243

        Exhibit 28: Gilead Sciences, Inc., Sofosbuvir Pricing and
          Market Access Assessment, Final Recommendations--July 31st,
          2013 (July 31, 2013) (GS-0014018--GS-0014058)..............  1246

        Exhibit 29: Gilead Sciences, Inc., Gilead HCV US BPOA (Oct.
          2012) (GS-0013489--GS-0013502).............................  1288

        Exhibit 30: Gilead Sciences, Inc., Sofosbuvir US Pricing &
          Contracting Strategy, SVP Briefing (March 25, 2013) (GS-
          0019128--GS-0019184).......................................  1303

        Exhibit 31: Gilead Sciences, Inc., U.S. HCV Launch Update to
          Board of Directors (Aug. 1, 2013) (GS-0014059--GS-0014078).  1361

        Exhibit 32: Gilead Sciences, Inc., 2013-2015 HCV Launch
          Commercial Plan (April 4, 2013) (GS-0013503--GS-0013546)...  1382

        Exhibit 33: Email from Jim Myers to David L. Johnson, et al.,
          Characterization of SOF pricing at Launch (Nov. 8, 2013)
          (GS-0020772--GS-0020773)...................................  1427

        Exhibit 34: Gilead Sciences, Inc., Sofosbuvir Pricing &
          Contracting Strategy Working Team, SVP Check-in II (May 10,
          2013) (GS-0013972--GS-0014017).............................  1430

        Exhibit 35: Gilead Sciences, Inc., Minutes of Regular Meeting
          of Board of Directors (Aug. 1, 2013) (GS-0019671--GS-
          0019674)...................................................  1477

        Exhibit 36: Gilead Sciences, Inc., Sofosbuvir Pricing and
          Market Access Assessment: Response to Follow Up Questions
          (Aug. 26, 2013) (GS-0013857--GS-0013887)...................  1482

        Exhibit 37: Gilead Sciences, Inc., Sofosbuvir Pricing and
          Market Access Recommendation (Nov. 2013) (GS-0014079--GS-
          0014082)...................................................  1514

        Exhibit 38: Email from Kevin Young to John Martin, et al.,
          Re: COMPANY CONFIDENTIAL (Nov. 18, 2013) (GS-0020800--GS-
          0020800)...................................................  1519

        Exhibit 39: Email from John Martin to Kevin Young, Re:
          CONFIDENTIAL (Nov. 24, 2013) (GS-0020946--GS-0020947)......  1522

        Exhibit 40: Email from Kevin Young to Jim Meyers et al., Re:
          ADAP and Sofosbuvir (Nov. 19, 2013) (GS-0020802--GS-
          0020804)...................................................  1525

        Exhibit 41: Gilead Sciences, Inc., ``EAME SOF Price
          Recommendations'' (Sept. 11, 2013) (GS-0019913--GS-0019919)  1529

        Exhibit 42: Email from Kevin Young to Jim Meyers and Derrell
          Porter (Oct. 19, 2013) (GS-0020285--GS-0020288)............  1537

        Exhibit 43: Email from Paul Carter to Cara Miller (Oct. 11,
          2013) (GS-0020212--GS-0020213).............................  1542

        Exhibit 44: Gilead Sciences, Inc., Canadian Sofosbuvir
          Pricing Considerations (Sept. 30, 2013) (GS-0020086--GS-
          0020094)...................................................  1545

        Exhibit 45: Gilead Sciences, Inc., 2015-2016 HCV Commercial
          Plan (April 22, 2014) (GS-0014083--GS-0014110).............  1555

        Exhibit 46: Gilead Sciences, Inc., Topics for Discussion--
          LDV/SOF US Pricing (Aug. 4, 2014) (GS-0019000--GS-0019033).  1584

        Exhibit 47: Gilead Sciences, Inc., US HCV Pricing Update, SVP
          Update Meeting (July 21, 2014) (GS-0018861--GS-0018953)....  1619

        Exhibit 48: Gilead Sciences, Inc., 2014-2015 US HCV Franchise
          BPOA (Draft) (June 2014) (GS-0014143--GS-0014171)..........  1713

        Exhibit 49: Gilead Sciences, Inc., Updated Slides--Wave 2
          Pricing (GS-0018965--GS-0018999)...........................  1743

        Exhibit 50: Gilead Sciences, Inc., Managed Markets Hepatitis
          C Virus (HCV) Payer Advisory Board Final Report (Oct. 14,
          2014) (GS-0018760--GS-0018814).............................  1779

        Exhibit 51: Email from Mark Schoenebaum to Robin Washington,
          FINAL data from gild/bmy (and sort of MRK/ROG) buy-side
          survey (Oct. 31, 2013) (GS-0020496--GS-0020512)............  1835

        Exhibit 52: Gilead Sciences, Inc., HCV Wave 2 Contracting
          Recommendations (Sept. 9, 2014) (GS-0019058--GS-0019127)...  1853

        Exhibit 53: Email from Cara Miller to Gregg Alton, FW: FPC Ad
          Board Feedback (Oct. 4, 2013) (GS-0020133--GS-0020135).....  1924

        Exhibit 54: Email from Jim Meyers to David L. Johnson, et
          al., Synopsis of feedback from top HCV advisors at AASLD
          (Nov. 5, 2013) (GS-0020776--GS-0020780)....................  1928

        Exhibit 55: Email from Jim Meyers to John Milligan, Synopsis
          of feedback from top HCV advisors at AASLD (Nov. 8, 2013)
          (GS-0020765--GS-0020769)...................................  1934

        Exhibit 56: Email from Jim Meyers to Norbert Bischofberger,
          Synopsis of feedback from top HCV advisors at AASLD (Nov.
          7, 2013) (GS-0020753--GS-0020759)..........................  1940

    Appendix F: Narrative answers from Gilead Sciences, Inc., in
      response to questions in the July 11, 2014 letter from Senators
      Wyden and Grassley.............................................  1949

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                             Appendix E--Continued

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                                   Appendix F

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