[Senate Prints 114-20, Part 1]
[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 1 OF 2
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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 1 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
______
U.S. GOVERNMENT PUBLISHING OFFICE
97-329-PDF WASHINGTON : 2015
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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
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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
THE PRICE OF SOVALDI
AND ITS IMPACT ON THE
U.S. HEALTH CARE SYSTEM
Note
This inquiry began as a Senate Committee on Finance
investigation when Senator Wyden was Chairman and Senator
Grassley was a member of the Committee's Minority. During the
course of the investigation, leadership on the Committee
changed in January 2015. Both senators instructed their staffs
to continue the investigation and produce a staff report to the
Finance Committee. All references to ``investigative staff ''
or ``staff '' refer to the current Minority staff of the
Finance Committee and the staff of Senator Grassley.
Introduction
Hepatitis C (HCV) is the most common blood-borne virus in
the United States, affecting as many as 5.2 million people.\1\
The virus attacks the liver, resulting in inflammation,
scarring and cirrhosis, while increasing the risk of liver
cancer. Left untreated, HCV can cause serious illness; the
disease is the leading cause of liver transplants in the United
States. The aggressiveness of the virus makes it a potent
public health issue in the United States. The virus is
disproportionally concentrated among Americans who are likely
to receive health coverage from public payers including
Medicaid, Medicare, the Veterans Administration, and the State
and Federal prison system.\2\ The high cost of HCV drugs sold
by Gilead Sciences, Inc., continues to put tremendous strain on
these public payer systems, creating difficult decisions about
how to provide medically necessary drugs to patients while
staying within budgets. As a result of the high cost of these
drugs, many public and private payers adopted access
restrictions to control HCV treatment costs, which reduced the
number of patients eligible for treatment.
---------------------------------------------------------------------------
\1\ Eric Chak et al., Hepatitis C Virus Infection in USA: An
Estimate of True Prevalence, 31 Liver Int'l 1090, 1090-1101 (Sept.
2011), available at http://www.ncbi.nlm.nih.gov/pubmed/21745274.
\2\ Id. at 1096, Table 6.
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Gilead brought two drugs to market in recent years, Sovaldi
and Harvoni, which have improved therapies to cure HCV.
Sofosbuvir--the drug that would ultimately reach the market as
Sovaldi and used in combination with ledispavir to create
Harvoni--was largely developed by Pharmasset, Inc., a
pharmaceutical company that was based in Princeton, New Jersey.
Gilead acquired Pharmasset in January 2012.
Sovaldi and Harvoni have reduced the time needed for
treatment to a fraction of what it was five years ago. In
addition, the effectiveness of treatment, that is, the
probability that a patient will be cured, has increased. The
new drugs have resulted in more patients being able to receive
HCV therapy with limited or no use of interferon, an injectable
drug that complicates treatment because it typically requires
visits to a health care provider, and is often accompanied by
difficult side effects.
Progress in therapeutics has come at a high cost for both
the public and private sectors. Concurrent with drug price
increases, greater numbers of providers and patients have been
drawn to these new drugs, leading to increased outlays for HCV
treatment. In the run-up to launching Sovaldi, Gilead estimated
that worldwide spending on HCV treatment in 2008 totaled $2.4
billion.\3\ By 2014, Gilead alone reported net product sales of
$12.4 billion for its HCV drugs, primarily from sales in the
United States and Europe.\4\ A competitor drug developed by
Johnson & Johnson, known as simeprevir, or Olysio, generated
sales of $2.3 billion in 2014,\5\ primarily due to ``off
label'' \6\ co-prescriptions with Sovaldi.\7\
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\3\ Appendix E, Ex. 1, Gilead Sciences, Inc., Gilead Liver Disease
Therapeutics Strategy Overview: Board of Directors Review (2011), GS-
0019261, at GS-0019265--GS-0019266 (2011).
\4\ Gilead Sciences, Inc., Annual Report (Form 10-K), at 59 (Feb.
25, 2015), available at http://www.sec.gov/Archives/edgar/data/882095/
000088209515000008/a2014form10-k.htm.
\5\ Johnson & Johnson, Annual Report (Form 10-K), Exhibit 13, at 5
(Feb. 23, 2015), available at http://www.sec.gov/Archives/edgar/data/
200406/000020040615000004/ex13-form10xk20141228
.htm.
\6\ The practice of a health care provider prescribing a drug or
combination of drugs in a manner outside of what has been officially
approved (in the U.S., by the Food and Drug Administration).
\7\ Chris Hepp, Drug Sales Bolster J&J's Bottom Line, Phila.
Inquirer (Apr. 21, 2014), available at http://articles.philly.com/2014-
04-21/business/49268459_1_olysio-gilead-sciences-sovaldi.
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Gilead's recent financial results show that the company has
generated an additional $14.3 billion in net product sales from
its HCV drugs through the first nine months of 2015, bringing
its 21-month total for its HCV drugs to $26.6 billion, $20.6
billion of which was from sales to U.S. consumers.\8\
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\8\ Gilead Sciences, Inc., Third Quarter 2015 Financial Results
(Form 8-K,), Exhibit 99.1) (October 28, 2015), available at
http://www.sec.gov/Archives/edgar/data/882095/000088209515000031/
exhibit991earningspress
rel.htm; Gilead Sciences, Inc., Fourth Quarter and Full Year 2014
Financial Results (Form 8-K), Exhibit 99.1 (Feb. 3, 2015), available at
http://www.sec.gov/Archives/edgar/data/882095/000088209515000003/
exhibit991earningspress
rel.htm.
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An analysis by the consulting firm IMS Institute for
Healthcare Informatics (IMS Institute) showed that U.S.
spending on Sovaldi in 2014 was $7.9 billion, and from 2010 to
2013 U.S. spending on all HCV drugs totaled $7.8 billion.
Sovaldi alone accounted for 64% of U.S. HCV drug spending in
2014, which totaled $12.3 billion, and more than a third of the
$20.3 billion spent that year on new pharmaceutical
treatments.\9\ HCV treatments also caused a jump in spending
for ``specialty therapies,'' which the IMS Institute defines in
part as ``mostly used by specialists and include treatment for
cancer and other serious conditions.'' \10\ According to the
IMS Institute, U.S. ``specialty medicine spending increased by
26.5% to $124.1 billion in 2014; the increase was 16.3%
excluding hepatitis C treatments.'' \11\
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\9\ IMS Institute for Healthcare Informatics, Medicines Use and
Spending Shifts: A Review of the Use of Medicines in the U.S. in 2014,
at 1, 8 (2015) [hereinafter IMS Institute for Healthcare Informatics,
Medicines Use and Spending Shifts].
\10\ Id. at 8.
\11\ Id.
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After the introduction of Sovaldi at end of 2013, millions
of Americans had a potentially viable path to a cure, but the
price and cumulative cost on the health care system caused
roadblocks for many. In response to treatment access and cost
issues, Senators Ron Wyden and Charles Grassley sent a letter
to Gilead on July 11, 2014, requesting documents and
information about how the company determined the price for
Sovaldi, the first of its two HCV drugs.
For over a year, investigative staff reviewed more than
20,000 pages of internal company documents provided by Gilead,
as well as documents obtained from the Federal Trade Commission
(FTC), Food and Drug Administration (FDA), state Medicaid
programs, the Centers for Medicare and Medicaid Services (CMS),
the Federal Bureau of Prisons (BOP), and other companies. In
addition, investigative staff interviewed more than 100 people
with expertise in HCV, or who had interacted with Gilead
regarding Sovaldi and/or Harvoni. Lastly, investigative staff
collected data from Medicaid programs in 50 states and the
District of Columbia that provide important information about
the breadth of HCV infection for one segment of public payers,
and the cost that states faced in order to treat the disease.
Based on all of the information reviewed, it appears that
in pricing its line of HCV drugs Gilead may have underestimated
the warnings of patient groups, insurers, health care
providers, and other organizations about the potential impact
that price would have on access. Such warnings were made not
only through the media, but directly to company officials, both
in private correspondence and various public forums. While
publicly saying it prioritized patient access, Gilead set
Sovaldi's price at a level where ultimately many patients would
not receive treatment. Sovaldi was on the market for almost a
year without serious competitors, allowing Gilead to maintain a
high effective price despite efforts by many payers to
negotiate volume or treatment discounts or rebates.
The costs incurred by Gilead to bring the drugs to market
included its $11.2 billion purchase of Pharmasset in 2011.
Pharmasset performed the initial development of the drug and
began the process of FDA approval, which Gilead then completed
following the acquisition. Several months after Gilead agreed
to buy Pharmasset, a Gilead executive described the acquisition
as a ``bargain.'' \12\ The company failed to provide sufficient
information to determine how much additional cost it incurred
to complete the development, finish the FDA approval process,
and bring the drug to market.
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\12\ Appendix E, Ex. 2, Email from John McHutchison to Matthew
Young, Re: Bristol-Inhibitex (Jan. 7, 2012), GS-0010634.
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This report describes how Gilead set the price for Sovaldi
and its follow-on drug, Harvoni. In addition, this report
discusses and analyzes the financial and budgetary impacts of
Gilead's pricing decisions on payers--public and private--as
well as the resulting access restrictions imposed due to
Sovaldi's cost. And finally, the report describes Gilead's
response to resultant market forces, including payer access
restrictions and competition.
Appendices
Several appendices to the report provide additional
information and documents related to the investigation.
Appendix A contains data collected by investigative staff
from state Medicaid programs showing the amount of money spent
on Sovaldi and Harvoni in 50 states and the District of
Columbia, as well as the estimated number of Medicaid clients
with HCV in states where the information was available.
Appendix B presents a review of prior authorization
restrictions put in place by state Medicaid programs for
Sovaldi and Harvoni, as well as a sample of other payers. The
study was completed by researchers at the Oregon Health and
Sciences University.
Appendix C presents data provided by the Centers for
Medicare & Medicaid Services (CMS) on Medicare spending on
Sovaldi, Harvoni, and other HCV drugs.
Appendix D contains correspondence and other documents
received by the Senators or investigative staff regarding
Sovaldi or Harvoni.
Appendix E contains all Gilead documents cited in this
report.
Appendix F contains all narrative answers cited in this
report from Gilead in response to questions in the July 11,
2014 letter from Senators Wyden and Grassley.
Section 1: Hepatitis C, its Human Toll, Treatment, and the Effect of
``Warehousing'' on Pharmaceutical Markets
Hepatitis C and Its Human Toll
In 2013, HCV was listed as the cause of death for 19,368
people in the United States.\13\ This number likely
underestimates the number of HCV deaths. CDC researchers have
found that fewer than 20% of HCV-infected decedents have HCV
listed on their death certificates, even though at least 75% of
HCV-infected decedents had pre-mortem evidence of serious liver
disease.\14\ Despite the likely undercounting, a 2012 study
reported that the number of HCV-associated deaths was greater
than the number of human immunodeficiency virus (HIV)-
associated deaths in the United States between 1999 and
2007.\15\ This trend has continued in recent years. The virus
is a killer not just in the United States, but across the
world. Globally, between 130 million and 150 million people
have chronic HCV; annually, the virus and related liver disease
kill 704,000 people worldwide.\16\ In comparison, the World
Health Organization (WHO) estimated that in 2010, malaria
caused 660,000 deaths, and that in 2011, tuberculosis caused
1.4 million deaths and HIV caused 1.7 million deaths.\17\
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\13\ Centers for Disease Control and Prevention (CDC), Surveillance
for Viral Hepatitis--United States, 2013, Table 4.5, at 58, available
at http://www.cdc.gov/hepatitis/statistics/2013
surveillance/commentary.htm.
\14\ Reena Mahajan et al., Mortality Among Persons in Care With
Hepatitis C Virus Infection: The Chronic Hepatitis Cohort Study
(CHeCS), 2006-2010, 58 Clinical Infectious Diseases 1055, 1055-61
(2014).
\15\ Kathleen N. Ly et al., The Increasing Burden of Mortality From
Viral Hepatitis in the United States Between 1999 and 2007, 156 Annals
of Internal Medicine 271, 271-78 (2012).
\16\ GBD 2013 Mortality and Causes of Death Collaborators, Global,
regional, and national age-sex specific all-cause and cause-specific
mortality for 240 causes of death, 1990-2013: a systematic analysis for
the Global Burden of Disease Study 2013, 385 Lancet 9963, 117-71
(2015).
\17\ World Health Organization, Global Policy Report on the
Prevention and Control of Viral Hepatitis in WHO Member States (2013),
available at http://apps.who.int/iris/bitstream/10665/85397/1/
9789241564632_eng.pdf?ua=1.
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Prior to the virus's identification in 1989, HCV was
frequently spread through unscreened blood transfusions.\18\
The virus is disproportionately concentrated among baby boomers
born from 1945 through 1965. In 2011, about 75% of HCV deaths
in the United States were among forty-five to sixty-four-year-
olds.\19\ The CDC estimates that 3.2% of baby boomers are
positive for HCV, five times higher than people born prior to
1945 or after 1965. Consequently, in 2012 and 2013, the CDC and
the U.S. Preventative Services Task Force recommended that all
people born from 1945 through 1965--more than 60 million
people--be tested for the virus.\20\ The virus is most commonly
transmitted in the United States through the use of unsanitary
needles, leaving intravenous drug users at high risk for
contracting the disease.\21\ With a growing number of people
who inject intravenous drugs, such as heroin or other opiates,
rates of HCV infection are increasing, as the recent HCV
outbreak reported in Indiana illustrates.\22\
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\18\ Q.L. Choo et al., Isolation of a cDNA clone derived from a
blood-borne non-A, non-B viral hepatitis genome, 244 Science 359, 359-
62 (1989).
\19\ CDC, Number and Rate* of Deaths with Hepatitis C Listed as a
Cause of Death, by Demographic Characteristic and Year--United States,
2007-2011, available at http://www.cdc.gov/hepatitis/Statistics/
2012Surveillance/Table4.4.htm.
\20\ Bryce D. Smith et al., CDC, Recommendations for the
Identification of Chronic Hepatitis C Virus Infection Among Persons
Born During 1945-1965 (2012), available at http://www.cdc.gov/mmwr/
preview/mmwrhtml/rr6104a1.htm; U.S. Preventative Services Task Force,
Hepatitis C: Screening, (June 2013), available at http://
www.uspreventiveservicestaskforce.org/Page/Topic/recommendation-
summary/hepatitis-c-screening.
\21\ Centers for Disease Control and Prevention, Viral Hepatitis
Surveillance, United States, 2013, at 6 (last updated Oct. 19, 2015),
available at http://www.cdc.gov/hepatitis/statistics/2013surveillance/
pdfs/2013hepsurveillancerpt.pdf (``HCV is transmitted primarily through
percutaneous (parenteral) exposure that can result from injection drug
use, needle stick injuries, and inadequate infection control in health-
care settings.''); id. at 52 (``Of the 955 case-reports that had
information about injection drug use, 61.6% (n=588) indicated use of
injection drugs.'').
\22\ Centers for Disease Control and Prevention, CDC Health Alert
Network, Outbreak of Recent HIV and HCV Infections Among Persons Who
Inject Drugs (Apr. 24, 2015), available at http://www.bt.cdc.gov/han/
han00377.asp.
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Distinct Genotypes Across the World
Create Distinct Markets
There are seven different genotypes of HCV and within each
genotype, there are sub-genotypes.\23\ Each genotype and sub-
genotype reacts differently to treatment, and the FDA has
approved drug regimens for specific HCV genotypes and sub-
genotypes, rather than the entire spectrum of HCV. The current
generation of HCV drugs, including Sovaldi and Harvoni, are not
``full spectrum'' drugs that can treat all genotypes, and they
are not an equally effective treatment against all sub-
genotypes.
---------------------------------------------------------------------------
\23\ Donald G. Murphy et al., Hepatitis C Virus Genotype 7, a New
Genotype Originating from Central Africa, 53 J. Clinical Microbiology
967, 967-72 (2015).
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The prevalence of specific genotypes and sub-genotypes
varies among different regions of the world. About 70% of HCV
cases in the United States are genotype 1, the majority of
which are sub-genotypes 1a and 1b. Genotypes 2 and 3 are
estimated to account for 16% and 12% of cases in the United
States, respectively, while genotypes 4, 5 and 6, in total,
account for fewer than 4% of cases in the United States.\24\
Conversely, in many Middle Eastern and African countries,
genotype 4 accounts for more than 90% of HCV infections.\25\
Genotype 5 is almost entirely contained within South Africa and
select countries in Europe and the Middle East.\26\ Drug
manufacturers have concentrated their focus on selling HCV
drugs that treat genotypes with prevalence in developed
countries.\27\
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\24\ See e.g., Jane P. Messina et al., Global Distribution and
Prevalence of Hepatitis C Virus Genotypes, 61 Hepatology 77, 77-87
(2015); M. Michele Manos et al., Distribution of Hepatitis C Virus
Genotypes in a Diverse U.S. Integrated Health Care Population, 84 J.
Med. Virology 1744, 1744-1750 (2012), available at http://
www.ncbi.nlm.nih.gov/pubmed/22997077.
\25\ Sanaa M. Kamal & Imad A. Nasser, Hepatitis C Genotype 4: What
We Know and What We Don't Yet Know, 47 Hepatology 1371, 1371 (2008),
available at http://webhome.weizmann.ac.il/home/liorg/HCV.pdf.
\26\ N. Antaki et al., HCV Genotype 5: An Orphan Virus, 18
Antiviral Therapy 263, 263-69 (2012), available at http://
www.ncbi.nlm.nih.gov/pubmed/23111702.
\27\ Appendix E, Ex. 3, Pharmasset, Board of Directors Meeting,
Princeton, NJ (July 21, 2011), GS-0004488; Appendix E, Ex. 4, Gilead
Sciences, Inc., Gilead to Acquire Harry (Nov. 19, 2011), GS-0009179, at
GS-0009187; Jane P. Messina et al., Global Distribution and Prevalence
of Hepatitis C Virus Genotypes, 61 Hepatology 77, 77-87 (2014),
available at http://www.ncbi.
nlm.nih.gov/pmc/articles/PMC4303918/.
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HCV Symptoms
A major challenge associated with HCV is its tendency to go
undiagnosed, due to its slow progression and tendency to remain
asymptomatic for years. These attributes have earned HCV the
moniker ``the silent killer,'' and have contributed to poor
surveillance of the disease.\28\ A recent study estimated that
half of people in the U.S. with chronic HCV are aware they are
infected.\29\ When HCV symptoms do develop, they include easily
bleeding or bruising, itchy skin, fluid accumulation in the
abdomen (ascites), swelling in the legs, weight loss,
confusion, drowsiness, slurred speech (hepatic encephalopathy),
and development of spider-like blood vessels on the skin
(spider angiomas).\30\ Approximately 20% of chronic HCV
patients, if untreated, will develop cirrhosis.\31\
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\28\ Patrick Strudwick, Hepatitis C: Hunting the Silent Killer, The
Guardian (Feb. 25, 2015), available at http://www.theguardian.com/
society/2015/feb/25/hepatitis-c-hunting-the-silent-killer.
\29\ Baligh R. Yehia et al., The Treatment Cascade for Chronic
Hepatitis C Virus Infection in the United States: A Systematic Review
and Meta-Analysis, PLoS ONE (July 2, 2014), available at http://
journals.plos.org/plosone/article?id=10.1371/journal.pone.0101554.
\30\ Mayo Clinic, Diseases and Conditions: Hepatitis C (Jan. 15,
2015), http://www.mayoclinic.
org/diseases-conditions/hepatitis-c/basics/definition/con-20030618?p=1.
\31\ David H. Spach, HCV Epidemiology in the United States,
University of Washington, Hepatitis C Online (June 16, 2014), available
at http://www.hepatitisc.uw.edu/go/screening-diagnosis/epidemiology-us/
core-concept/all#hcv-incidence-prevalence.
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Hepatitis C remains the leading primary indication for
people receiving or waiting for liver transplants.\32\ The most
recent available federal data show that 1,402 patients received
transplants in 2012, and 4,612 patients were on waiting
lists.\33\
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\32\ United States Department of Health & Human Services, Organ
Procurement & Transplantation Network, Scientific Registry of
Transplant Recipients, 2012 Annual Data Report: Liver, at 69, 75 (Table
1.3) and 81 (Table 4.7), available at http://srtr.transplant.hrsa.gov/
annual_
reports/2012/flash/03_liver_13/v2files/assets/downloads/
publication.pdf.
\33\ Id.
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Advancing Treatment for Hepatitis C
There is no vaccine for HCV, unlike for Hepatitis A and
Hepatitis B. However, in recent years, significant progress has
been made in improving standards of care (SOC). The
effectiveness of a drug is primarily measured by the speed of
viral reduction (early virologic response, or EVR, and rapid
virologic response, or RVR) and the percentage of cured
patients. A patient is considered cured when blood tests do not
detect the virus twelve or twenty-four weeks after treatment,
which is called sustained virologic response (SVR).\34\ Each
successive SOC has simplified and shortened treatment regimens,
increased effectiveness, and minimized side effects.
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\34\ H. Nina Kim & David H. Spach, Virologic Responses During
Treatment of Hepatitis C, University of Washington, Hepatitis Web
Study, (last updated Oct. 1, 2012), available at http://
depts.washington.edu/hepstudy/hepC/mgmt/viroresponse/discussion.html
(last updated Oct. 1, 2012).
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HCV treatment relied on interferon for nearly twenty-five
years. It is a naturally occurring protein that cells secrete
when they are attacked by a virus and was first identified in
1957. Interferon exists in three different forms--alpha, beta,
and gamma--and each is used to treat numerous diseases,
including cancer, multiple sclerosis, AIDS, and genital
warts.\35\ Interferon works by boosting the immune system to
effectively block new cell sites to which a virus could attach.
However, interferon has drawbacks, especially when used for
prolonged treatment. Interferon treatment requires injections,
necessitating weekly or semi-weekly visits to a provider's
office or regular access to other health care services.
Additionally, interferon causes side effects, including flu-
like symptoms, such as fever, fatigue, muscle aches, and
myalgia.\36\ Patients have likened the side effects to having
the flu throughout treatment. Many patients cannot tolerate
interferon, and thus did not have a viable treatment
option.\37\
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\35\ Interferon, Encyclopedia Britannica Online (Aug. 7, 2009),
available at http://www.
britannica.com/EBchecked/topic/290230/interferon.
\36\ Mary L. Filipi et al., Nurses' Perspective on Approaches to
Limit Flu-Like Symptoms During Interferon Therapy for Multiple
Sclerosis, 16 Int'l J. of MS Care 55, 59 (2014), available at http://
ijmsc.org/doi/pdf/10.7224/1537-2073.2013-006.
\37\ Id.
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Researchers began testing the effectiveness of interferon-
alpha (interferon) therapies for HCV in the mid-1980s before
the virus was identified and was still known as non-A-non-B
hepatitis.\38\ After the virus' identification in 1989,
interferon became the first SOC for those that could tolerate
it. Interferon, as a standalone SOC, has a poor SVR rate. A
twenty-four-week regimen has an SVR of only 6%, and a forty-
eight-week regimen increases the SVR to 16%.\39\ In 1998, the
FDA approved ribavirin, an antiviral drug, for use in
combination with interferon for treatment of HCV.\40\ The
combination improved the effectiveness of treatment; a twenty-
four-week regimen resulted in an SVR of 34%, and a forty-eight-
week regimen resulted in an SVR of 42%. Ribavirin further
increased the SVR to 54% when combined with pegylated
interferon, which combines polyethylene glycol (PEG) with
interferon.\41\
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\38\ Jay H. Hoofnagle et al., Treatment of Chronic Non-A, Non-B
Hepatitis with Recombinant Human Alpha Interferon: A Preliminary
Report, 315 New Eng. J. Med. 1575, 1575-1578 (1986), available at
http://www.ncbi.nlm.nih.gov/pubmed/3097544.
\39\ Doris B. Strader & Leonard B. Seef, A Brief History of the
Treatment of Viral Hepatitis C, 1 Clinical Liver Disease 6, 6 (2012),
available at http://onlinelibrary.wiley.com/doi/10.1002/cld.1/epdf
[hereinafter Strader & Seef, A Brief History of the Treatment of
Hepatitis C].
\40\ Press Release, Schering-Plough Corp., Schering-Plough
Announces FDA Approval of Rebetron(TM) Combination Therapy for
Previously Untreated Hepatitis C Patients; Rebetron Combination Therapy
Now Approved for Use in Both Previously Untreated and Relapse Hepatitis
C Patients (Dec. 9, 1998). Ribavirin was discovered in 1972 and, in
addition to treating HCV, treats other RNA viruses. Shane Crotty et
al., Ribavarin's Antiviral Mechanism of Action: Lethal Mutagenesis?, 80
J. Molecular Med. 86, 86 (2001), available at http://www.liai.org/
files/Ribavirin-Crotty.pdf. Ribavirin does not effectively treat HCV as
a monotherapy because it does not reduce the production of HCV RNA,
although it does significantly reduce liver damage. Id. at 91.
\41\ Strader & Seef, A Brief History of the Treatment of Hepatitis
C, at 6.
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The next major advance in treatment was the development of
direct-acting antiviral (DAA) drugs, which work by attacking
specific viral proteins encoded within the virus's RNA. These
viral proteins include enzymes such as the NS5B polymerase and
NS3/4A protease, as well as the NS5A protein, which is involved
in the HCV replication complex. In 2011, the FDA approved two
DAAs, boceprevir (Victrelis) and telaprevir (Incivek).\42\ In
2013, the FDA approved two additional DAAs, simeprevir (Olysio)
and sofosbuvir (Sovaldi).\43\ Each successive DAA advanced HCV
treatment by maintaining or improving SVR, while also reducing
treatment time for most patients, thereby reducing the use of
interferon.
---------------------------------------------------------------------------
\42\ VICTRELIS Prescribing Information (2011), available at http://
www.accessdata.fda.gov/drugsatfda_docs/label/2011/202258lbl.pdf;
INCIVEK Prescribing Information (2011), available at http://
www.accessdata.fda.gov/drugsatfda_docs/label/2011/201917lbl.pdf.
\43\ OLYSIO Prescribing Information (2013), available at http://
www.accessdata.fda.gov/drugsatfda--docs/label/2013/205123s001lbl.pdf;
SOVALDI Prescribing Information (2013), available at http://
www.accessdata.fda.gov/spl/data/24e7ec0a-9f1b-4b63-8e48-53a63cd7c46f/
24e7ec0a-9f1b-4b63-8e48-53a63cd7c46f.xml.
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The introduction of drugs that could treat patients without
interferon critically advanced HCV treatment. Although the FDA
approved Sovaldi for use without interferon for genotype 2 and
genotype 3 patients, the primary cohort of genotype 1 patients
still required the use of interferon and ribavirin with
Sovaldi. However, in January 2014, the American Association for
the Study of Liver Disease (AASLD) recommended that providers
combine Sovaldi with Olysio for patients who could not tolerate
interferon-based therapies. This off-label combination
comprised approximately one-third of all Sovaldi-based
treatments by the second quarter of 2014.\44\ The off-label
drug combination further increased the cost of treatment for a
portion of the patient population, primarily genotype 1
patients who could not tolerate interferon.
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\44\ Appendix E, Ex. 5, Gilead Sciences, Inc., Miscellaneous
powerpoint slides (2014), GS-0019034, at GS-0019036.
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In October 2014, nine months after the AASLD
recommendation, the FDA approved Gilead's ledipasvir-sofosbuvir
(Harvoni), the first FDA-approved interferon-free HCV therapy
for genotype 1 patients.\45\ In November 2014, the FDA approved
Johnson & Johnson's application for the AASLD-recommended
Olysio-Sovaldi combination,\46\ but use of these drugs and
their combination has fallen due to market competition from
Viekira Pak and Harvoni \47\ (see slide below).\48\ In December
2014, the FDA approved another interferon-free regimen,
consisting of a combination of drugs--ombitasvir, paritaprevir,
ritonavir, and dasabuvir (Viekira Pak).\49\ Notably, Harvoni is
a single-tablet therapy, whereas Viekira Pak is a multi-tablet
therapy.
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\45\ HARVONI Prescribing Information (2014), available at http://
www.accessdata.fda.gov/spl/data/a3f06ce8-e0c0-4d41-9126-c43c94e4c87c/
a3f06ce8-e0c0-4d41-9126-c43c94e4c87c.xml.
\46\ Anna Edney, J&J Wins U.S. Approval for Hepatitis C Combo with
Gilead, Bloomberg (Nov. 5, 2014), available at http://
www.bloomberg.com/news/articles/2014-11-05/j-j-wins-u-s-approval-for-
hepatitis-c-combo-with-gilead.
\47\ Olysio generated revenue of $234 million during the first
three months of 2015, an annualized pace of $936 million, compared to
$2.3 billion in sales during the full year 2014.
\48\ Appendix D, Ex. 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, at 6.
\49\ VIEKIRA PAK Prescribing Information (2014), available at
http://www.accessdata.fda.gov/spl/data/045ddc2b-403e-7db2-b3e1-
9627632ab3d7/045ddc2b-403e-7db2-b3e1-9627632ab3d7.xml.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Even after competition entered the genotype 1 market,
Sovaldi was the only drug that the FDA had approved to treat
genotypes other than genotype 1--its label included indications
for the treatment of genotypes 1, 2, 3, and 4 patients.
Consequently, Gilead did not face significant competition in
the U.S. for genotype 2 or 3 treatments besides the interferon-
ribavirin combination, which has significantly worse side
effects and, in some genotypes, worse outcomes. On July 24,
2015, the FDA approved daclatasvir (Daklinza) for treatment of
genotype 3; however, its label indicates that it should be used
in combination with Sovaldi,\50\ which means there remains no
standalone competitor. The AASLD has added the Daklinza-Sovaldi
combination to its recommended treatment regimens for genotype
1 and 2 patients. In addition, the FDA has approved a
combination of ombitasvir, paritaprevir, and ritonavir
(Technivie) for genotype 4 patients without cirrhosis.\51\
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\50\ DAKLINZA Prescribing Information (2015), available at http://
www.accessdata.fda.gov/drugsatfda_docs/label/2015/
206843Orig1s000lbl.pdf.
\51\ TECHNIVIE Prescribing Information (2015), available at http://
www.accessdata.fda.gov/drugsatfda--docs/label/2015/
207931Orig1s000lbl.pdf.
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Fibrosis and Patient ``Warehousing''
The severe side effects of interferon-based regimens
coupled with the anticipation of new, more tolerable treatment
regimens, and the slow progression of HCV, caused many
providers to advise their HCV patients to wait until more
tolerable and effective therapies came to market. This practice
is known as ``warehousing.'' Providers warehoused patients
based in part on fibrosis scores, which correspond with
declining liver function and range from 0 (no fibrosis) to 4
(severe fibrosis or cirrhosis).\52\ Warehousing can result in
sharply increased demand when an anticipated treatment comes to
market. Fibrosis scores played two key roles in the recent
debate over HCV treatment in part because low fibrosis scores
are an indicator of a patient's ability to forestall treatment.
Patients with early stages of the disease (fibrosis scores of
0, 1 or 2) were frequently advised to wait until new drugs were
released before beginning treatment. The rationale was that
there would be better outcomes for patients who could medically
afford to wait on new treatments with shorter durations, higher
cure rates, and fewer side effects.
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\52\ Marc G. Ghany et al., Diagnosis, Management, and Treatment of
Hepatitis C: An Update, 49 Hepatology 1335 (2009), available at http://
onlinelibrary.wiley.com/doi/10.1002/hep.22759/abstract.
---------------------------------------------------------------------------
Warehousing had previously occurred in 2000, in
anticipation of the FDA's approval of pegylated interferon, and
again in 2010, leading up to the approval of DAA medications.
Warehousing has been a focus of pharmaceutical makers, Wall
Street analysts, and the financial press because pent up demand
materially affects revenue when regulatory approvals for
improved treatments are anticipated. Such warehousing with HCV
medications was noted in 2000 ahead of regulatory approval of
pegylated interferon:
One issue is a study released in late October showing
that Schering-Plough Corp.'s experimental hepatitis
drug Peg-Intron is more effective than the standard
treatment for hepatitis C when the drug is combined
with ICN's ribavirin. The study compared the
combination to the standard therapy of ribavirin and
Intron A, a combination sold by Schering-Plough as
Rebetron. The study results ``have led to some
speculation that doctors may be warehousing their
patients instead of giving them Rebetron now as they
wait for approval of Peg-Intron and ribavirin,'' Smith
said. If that's true, that could lead to a temporary
weakness in ribavirin sales, Smith said.\53\
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\53\ Karen Fessler, Panic Abandons Plan to Sell 50,000 ICN Shares,
L.A. Times (Dec. 14, 2000), available at http://articles.latimes.com/
2000/dec/14/business/fi-47.
Again in 2010, warehousing occurred leading up to approval
---------------------------------------------------------------------------
of the first DAA medications:
At Fred Poordad's bustling hepatitis C clinic in the
heart of Los Angeles, one in every five patients
receives no treatment. They are waiting for a wave of
new drugs, expected in the next 18 months, that may
boost their chance at a cure by as much as 10-fold. The
medicines also may bolster the prospects of Merck &
Co., Vertex Pharmaceuticals Inc. and Johnson & Johnson,
the companies in a race to get the first new treatment
to the market in a decade. About half of patients can't
tolerate the side effects of existing therapies, which
generate $2 billion annually in sales. The new drugs
could expand the market to $10 billion in five years,
said Geoff Porges, an analyst for Sanford C. Bernstein
& Co. in New York.\54\
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\54\ Michelle Cortez & Naomi Kresge, Warehoused Hepatitis C
Patients May Boost Merck, J&J, Bloomberg (Apr. 19, 2010), available at
http://www.bloomberg.com/news/articles/2010-04-18/-warehoused-
hepatitis-c-patients-may-boost-sales-for-merck-j-j-vertex.
With the expected introduction of new, more effective HCV
drugs, Pharmasset noted the projected effect of warehousing on
the market in financial filings after Gilead announced its
intention to buy the company: ``Warehousing in 2012 and 2013
results in the 2011 treatment rate being halved for these
years. The treatment rate then accelerates in 2014 to twice the
2011 treatment rate and remains stable through the end of the
forecast period.'' \55\ In a 2013 New York Times article, Dr.
Scott Friedman explained the rationale behind the patient
warehousing that occurred in anticipation of Sovaldi:
---------------------------------------------------------------------------
\55\ Pharmasset, Inc. Amendment No. 2 to Solicitation/
Recommendation Statement Under Section 14(d)(4) of the Securities
Exchange Act of 1934 (Schedule 14D-9), at 9 (Dec. 20, 2011), available
at http://www.sec.gov/Archives/edgar/data/1301081/000119312511347237/
d270458dsc
14d9a.htm.
Many doctors are now ``warehousing'' their hepatitis C
patients--urging them to forgo treatment until the new
drugs are approved. ``There's no way I'm going to put
them on an interferon regimen when we're a year away
from having interferon-free regimens,'' said Dr. Scott
Friedman, the chief of liver diseases at the Icahn
School of Medicine at Mount Sinai. ``It's rare you have
to pull the trigger and get them on treatment in that
period of time.'' Gilead estimates that only 58,000
Americans with hepatitis C are now undergoing
treatment, a small fraction even of those who know they
are infected. Wanting to avoid interferon's side
effects, some patients without symptoms try to monitor
their liver and start treatment only if it shows signs
of deterioration. But with the new more tolerable
treatments, some experts say, it makes sense to treat
early-stage disease to prevent cirrhosis and the
accompanying risk of liver cancer.\56\
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\56\ Andrew Pollack, Hepatitis C, A Silent Killer, Meets Its Match,
N.Y. Times (Nov. 4, 2013), available at http://www.nytimes.com/2013/11/
05/health/hepatitis-c-a-silent-killer-meets-its-
match.html?pagewanted=all&_r=0.
Section 2: Gilead's Acquisition of Pharmasset and the Final Approval
Phase for Sovaldi
Pharmasset's Path From University Labs to
Hepatitis C Front-Runner
Pharmasset was launched by four medical researchers in
1998, with its first headquarters in a suburb of Atlanta. Soon
thereafter, the company signed licensing agreements for drug
candidates discovered during university-based research and
signed additional agreements with several pharmaceutical
companies.\57\
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\57\ Pharmasset, Inc., Registration Statement (Form S-1), at F-21
(May 8, 2006), available at http://www.sec.gov/Archives/edgar/data/
1301081/000119312506103750/ds1.htm.
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As Pharmasset prepared to become a publicly traded company
in 2006, it focused on the clinical development of drugs to
treat HIV, Hepatitis B, and HCV.\58\ By 2008, Pharmasset's
financial filings showed that it began spending money on pre-
clinical studies for PSI-7977, which Gilead would eventually
market as Sovaldi, and include as a component of Harvoni.\59\
Between 2008 and 2011, Pharmasset spent $62.4 million
researching and developing PSI-7977.\60\ Those research funds
included a federal grant of $244,479.25 awarded under the
Qualifying Therapeutic Discovery Program for development of
PSI-7977.\61\
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\58\ Id.
\59\ Appendix F, Gilead Sciences, Inc., Response to Chairman Wyden/
Senator Grassley letter dated July 11, 2014, narrative answer to
question 6a (Sept. 9, 2014).
\60\ Id.
\61\ Qualifying Therapeutic Discovery Project Grants for the State
of New Jersey, Internal Revenue Service (May 7, 2015), available at
http://www.irs.gov/Affordable-Care-Act/Affordable-Care-Act-Tax-
Provisions.
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Pharmasset executives understood PSI-7977's potential as a
drug candidate. More than a year before acquisition talks began
with Gilead, Pharmasset executives informed their board of
directors that the drug's safety and efficacy profile proved
promising in clinical trials, and that PSI-7977 ``is less risky
than other drugs at this stage of development.'' \62\
Pharmasset received unsolicited buyout offers from other
pharmaceutical companies, prompting the company to engage
Morgan Stanley as an advisor.\63\
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\62\ Appendix E, Ex. 6, Pharmasset, Board of Directors meeting
packet (July 21, 2010), GS-0014970 at GS-0015031--GS-0015039.
\63\ Pharmasset, Inc. Solicitation/Recommendation Statement Under
Section 14(d)(4) of the Securities and Exchange Act of 1934 (Schedule
14D-9) (Dec. 6, 2011), at 8-12, available at http://www.sec.gov/
Archives/edgar/data/1301081/000119312511331226/d265035dsc14d9.htm.
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Pharmasset executives also continued to press the board for
supplemental budget approvals to carry on development of PSI-
7977.\64\ Executives discussed and explored ways to turn a
small firm focused on research into a company that sold HCV
drugs internationally.\65\ According to an internal slide
presentation, the FDA told the company on August 18, 2011 that
PSI-7977 ``could enable [a] rapid transition away from
interferon AND ribavirin,'' and that agency officials ``were
supportive of a rapid move to monotherapy in order to eliminate
both interferon and ribavirin.'' \66\ On November 6, 2011, just
two weeks before announcing its acquisition by Gilead,
Pharmasset publicly unveiled the results of a Phase 2 FDA trial
dubbed ``ELECTRON,'' which showed that PSI-7977 effectively
cured all 40 of the genotype 2 and 3 participants, including 10
who had not used interferon.\67\
---------------------------------------------------------------------------
\64\ Appendix E, Ex. 7, Pharmasset, Board of Directors Memorandum
(Sept. 16, 2011), GS-0017760.
\65\ Appendix E, Ex. 8, Global Commercialization Strategy Update to
Pharmasset Board of Directors (2011), GS-0003852.
\66\ Appendix E, Ex. 9, PSI-7977 Phase II Clinical Trial Data
Review (Oct. 3, 2011), GS-0011638, at GS-0011640.
\67\ Twelve Weeks Interferon-Free PSI-7977 Regimen Cures 100
Percent Hep C Genotype 2/3, Hep Mag (Nov. 6, 2011), available at http:/
/www.hepmag.com/articles/psi7977_svr_hcv_
2501_21405.shtml.
---------------------------------------------------------------------------
Jim Meyers, Gilead vice president of North American
commercial operations, told investigative staff that the data
release was better than Gilead expected. It provided a better
view and a more bullish view of all of the variables that came
into play, including assumptions about the drug's launch year,
its eventual market penetration, overall disease prevalence and
geographic distribution.\68\
---------------------------------------------------------------------------
\68\ Interview with Jim Meyers, Senior Vice President, North
America Commercial Organization, Gilead Sciences, Washington, D.C.
(Dec. 1, 2014).
---------------------------------------------------------------------------
Pharmasset's Phase 2 success with PSI-7977 came against a
backdrop of stiff competition. In 2011, the first drugs that
directly attacked HCV had been released, and a herd of
pharmaceutical companies was racing to be the first with an
interferon-free therapy, as described in a 2010 memo from
Pharmasset's executives to its board:
[M]ost big pharmaceutical companies with antiviral
franchises are expecting HCV to be the next big
antiviral market and are placing a strong emphasis on
quickly establishing market leadership through the use
of direct acting antivirals to improve the efficacy of
current therapy with the hope of decreasing the
duration of interferon therapy. This will be quickly
followed by combinations of direct acting antivirals in
hopes of eliminating interferon therapy.\69\
---------------------------------------------------------------------------
\69\ Appendix E, Ex. 6, Pharmasset, Board of Directors meeting
packet (July 15, 2010), GS-0014970, at GS-0015031--0015042.
Given the promising data from clinical trials and the
potential market for improved HCV therapies, Pharmasset's PSI-
7977 was well-positioned to be a market leader. Gilead was
aware of this potential.
Gilead's Concern About a Weak Product Pipeline
Gilead was not only concerned about ensuring it could
acquire Pharmasset's promising molecule, it was aware that it
could move too slowly and miss the chance to purchase the
company in a highly competitive industry. Gilead and its
bankers code-named the acquisition ``Project Harry,'' with the
companies named after characters from the children's novel
Harry Potter--Pharmasset was referred to as ``Harry'' and
Gilead was ``Gryffindor.'' In a presentation titled
``Introduction to Project Harry'' on July 21, 2011, Gilead COO
John Milligan stated that ``Harry is the best, and most timely,
way to bring a nucleotide to Gilead's portfolio,'' and the
company was ``unlikely to be available a year from now''
because it is an ``[a]ttractive acquisition for several
companies.'' \70\
---------------------------------------------------------------------------
\70\ Appendix E, Ex. 10, Gilead Sciences, Inc., Introduction to
Project Harry (July 21, 2011), GS-0019211, at GS-0019214.
---------------------------------------------------------------------------
Presentations to Gilead's board suggest that absent its own
promising drug compounds, the purchase of Pharmasset was the
primary route for the company to compete in the HCV market.
Barclays summarized the strategic rationale in the days before
the acquisition was announced:
Diversifies Gryffindor's business outside of HIV while
leveraging Gryffindor's area of expertise
Harry acquisition accelerates Gryffindor's development
program in the treatment of HCV
Harry's nucleotide analog PSI-7977 and portfolio of nucs
have demonstrated potency and effectiveness in 700+
patients without safety or resistance concerns
Gryffindor's expertise in anti-viral therapies positions
it as the company uniquely capable of maximizing
Harry's HCV commercial opportunity \71\
---------------------------------------------------------------------------
\71\ Appendix E, Ex. 11, Barclays, Description of Fairness Opinion
(Nov. 13, 2011), GS-0011877, at GS-0011880 (emphasis in original).
More than a year before acquisition talks began, Pharmasset
executives presented a case study to the company's board that
succinctly summarized their view of Gilead's difficulties in
---------------------------------------------------------------------------
HCV drug development:
Today, Gilead is left wondering what to do in HCV. As a
result of their lack of success in HCV, they hired John
McHutchison to head their Hepatitis development efforts
in June 2010. The very clear signals from Gilead and
John are that they will be making some strategic moves
in HCV.\72\
---------------------------------------------------------------------------
\72\ Appendix E, Ex. 6, Pharmasset, Board of Directors meeting
packet (July 15, 2010), GS-0014970, at GS-0015031--0015061.
The expectation of a strategic move was partially due to
Gilead's own difficulties in developing an HCV drug. As
negotiations with Pharmasset began in September 2011, Gilead
announced another setback for one of its HCV drugs, GS-9190,
forcing the company to alter study protocols after patients in
two studies reported adverse side effects.\73\ A presentation
to Gilead's board of trustees in October 2011 showed that as
late as 2010, Gilead had been aiming for a ``broad genotypic
oral antiviral'' in 2020, but that ``the competitive nature of
the field and speed of development has now compacted the
timelines'' to within just a few years.\74\ Another
presentation showed that Gilead's advisory board expected an
all-oral therapy ``very soon,'' that ``[development]
[t]imelines are shrinking rapidly,'' and that the ``[f]ield is
moving very fast; faster than anyone anticipated.'' \75\ The
presentation stated that Pharmasset was recruiting patients to
its clinical trials faster than any other company, and
concluded that the company ``has established the fastest
pathway forward with the simplest regimen that is furthest
along.'' \76\ These presentations made clear that Gilead's lack
of success in its HCV pipeline and its desire to remain
competitive increased both the value and importance of
acquiring Pharmasset's promising therapies.
---------------------------------------------------------------------------
\73\ Press Release, Gilead Sciences, Inc., Gilead Amends Study
Design for Ongoing Hepatitis C Clinical Trials That Include GS 9190,
Pegylated Interferon and Ribavirin, and Another Direct-Acting Antiviral
Agent (Sept. 4, 2011), available at http://www.gilead.com/news/press-
releases/2011/9/gilead-amends-study-design-for-ongoing-hepatitis-c-
clinical-trials--that-include-gs-9190-pegylated-interferon-and-
ribavirin-and-another--directacting-antiviral-agent.
\74\ Appendix E, Ex. 12, Gilead Sciences, Inc., Gilead Liver
Disease Franchise: BOD Strategic Review (2011), GS-0019275, at GS-
0019285--0019286.
\75\ Appendix E, Ex. 13, Gilead Sciences, Inc., Harry Update (Oct.
7, 2011), GS-0019236, at GS-0019239.
\76\ Id. at GS-0019246.
---------------------------------------------------------------------------
The $11.2 Billion Acquisition of Pharmasset
On January 17, 2012, Gilead Sciences, Inc., announced the
completion of its $11.2 billion purchase of Pharmasset, Inc.
Gilead executives were confident in Pharmasset's HCV drug
candidate, which was entering the final phase of testing for
regulatory approval. However, when the acquisition was first
announced on November 21, 2011, it triggered a selloff of
Gilead stock, and was panned by financial analysts who deemed
the deal as extremely risky:
Investors balked at the deal on Monday, with shares of
Gilead falling 9 percent on the announcement. ``For
Gilead to give up effectively one-third of their value
for an unproven asset still subject to significant
ongoing clinical risk seems remarkable,'' Geoffrey
Porges, biotechnology analyst at Sanford C. Bernstein &
Company, wrote in a note Monday. Thomas Wei of
Jefferies & Company estimated that Gilead's sales of
hepatitis C drugs would have to reach $4 billion a
year--difficult, but not impossible--to justify the
purchase price.\77\
---------------------------------------------------------------------------
\77\ Andrew Pollack & Michael J. De La Merced, Gilead to Buy
Pharmasset for $11 Billion, N.Y. Times (Nov. 21, 2011), available at
http://dealbook.nytimes.com/2011/11/21/gilead-to-buy-pharmasset-for-11-
billion/?_r=0.
Despite doubts among analysts and investors, Gilead
executives were confident that Pharmasset was developing a
molecule that would revolutionize HCV treatment by potentially
removing interferon from therapy in the future. Furthermore,
executives were willing to pay a premium because, as noted
above, Gilead's own efforts at developing HCV drugs were not
succeeding and were not progressing as quickly as needed to
keep up with competitor companies.
Although a company executive told investigative staff that
Gilead was taking an extraordinary risk in buying
Pharmasset,\78\ documents provided by the company suggest that
executives were very confident in sofosbuvir's ability to gain
FDA approval. Gilead slides highlighted an ``[e]xcellent safety
profile (no measureable side effects in any patients to date)''
headed into Phase 3 testing as well as high cure and response
rates for genotype 1 patients with and without interferon.\79\
The confidence stemmed from months that Gilead, in conjunction
with advisors from Barclays and Bank of America, had spent
studying the global HCV market and potential revenue streams
from a hypothetical ``Harry-Gryffindor'' acquisition. The
acquisition team had studied proprietary financial and research
data provided by Pharmasset under non-disclosure agreements,
and provided regular reports to executives and the Board of
Directors at Gilead.
---------------------------------------------------------------------------
\78\ Interview with Jim Meyers, Senior Vice President, North
America Commercial Organization, Gilead Sciences, Inc., in Washington,
D.C. (Oct. 30, 2014).
\79\ Appendix E, Ex. 13, Gilead Sciences, Inc., Harry Update (Oct.
7, 2011), GS-0019236 at GS-0019240.
---------------------------------------------------------------------------
The information left Gilead's leadership sufficiently
convinced of PSI-7977's promise, that the company increased its
offer 37% during the 11 weeks spent negotiating the deal--from
$100 per share to the final offer price of $137 per share.\80\
That was a 59% premium to the all-time high price for
Pharmasset stock.\81\
---------------------------------------------------------------------------
\80\ Pharmasset, Inc. Solicitation/Recommendation Statement Under
Section 14(d)(4) of the Securities and Exchange Act of 1934 (Schedule
14D-9) (Dec. 6, 2011), at 8-12, available at http://www.sec.gov/
Archives/edgar/data/1301081/000119312511331226/d265035dsc14d9.htm.
\81\ Press Release, Gilead Sciences, Inc., Pharmasset, Inc., Gilead
Sciences to Acquire Pharmasset, Inc. for $11 Billion (Nov. 21, 2011),
available at http://www.sec.gov/Archives/edgar/data/882095/
000119312511317734/d259746dex991.htm.
---------------------------------------------------------------------------
John McHutchison, who would be an important player in the
eventual pricing of Sovaldi, was deeply involved in the
acquisition process. A medical doctor and well-known HCV
researcher, McHutchison had been a consultant to Pharmasset
before joining Gilead as senior vice president, liver disease
therapeutics, and a member of the company's executive team.\82\
Shortly before the deal closed, McHutchison described the
purchase of Pharmasset as a ``bargain'' in an email to Matthew
Young at Barclays, which served as Gilead's acquisition
advisor. In the same email, dated January 7, 2012, McHutchison
wrote that Bristol-Meyers Squibb acted in ``desperation'' when
the company paid $2.5 billion to purchase another small
biotechnology firm developing a different HCV drug.\83\
---------------------------------------------------------------------------
\82\ Press Release, Gilead Sciences, Inc., John G. McHutchison, MD,
to Join Gilead Sciences as Senior Vice President, Liver Disease
Therapeutics (June 8, 2010), available at http://investors.gilead.com/
phoenix.zhtml?c=69964&p=irol-newsArticle&ID=1436018.
\83\ Appendix E, Ex. 2, Gilead Sciences, Inc., Emails between
Matthew Young, Barclays Capital, and John McHutchison (Jan. 7, 2012),
GS-0010634.
---------------------------------------------------------------------------
In 2014, the first year that Gilead marketed Sovaldi and
Harvoni, the company reported $12.4 billion in worldwide HCV
sales,\84\ more than three times the amount that Jefferies &
Company projected being needed to justify the purchase of
Pharmasset. The company expects sales of its HCV drugs to grow
in 2015, having reported net product sales of $14.3 billion
during the year's first nine months.\85\
---------------------------------------------------------------------------
\84\ Gilead Sciences, Inc. Annual Report (Form 10-K) (Feb. 25,
2015), available at http://www.sec.gov/Archives/edgar/data/882095/
000088209515000008/a2014form10-k.htm.
\85\ Press Release, Gilead Science, Inc., Gilead Sciences Announces
Second Quarter 2015 Financial Results (July 28, 2015), available at
http://www.sec.gov/Archives/edgar/data/882095/000088209515000022/
exhibit991earningspressrel.htm.
---------------------------------------------------------------------------
Pharmasset Expected 12-Week HCV Treatment
to Cost $36,000
Gilead's eventual selling price for Sovaldi was
substantially higher than what Pharmasset expected to charge.
Specifically, after the acquisition was announced, Pharmasset
filed with the Securities and Exchange Commission on December
6, 2011, showing it projected to sell PSI-7977 for $36,000 per
treatment regimen in the United States, with discounted prices
in the European Union.\86\ Gilead ultimately set the price of
Sovaldi at $84,000 for a single 12-week treatment course, more
than twice as high as Pharmasset's public projection at the
time the acquisition was announced.
---------------------------------------------------------------------------
\86\ Pharmasset, Inc. Solicitation/Recommendation Statement Under
Section 14(d)(4) of the Securities and Exchange Act of 1934 (Schedule
14D-9) (Dec. 6, 2011) at 32, available at http://www.sec.gov/Archives/
edgar/data/1301081/000119312511331226/d265035dsc14d9.htm.
---------------------------------------------------------------------------
Gilead claims that Pharmasset actually projected a higher
selling price than $36,000. In particular, Gilead's outside
counsel directed investigative staff to Pharmasset's amended
14-D filing, which projects a price range of $36,000 to $72,000
for U.S. customers, filed on December 20, 2011.\87\
Investigative staff's review of documents provided during the
course of the investigation show that Pharmasset's executives
and board of directors were presented with this price range
immediately before the acquisition was announced, but the
$72,000 price did not appear to play a role as the company
considered selling to Gilead.
---------------------------------------------------------------------------
\87\ Pharmasset, Inc., Amendment No. 2 to Solicitation/
Recommendation Statement Under Section 14(d)(4) of the Securities
Exchange Act of 1934 (Schedule 14D-9) (Dec. 20, 2011), available at
http://www.sec.gov/Archives/edgar/data/1301081/000119312511347237/
d270458dsc14d9a.htm.
---------------------------------------------------------------------------
Documents show that the $72,000 price for PSI-7977 first
appeared on November 18, 2011, three days before the
acquisition was announced. That day, Pharmasset CEO Schaefer
Price emailed a presentation to the company's board of
directors. The presentation states that the ``price for 7977 +
RBV ranges from $36,000 (Victrelis only) to $72K (Incivek +
SOC). This does not reflect any price premium or cost savings
to payers.'' \88\ The presentation also states that the then-
current cost to treat patients with protease inhibitors ranged
from ``$65K to $74K based on length'' of treatment.
Importantly, though, the price increases were not included in
the presentation's forecast model.\89\
---------------------------------------------------------------------------
\88\ Appendix E, Ex. 14, Email from Schaefer Price to Herb Conrad,
et al., ``FW: Forecast Assumptions,'' November 18, 2011, GS-0018378;
Appendix E, Ex. 15, Pharmasset, Inc., ``Adjustments to Forecast
Assumptions, Based on Learnings from AASLD'' (Nov. 18, 2011), GS-
0018379 at GS-0018380. At the time, clinical guidelines recommended
using Victrelis (boceprevir) in combination with peg-interferon/
ribavirin for 24 to 44 weeks; guidelines recommended that Incivek be
used for 12 weeks in combination with peg-interferon/ribavirin, with an
additional 12 to 36 weeks of peg-interferon/ribavirin. See Table 2 in
Mark G. Ghany et al., An Update on Treatment of Genotype 1 Chronic
Hepatitis C Virus Infection: 2011 Practice Guideline by the American
Association for the Study of Liver Diseases, 54 Hepatology 1433, 1433-
44 (Oct. 2011), available at http://doi.org/10.1002/hep.24641.
\89\ Appendix E, Ex. 15, Pharmasset, Inc., ``Adjustments to
Forecast Assumptions, Based on Learnings from AASLD'' (Nov. 18, 2011),
GS-0018379, at GS-0018380.
---------------------------------------------------------------------------
On the same day as the Price email, Morgan Stanley
presented slides to the Pharmasset board containing a matrix
titled ``Pricing Sensitivity--Mgmt. Case.'' \90\ In this
matrix, unit pricing of $72,000 translates to a price of $290
per share.\91\ This amount per share is more than twice the
purchase price the board approved from Gilead less than 72
hours later. This suggests that Pharmasset did not view $72,000
as a realistic price. Moreover, in that presentation, all of
the management cases--downside, base, and upside--used $36,000
as the price for PSI-7977. The management case ``represents
management's view of the most probable scenario in light of
recent developments in the Hepatitis C landscape.'' \92\
---------------------------------------------------------------------------
\90\ A management case is typically the financial model that
executives believe is most likely reflective of a company's business on
a go-forward basis or the model that management is using to make
planning decisions.
\91\ Appendix E, Ex. 16, Morgan Stanley, Project Royal Discussion
Materials (Nov. 18, 2011), GS-0018382, at GS-0018396.
\92\ Id. at GS-0018393.
---------------------------------------------------------------------------
Other documents from earlier in the year further
demonstrate that Pharmasset had not contemplated pricing PSI-
7977 nearly as high as Gilead would eventually price Sovaldi.
One document contains a presentation prepared by Morgan Stanley
with financial analysis prepared in its advisory role to
Pharmasset. These presentations contained a matrix like the one
below estimating the per-share value of Pharmasset correlated
with the expected prices for PSI-7977 and another drug
candidate, PSI-938: \93\
---------------------------------------------------------------------------
\93\ Appendix E, Ex. 17, Morgan Stanley, Project Royal Discussion
Materials (Oct. 6, 2011), GS-0002762.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The above pricing sensitivity matrix suggests that if
Pharmasset expected PSI-7977 to sell for $50,000, the company
would have expected its market value to range from $13.7
billion to $15.2 billion--between 22.6% and 35.7% higher than
the price that was actually garnered from Gilead.\94\
Similarly, presentations in May 2011 and July 2011 show that
the highest price points being discussed in modeling were
$24,000 and $36,000, the latter of which was dubbed the
``management case.''
---------------------------------------------------------------------------
\94\ To determine this estimate, investigative staff compared the
tender price Gilead offered Pharmasset shareholders when the 2011
transaction took place ($137/share) with the Morgan Stanley pricing
sensitivity matrix. Id. The matrix projected different share prices for
Pharmasset based on prices for PSI-7977 and PSI-938. The column in
which PSI-7977 was priced at $50,000 had a range of share prices as low
as $168 (with PSI-938 at $24,000) and $186 (with PSI-938 at $50,000),
which are 122.6% and 135.7% of the tender price. Staff used those
percentage differences to multiply the final purchase Gilead paid for
Pharmasset ($11.2 billion) to arrive at a range of $13.7 billion and
$15.2 billion.
---------------------------------------------------------------------------
Lastly, a presentation from September 2011 shows the price
of manufacturing PSI-7977 in relation to the price of therapy.
While the drug was being manufactured for testing, Pharmasset
calculated the production cost to be $32,000 per kilogram, or
$1 per 1,200-milligram caplet.\95\ Pharmasset expected
production costs to be cut by almost two-thirds to $11,000 per
kilogram when commercial-scale operations began.\96\ The
presentation shows that manufacturing costs for Pharmasset
would be de minimis compared to the revenue each course of
therapy would generate--ranging from 0.9% for a $50,000 course
to 1.5% for a $30,000 course: \97\
---------------------------------------------------------------------------
\95\ Appendix E, Ex. 18, Pharmasset, Untitled Presentation by
Pharmasset Executives (Sept. 2011), GS-0011557 at GS-0011588.
\96\ Id. at GS-0011581.
\97\ Id. at GS-0011590.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Thus, it appears that, based on internal presentations
given between five months and three days before the
announcement of Gilead's acquisition of Pharmasset, Pharmasset
did not intend to sell PSI-7977 for prices exceeding $50,000.
In particular, the range that was presented to the board while
the acquisition was in its final stages indicate that the
financial impacts of the higher end of the drug price range
would have meant Pharmasset was substantially undervaluing
itself.
Gilead Did Not Contemplate a Price Above $75,000
Leading up to Acquisition
On November 13, 2011, less than two weeks before the deal
was announced, Barclays gave a presentation to Gilead that
suggests Gilead was considering a price range of $55,000 to
$75,000 for Sovaldi treatment to ensure suitable financial
returns. The presentation referenced a gross price per patient
in the United States of $65,000 and included sensitivity
analysis showing the revenue effect of increasing or decreasing
the price by $10,000 (resulting in the $55,000 to $75,000
range).\98\ It is important to recognize that the figures in
the presentation were projected gross prices, which is the
price point before discounting to payers which results in a net
price.
---------------------------------------------------------------------------
\98\ Appendix E, Ex. 19, Barclays Capital, Revenue/Valuation
Models: Project Harry (Nov.13, 2011), GS-0013466, at GS-0013467, GS-
00013474.
---------------------------------------------------------------------------
These figures were developed over the course of several
months by Barclays in close partnership with a Gilead project
team. Emails show that the pricing model had been through
numerous iterations with Gilead's employees studying the model
for market assumptions with respect to infection rates, cure
rates, market share and other data points related to the HCV
population domestically and abroad.\99\
---------------------------------------------------------------------------
\99\ Appendix E, Ex. 20, Email from John McHutchison to Jonathan
Piazza, Re: Project Pyramid Assumptions (June 21, 2011), GS-0004809;
Appendix E, Ex. 21, Gilead Sciences, Inc., Project Harry--Model
Discussion (Aug 16, 2011), GS-0005511.
---------------------------------------------------------------------------
Jim Meyers told investigative staff that the molecule's
ultimate price was not a major consideration during the run-up
to the purchase of Pharmasset.\100\ Gilead had a rough but
conservative estimate for drug prices, primarily based on the
Barclays model.\101\ Treatment rates, flow of patients and flow
of diagnosis were the company's primary concern at that
point.\102\ Price was not unimportant, but the number of
patients was more important to making the deal acceptable.\103\
---------------------------------------------------------------------------
\100\ Interview with Jim Meyers, Senior Vice President, North
America Commercial Organization, Gilead Sciences, Inc., in Washington,
D.C. (Dec. 1, 2014).
\101\ Id.
\102\ Id.
\103\ Id.
---------------------------------------------------------------------------
Meyers referred investigative staff to the last page of a
presentation from July 20, 2011, and a summary of assumptions,
including an $80,000 ``price-per-cure'' (the total cost of
prescribing drugs divided by the number of cured patients
results in an average price per cured patient), which was based
on the price of telaprevir and boceprevir.\104\ Price per cure
is higher than the price of these drugs because some number of
patients taking the drug would not be cured, and the initial
treatment regimen required the use of interferon and/or
ribavirin to also be administered.\105\ That presentation
assumed that the gross price of DAA drugs would start at
$63,500, equaling a price per cure of $80,000.\106\ The pricing
assumption model showed that the cost-per-cure was projected to
increase 3% annually, and assumes an 8% ``convenience bump'' in
pricing when an all-oral, single-tablet drug came to
market.\107\ This appears similar to the strategy, detailed
later in this report, which Gilead employed when it priced
Sovaldi and Harvoni. Lastly, Barclays expected that American
patients would be charged a premium for HCV treatments,
compared to patients in Japan and Europe (see slide
below).\108\
---------------------------------------------------------------------------
\104\ Appendix E, Ex. 22, Gilead Sciences, Inc., Project Harry--
Barclays Deck Backgrounder (July 20, 2011), GS-0000207, at GS-0000228.
\105\ Id. at GS-0000214.
\106\ Id. at GS-0000219.
\107\ Id.
\108\ Id.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In sum, as the deal between Pharmasset and Gilead entered
its final phase, Gilead executives believed that the purchase
of Pharmasset would be profitable if the drug were sold for a
gross price ranging from $55,000 to $75,000 before sales
discounts were applied. A presentation one year after the sale
suggests the company expected prices to be at the midpoint--
i.e., $65,000.\109\ This was approximately $20,000 less than
what Gilead ultimately chose as the selling price.
---------------------------------------------------------------------------
\109\ Appendix E, Ex. 23, Gilead Sciences, Inc., Hepatitis C and
GS-7977 Development Update, ``HCV Strategy Review,'' November 5, 2012,
GS-0019442, at GS-0019461--GS-0019462.
---------------------------------------------------------------------------
Complete R&D Costs for Gilead's Completion of the Approval Process for
Sovaldi Were Not Provided
Gilead provided R&D spending data for ``sofosbuvir-based
regimens,'' which include ``any compound in R&D that uses
sofosbuvir or is combined in development with sofosbuvir.''
\110\ Thus, the spending data may overstate the R&D costs
associated with bringing Sovaldi to market because the data
includes three compounds in addition to sofosbuvir as a single-
agent drug.\111\ Gilead failed to provide costs attributable
solely to the development of Sovaldi, despite repeated requests
to do so.
---------------------------------------------------------------------------
\110\ Appendix F, Gilead Sciences, Inc., Response to Chairman
Wyden/Senator Grassley letter dated July 11, 2014, narrative answer to
question 12 (Sept. 9, 2014).
\111\ These four combinations were GS-7977 (sofosbuvir as a single-
agent drug); GS-7977 in combination with GS-5885 (which would
eventually become Harvoni); GS-7977 in combination with GS-5816; and
GS-7977 in combination with GS-9813. Appendix E, Ex. 24, Gilead
Sciences, Inc., 2012-2018 Financial Forecast (Nov. 2012), GS-0019394 at
GS-0019413.
---------------------------------------------------------------------------
Gilead said that its estimated R&D costs for sofosbuvir-
based regimens would be $880.3 million between 2012 and
2014.\112\ The R&D costs that Gilead provided are detailed in
table 1 below:
---------------------------------------------------------------------------
\112\ Appendix F, Gilead Sciences, Inc., Response to Chairman
Wyden/Senator Grassley letter dated July 11, 2014, narrative answer to
question 12 (Sept. 9, 2014).
Table 1--Gilead Sciences' Research and Development Costs for Sofosbuvir-based Drug Regimens
----------------------------------------------------------------------------------------------------------------
2012 2013 2014 (estimated)
----------------------------------------------------------------------------------------------------------------
Personnel Costs *................................ $45,195,000 $51,770,600 $74,765,423
----------------------------------------------------------------------------------------------------------------
Clinical Studies/Contract Research Organization $136,942,698 $238,986,739 $242,830,400
Costs **........................................
----------------------------------------------------------------------------------------------------------------
Milestones/Licenses.............................. - $4,117,281 ($2,907,678)
----------------------------------------------------------------------------------------------------------------
Overhead Allocations/Facilities Costs/Materials $27,859,182 $29,339,061 $31,367,638
and Supplies....................................
----------------------------------------------------------------------------------------------------------------
Total............................................ $209,996,871 $324,213,681 $346,055,782
----------------------------------------------------------------------------------------------------------------
Total 2012-2014.................................. $880,266,334
----------------------------------------------------------------------------------------------------------------
Source: Gilead Sciences, Inc.
* Gilead does not track expenses related to personnel costs, overhead allocation, facilities costs, and
materials and supplies by therapeutic product candidate. Gilead estimated expenses by allocating based on a
percentage of total employee headcount.
** Section 14.1 of Sovaldi's FDA label states ``The safety and efficacy of SOVALDI was evaluated in five Phase 3
trials in a total of 1724 HCV mono-infected subjects with genotypes 1 to 6 chronic hepatitis C (CHC) and one
Phase 3 trial in 223 HCV/HIV-1 co-infected subjects with genotype 1, 2 or 3 CHC.'' \113\
As noted above, Pharmasset spent $62.4 million between 2008
and 2011 researching and developing PSI-7977. Combined, this
totals $942.4 million. Gilead did note in its response to the
senators' letter that additional costs were expected for post-
market release studies, but Gilead failed to detail those
costs.\114\
---------------------------------------------------------------------------
\113\ SOVALDI Prescribing Information, Section 14.1 (2013),
available at http://www.
accessdata.fda.gov/spl/data/24e7ec0a-9f1b-4b63-8e48-53a63cd7c46f/
24e7ec0a-9f1b-4b63-8e48-53a
63cd7c46f.xml.
\114\ Appendix F, Gilead Sciences, Inc., Response to Chairman
Wyden/Senator Grassley letter dated July 11, 2014, narrative answer to
question 12 (Sept. 9, 2014).
By comparison, while negotiating its eventual sale to
Gilead, executives for Pharmasset presented the company's
expected drug development costs for fiscal year 2012 (which
---------------------------------------------------------------------------
began October 1, 2011):
Our budgeted development program expenses are $125.0
million for fiscal 2012, up $72.7 million from $52.3
million in fiscal 2011. The main drivers of this
substantial increase in our development expenses is the
advancement of PSI-7977 into four Phase 2b studies
(including the Phase 2b QUANTUM study), as well as 3
Phase 3 studies, and the advancement of PSI-938 into
the QUANTUM study.\115\
---------------------------------------------------------------------------
\115\ Appendix E, Ex. 25, Pharmasset, Inc., Board of Directors
Packet (Oct. 11, 2011), GS-0017925, at GS-0017956.
---------------------------------------------------------------------------
Specifically, development costs for PSI-7977 were budgeted
by Pharmasset to be $90.5 million.\116\ In the same
presentation, Pharmasset executives projected that the Phase 3
studies for PSI-7977--the final clinical development needed for
regulatory approval that Gilead was primarily engaged in after
the merger--would total $125.6 million.\117\
---------------------------------------------------------------------------
\116\ Id.
\117\ Id. at GS-0017966.
---------------------------------------------------------------------------
The spreadsheet on the following page provides specific,
quarterly costs that Pharmasset budgeted for these studies.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Gilead's Development Timeline Benefited from FDA Policies
Sovaldi was one in a series of HCV therapies that benefited
from FDA policies designed to shorten the R&D process and
broaden access to potentially lifesaving therapies (See Table
2). In the case of Sovaldi, the compressed timeline meant
Gilead was afforded an opportunity to sell its therapy in the
U.S. with minimal competition in the genotype 1 market for
nearly a year.
Little more than a month before acquiring Pharmasset in
2011, Gilead executives reported to the board that changes to
FDA standards regarding HCV testing protocols would benefit the
purchase of Pharmasset and speed up the eventual approval of
sofosbuvir. The agency would no longer require SVR to be tested
24 weeks after treatment ended. Instead, it would require an
SVR follow-up at just 12 weeks.\118\ Furthermore, studies using
placebo-controlled trials would be accepted. As a result, Phase
3 studies would be ``simpler and faster.'' \119\ Gilead
executives believed that the probability of successfully
reaching the market increased along with the ``truncated
timelines for approval.'' \120\
---------------------------------------------------------------------------
\118\ Appendix E, Ex. 26, Gilead Sciences, Inc., Harry Update:
Board Meeting (Oct. 24, 2011), GS-0019309, at GS-0019311.
\119\ Id.
\120\ Appendix E, Ex. 13, Gilead Sciences, Inc., Harry Update:
Board Meeting (Oct. 7, 2011), GS-0019236, at GS-0019244.
---------------------------------------------------------------------------
By November 2012, McHutchison reiterated to the board that
``the timelines have shortened considerably for both GS-7977 as
a single agent and GS-7977 combinations,'' in a presentation
that referred to additional conversations with the FDA (when
Gilead acquired Pharmasset, the PSI-7977 became GS-7977). A
presentation made on the same day first referenced the
company's expectation that a new drug approval (NDA) for GS-
7977 would be submitted by April 2013, and approval achieved by
December of that year.\121\
---------------------------------------------------------------------------
\121\ Appendix E, Ex. 23, Gilead Sciences, Inc., Hepatitis C and
GS-7977 Development Update, November 5, 2012, GS-0019442, at GS-
0019443, GS-0019469.
---------------------------------------------------------------------------
In 2013, the FDA granted GS-7977 both ``breakthrough
therapy designation'' \122\ and GS-7977 ``priority review''
\123\ status. The priority review, granted in June 2013,
expedited the approval of Sovaldi.\124\ The breakthrough status
broadened the label's treatment indication, as Martin explained
in a memo that was drafted for the board of directors:
---------------------------------------------------------------------------
\122\ The agency implemented the process based on instruction in
the Food and Drug Administration Safety and Innovation Act of 2012 to
``implement more broadly effective processes for the expedited
development and review of innovative new medicines intended to address
unmet medical needs for serious or life-threatening diseases,'' Pub. L.
No. 112-144, Sec. 901(a)(1)(C), 126 Stat. 993.
\123\ Authorized by the Prescription Drug User Act (PDUFA) of 1992,
Pub. L. No. 102-571, priority review allows the FDA to act on an NDA
within six months of submission, as opposed to the standard 10-month
period. The FDA can grant priority review status if the NDA ``treats a
serious condition and, if approved, would provide a significant
improvement in safety or effectiveness.'' Food and Drug Administration,
Guidance for Industry: Expedited Programs for Serious Conditions--Drugs
and Biologics, at 7 (2014), available at http://www.fda.gov/downloads/
drugs/guidancecomplianceregulatoryinformation/guidances/ucm358301.
\124\ Press Release, Gilead Sciences, Inc., Gilead Announces U.S.
FDA Priority Review Designation for Sofosbuvir for the Treatment of
Hepatitis C (June 7, 2013), available at http://www.gilead.com/news/
press-releases/2013/6/gilead-announces-us-fda-priority-review-
designation-for-sofosbuvir-for-the-treatment-of-hepatitis-c.
As highlighted by John McHutchison and Bill Symonds
during our meeting last month/earlier this month, the
FDA granted Sovaldi a Breakthrough Designation, which
allowed us to submit data from two additional Phase 3
studies beyond the four Phase 3 trials submitted with
the initial New Drug Application.\125\
---------------------------------------------------------------------------
\125\ Appendix E, Ex. 27, Gilead Sciences, Inc., Email from Cara
Miller to Gregg Alton (Nov. 22, 2013), GS-0020826.
Martin appeared to be referring to the VALENCE and PHOTON-1
studies.\126\ The FDA's summary review explained, ``VALENCE
provided data to support a 24-week treatment duration for GT3
subjects to improve relapse rates and PHOTON-1 provided data to
support regimens for HCV/HIV-1 co-infected subjects along with
an interferon-free regimen for GT1 subjects.'' \127\
---------------------------------------------------------------------------
\126\ Food and Drug Administration Center for Drug Evaluation and
Research, Clinical Pharmacology and Biopharmaceutics Review(s):
Application Number: 204671Orig1s000, at 2 (Nov. 22, 2013), available at
http://www.accessdata.fda.gov/drugsatfda_docs/nda/2013/204671Orig1s
000ClinPharmR.pdf.
\127\ Id. at 8.
---------------------------------------------------------------------------
Under section 506(a) of the Federal Food, Drug, and
Cosmetic Act (FFDCA), as amended, breakthrough designation is
provided:
if the drug is intended, alone or in combination with 1
or more other drugs, to treat a serious or life-
threatening disease or condition and preliminary
clinical evidence indicates that the drug may
demonstrate substantial improvement over existing
therapies on 1 or more clinically significant
endpoints, such as substantial treatment effects
observed early in clinical development.\128\
---------------------------------------------------------------------------
\128\ Food and Drug Administration Safety and Innovation Act Pub.
L. No. 112-114, Sec. 902(a)(3), 126 Stat. 995 (2012).
When considering a breakthrough therapy designation
request, the FDA evaluates the quantity and quality of the
clinical evidence submitted, available alternative therapies to
that drug, and magnitude of treatment effects shown.\129\ For
Gilead, expanding the label's indication meant that Sovaldi
would be a viable therapy for more patients, expanding the
market for the drug.
---------------------------------------------------------------------------
\129\ Center for Health Policy at Brookings, Breakthrough Therapy
Designation: Exploring the Qualifying Criteria (2015) [hereinafter
Brookings, Breakthrough Therapy Designation], available at http://
www.brookings.edu//media/events/2015/04/24-fda-breakthrough-therapy-
designation/breakthrough-therapy-designation_final.pdf.
---------------------------------------------------------------------------
Financial documents filed a month after the Gilead-
Pharmasset acquisition was announced show that Pharmasset's
management expected that the drug would be launched in the U.S.
sometime between the fourth quarter of 2013 and the second
quarter of 2015.\130\ The actual December 2013 FDA approval was
at the front-end of these projections. The importance of this
timing shift is underscored in pricing documents discussed in
detail later in this report showing that Gilead officials
believed a lack of competition would inform the eventual price
for Sovaldi.
---------------------------------------------------------------------------
\130\ Pharmasset, Inc., Amendment No. 2 to Solicitation/
Recommendation Statement Under Section 14(d)(4) of the Securities
Exchange Act of 1934 (Schedule 14D-9) (Dec. 20, 2011), available at
http://www.sec.gov/Archives/edgar/data/1301081/000119312511347237/
d270458dsc14d9a.htm. Pharmasset, Inc.
---------------------------------------------------------------------------
Table 2 shows the HCV drugs that received FDA approval.
Table 2--HCV Drugs That Received FDA Approval
----------------------------------------------------------------------------------------------------------------
Breakthrough
Therapy
Drug Approval Date Designation for Priority Indication(s) Approved
Approved Review (Y/N)
Indication(s)
----------------------------------------------------------------------------------------------------------------
Daklinza (daclatasvir) NDA 206843.. July 24, 2015 No Yes For the treatment of
hepatitis C virus
(HCV) genotype 3 in
combination with
sofosbuvir.
----------------------------------------------------------------------------------------------------------------
Technivie (ombitasvir, July 24, 2015 Yes Yes For use in combination
paritaprevir, and ritonavir) NDA with ribavirin for
207931. the treatment of
hepatitis C virus
(HCV) genotype 4
infections in
patients without
cirrhosis.
----------------------------------------------------------------------------------------------------------------
Viekira Pak (ombitasvir, December 19, Yes Yes For use with or
paritaprevir, and ritonavir; 2014 without ribavirin to
dasabuvir) NDA 206619. treat patients with
chronic hepatitis C
virus (HCV) genotype
1 infection.
----------------------------------------------------------------------------------------------------------------
Harvoni (ledipasvir and sofosbuvir) October 10, Yes Yes For the treatment of
NDA 205834. 2014 chronic hepatitis C
(CHC) genotype 1
infection.
----------------------------------------------------------------------------------------------------------------
Sovaldi (sofosbuvir) NDA 204671.... December 6, Yes Yes For the treatment of
2013 chronic hepatitis C
(CHC) infection as a
component of a
combination antiviral
treatment regimen.
[Labeling specifies
efficacy established
in genotype 1, 2, 3
or 4]
----------------------------------------------------------------------------------------------------------------
Olysio (simeprevir) NDA 205123..... November 22, No Yes For the treatment of
2013 chronic hepatitis C
(CHC) genotype 1
infection as a
component of a
combination antiviral
treatment regimen.
----------------------------------------------------------------------------------------------------------------
Incivek (telaprevir) NDA 201917.... May 13, 2011 No * Yes In combination with
peginterferon alfa
and ribavirin, the
treatment of genotype
1 chronic hepatitis C
(CHC) in adult
patients with
compensated liver
disease, including
cirrhosis.
----------------------------------------------------------------------------------------------------------------
Victrelis (boceprevir) NDA 202258.. May 13, 2011 No * Yes For the treatment of
chronic hepatitis C
(CHC) genotype 1
infection, in
combination with
peginterferon alfa
and ribavirin, in
adult patients with
compensated liver
disease, including
cirrhosis.
----------------------------------------------------------------------------------------------------------------
Source: FDA.
Note: * Prior to Food and Drug Administration Safety and Innovation Act and creation of the Breakthrough Therapy
designation.
Section 3: The Pricing of Sovaldi
Shortly after Gilead bought Pharmasset, the company's
senior officials began to prepare for the release of what they
expected to be a blockbuster drug. The documentation reviewed
shows that Gilead considered a number of factors in determining
a price point for Sovaldi, including costs for the existing
standard of care for HCV treatment and setting a high baseline
for the next wave of HCV drugs. In addition, during the pricing
process, Gilead looked at a range of impacting factors to gauge
the likelihood of various ``softer issues'' at different
pricing points, ranging from professional societies including
price ``asterisks'' in their therapy recommendations, to
protests from the AIDS Health Foundation or Fair Pricing
Coalition, to losing ``key opinion leader'' endorsements, and
even the likelihood of congressional hearings or letters
concerning the price of Sovaldi.\131\ (See slide below)
---------------------------------------------------------------------------
\131\ Appendix E, Ex. 28, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Assessment, Final Recommendations--July 31st, 2013,
GS-0014018, at GS-0014047.
---------------------------------------------------------------------------
The Gilead pricing team concluded that while pricing
Sovaldi at $80,000 to $85,000 would generate an outcry from
advocacy groups and payers, ``[t]his price will allow Gilead to
capture value for the product without going to a price where
the combination of external factors and payer dynamics could
hinder patient access to uncomfortable levels.'' \132\
Ultimately, Gilead was mistaken in some of its key assumptions
as many public and private payers quickly reacted and adopted
access restrictions.
---------------------------------------------------------------------------
\132\ Id. at GS-0014044, GS-0014047--GS-0014050, GS-0014053.
---------------------------------------------------------------------------
Gilead did not produce all relevant documents and
supporting materials related to pricing as requested, despite
the company's assurances of cooperation. Therefore, the staff's
analysis of pricing decisions and strategies that follows is
necessarily based only on the documents and interviews that
were provided by the company and from outside sources.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Early Pricing Strategy
By October 2012, the company had Phase 3 trials well
underway, and was turning its attention to how it would market
Sovaldi. That same month, Gilead laid out objectives for its
commercial launch in a working document titled ``Gilead HCV
U.S. BPOA.'' \133\ The document detailed potential customer
groups, advertising strategies to reach baby boomers, and
``critical success factors for launch.'' \134\ As it would for
the next 14 months, the company was largely focused on
expanding the patient pool that would be treated with
sofosbuvir.
---------------------------------------------------------------------------
\133\ Appendix E, Ex. 29, Gilead Sciences, Inc., Gilead HCV U.S.
BPOA (Oct. 2012), GS-0013489, at GS-0013489.
\134\ Id. at GS-0013492--GS-0013502.
---------------------------------------------------------------------------
In a November 2012 a presentation titled ``HCV Strategy
Review,'' Kevin Young, the company's executive vice president
for commercial operations, referenced a U.S. price of ``$58k
vs. $65k (likely at parity for launch).'' \135\ The price in
the EU would be ``discount to U.S. 25%.'' \136\
---------------------------------------------------------------------------
\135\ Appendix E, Ex. 23, Gilead Sciences, Inc., Hepatitis C and
GS-7977 Development Update, ``HCV Strategy Review,'' November 5, 2012,
GS-0019442, at GS-0019460, GS-0019462.
\136\ Id. at GS-0019462.
---------------------------------------------------------------------------
On March 25, 2013, Gilead management met and reviewed the
results of market data that had been collected in a senior vice
president briefing titled ``Sofosbuvir U.S. Pricing &
Contracting Strategy.'' \137\ This meeting was the first of
eight scheduled meetings leading to a recommendation to a group
of senior executives known as the ``global pricing committee''
or GPC.\138\
---------------------------------------------------------------------------
\137\ Appendix E, Ex. 30, Gilead Sciences, Inc., Sofosbuvir U.S.
Pricing & Contracting Strategy, SVP Briefing, March 25, 2013, GS-
0019128.
\138\ Gilead failed to provide documents related to the GPC meeting
scheduled for April 22 or July 21. Only one SVP review was provided for
the month of May, and none in June. The ``KY/RW Review,'' which stands
for Kevin Young and Robin Washington, both senior officials at the
company, is referred to on page GS-0019129 of Exhibit 30, but was not
provided. See id. at GS-0019129. In a letter dated September 30, 2014,
Senators Grassley and Wyden asked Gilead's outside counsel, Mark R.
Paoletta, to certify all documents related to these meetings had been
provided. Gilead's counsel failed to certify that the document
production had been completed, indicating that many documents remained,
and that the request would likely ``incorporate hundreds of thousands
of emails and documents.'' Gilead also failed to provide any
documentation of a ``SOF Launch Meeting'' that the HCV Sales Team was
scheduled to convene in November 2013 (referred to in Appendix E, Ex.
31, Gilead Sciences, Inc., U.S. HCV Launch Update, August 1, 2013, GS-
0014059, at GS-0014068).
---------------------------------------------------------------------------
Gilead's key pricing considerations at this time, as
reflected in the documents provided, were comparisons to the
costs of existing HCV SOCs, the impact of expected competition
on the market for HCV therapies, the increased cost for SOCs
longer than the 12-week regimen for genotype 1 patients, and an
initial discussion of contracting strategies. The slide on the
following page indicates Gilead's contracting and pricing
timeline.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
According to Meyers, the GPC is a critical intra-corporate
body that determined the final price of Sovaldi and other
drugs.\139\ The committee typically meets when a material
product, such as Sovaldi, is being priced. The GPC is made up
of top executives at the company including:
---------------------------------------------------------------------------
\139\ Interview with Jim Meyers, Senior Vice President, North
America Commercial Organization, Gilead Sciences, Inc., in Washington,
D.C. (Dec. 1, 2014).
John Martin, CEO
Robin Washington, CFO
John Milligan, COO
Jim Meyers, Senior Vice President for Commercial
Operations, North America
Kevin Young, Executive Vice President, Commercial
Operations (now retired)
Norbert Bischofberger, Executive Vice President, Research
and Development Chief Scientific Officer
John McHutchison, Executive Vice President for Clinical
Research.\140\
---------------------------------------------------------------------------
\140\ Id.
By the time of the March 2013 presentation, the company had
Phase 3 testing data and had begun taking steps to understand
the drug's place in the market.\141\ The company was gathering
data relevant for pricing determinations taking into
consideration what was currently being paid for similar drugs,
discounting, and the concentration of the payer market share.
The pricing process was based on four different factors:
clinical attributes, value determination, market research with
payers, and the cost of current product regimens.\142\ The 58-
page slide deck prepared for management touched on all of these
points and data, while noting that ``sofosbuvir will likely
rank among the largest launches ever (year 1 sales), driving a
doubling in payers' HCV class expenditures in 2014.''\143\
---------------------------------------------------------------------------
\141\ Id.
\142\ Id.
\143\ Appendix E, Ex. 30, Gilead Sciences, Inc., Sofosbuvir U.S.
Pricing & Contracting Strategy, SVP Briefing, March 25, 2013, GS-
0019128, at GS-0019156.
---------------------------------------------------------------------------
As part of pricing considerations, Gilead aimed to gain a
thorough understanding of how similar drugs on the market were
priced.\144\ Gilead focused on the genotype 1 market because it
makes up roughly 70% of HCV patients in the United States and
was a focal point for competing drug companies. As discussed in
Section 1 of this report, two protease inhibitors, telaprevir
(Incivek developed by Vertex) and boceprevir (Victrelis
developed by Merck), had already received FDA approval in 2011.
However, Sovaldi was expected to have an edge because clinical
studies showed it would provide faster, more effective
treatment and reduced time on, or outright elimination of,
interferon injections.\145\
---------------------------------------------------------------------------
\144\ Id. at GS-0019143.
\145\ Id. at GS-0019133.
---------------------------------------------------------------------------
Gilead used the prices of Incivek and Victrelis as a
baseline and evaluated how to price sofosbuvir at a premium to
existing therapies.\146\ Company officials surmised that its
drug had a ``value premium'' because of increased efficacy and
tolerability, shorter treatment duration, and its potential to
ultimately be part of an all-oral regimen (as it ultimately
would be in combination with ledipasvir in Harvoni).
---------------------------------------------------------------------------
\146\ Id. at GS-0019172, GS-0019173.
---------------------------------------------------------------------------
In a slide titled ``Premium Based on Explicit Savings from
P/R Duration,'' the company used the approximate price of
Incivek ($55,275) as a pricing baseline. Incivek required using
interferon/ribavirin for 24 to 48 weeks. Gilead calculated
Incivek's average Wholesale Acquisition Cost (WAC) based on 36
weeks of interferon/ribavirin would be $82,496.\147\ Using this
model, Gilead's clinical and projected ``real world'' cure
rates could justify prices ranging between $82,000 and $121,000
for a 12-week course of the drug.\148\
---------------------------------------------------------------------------
\147\ Id. at GS-0019143.
\148\ Id. at GS-0019174--GS-0019175.
---------------------------------------------------------------------------
The next step was to evaluate competition. Because Incivek
and Victrelis would be sidelined by next generation drugs,
Gilead anticipated two primary competitors, simeprevir (Olysio)
and the ``second wave'' all-oral drug combination being
developed by AbbVie (later launched as Viekira Pak).\149\
---------------------------------------------------------------------------
\149\ Id. at GS-0019133.
---------------------------------------------------------------------------
Another key concern was the timing and order of competitor
drug release dates. For example, AbbVie's all-oral regimen
could affect uptake for sofosbuvir, which still relied on
interferon and ribavirin, if Gilead's all-oral offering,
Harvoni, had not yet received approval. The presentation also
left open the question about what weight Gilead should give to
``actual or assumed competitive pricing.'' \150\ Importantly,
the group also weighed how Harvoni's eventual pricing should
affect pricing for the launch of Sovaldi.\151\
---------------------------------------------------------------------------
\150\ Id. at GS-0019136.
\151\ Id.
---------------------------------------------------------------------------
The clinical data that was included in the presentation
showed that Sovaldi would perform better clinically in genotype
1 patients than Olysio, which would be Sovaldi's primary head-
to-head advantage until the FDA approved interferon-free
regimens.\152\ Looking ahead to competition, Gilead recognized
that AbbVie's yet-to-be-approved Viekira Pak had shown similar
clinical efficacy as Gilead's interferon-free Harvoni (which
also was in clinical trials). However, Gilead was confident
that the simplicity of its eventual drug--Harvoni would require
taking only a single pill per day whereas Viekira Pak required
multiple pills--would be more popular with providers and
payers.\153\
---------------------------------------------------------------------------
\152\ Id. at GS-0019167, GS-0019168.
\153\ Id. at GS-0019166.
---------------------------------------------------------------------------
Gilead surmised that ``price and/or contracting may be an
important competitive differentiator'' for Olysio and Viekira
Pak.\154\ The company planned to focus on a series of strategic
questions over the coming months:
---------------------------------------------------------------------------
\154\ Id. at GS-0019135.
Is our objective to maximize revenue or volume/
share?
What nominal price range for sofosbuvir should we
consider? Are today's PIs [protease inhibitors] a valid
reference point?
How should we think about articulating sofosbuvir's
price--in terms of price per cure? Other more or less
sophisticated metrics?
How can we best manage value perceptions of
sofosbuvir for those patient groups for which SVR% is
lower? Should we evaluate strategies that offer
guarantees, e.g., price-per-cure, blended pricing
maximum across genotypes? \155\
---------------------------------------------------------------------------
\155\ Id. at GS-0019178.
The last of these questions touched in part on the
treatment of people with genotype 2 and 3, for which sofosbuvir
would be the only DAA to gain FDA approval until the July 2015
approval of Daklinza. The FDA label that was eventually issued
recommended that genotype 3 patients use the drug for twice as
long as for genotype 1 patients--24 weeks.\156\ Using the drug
longer meant paying twice as much--a $168,000 WAC price before
additional costs for ribavirin--and an increased likelihood of
side effects such as pruritus and asthenia.\157\ The March 2013
presentation shows that Gilead anticipated that the headline
number for cures--more than 90%--would set a higher expectation
for many patients whose actual outcomes were significantly more
uncertain.\158\ Some patients taking Sovaldi would pay more for
a drug that had a lower probability of curing their particular
HCV genotype or sub-genotype.\159\
---------------------------------------------------------------------------
\156\ SOVALDI Prescribing Information (2013), available at http://
www.accessdata.fda.gov/spl/data/24e7ec0a-9f1b-4b63-8e48-53a63cd7c46f/
24e7ec0a-9f1b-4b63-8e48-53a63cd7c46f.xml.
\157\ Id. at Table 3.
\158\ Appendix E, Ex. 30, Gilead Sciences, Inc., Sofosbuvir U.S.
Pricing & Contracting Strategy, SVP Briefing, March 25, 2013, GS-
0019128, at GS-0019167, GS-0019178, GS-0019182.
\159\ One of the company's strategic questions in the presentation
was: ``How can we best manage value perceptions of sofosbuvir for those
patient groups for which SVR% is lower? Should we evaluate strategies
that offer guarantees, e.g., price-per-cure, blended pricing maximum
across genotypes?'' Id. at GS-0019178.
---------------------------------------------------------------------------
Gilead's clinical data showed that the outcomes for
genotype 3 patients, particularly those with cirrhosis or who
had undergone previous treatment for HCV (``treatment
experienced'' or ``TE'') were far less certain than, for
example, patients with genotype 1 who were non-cirrhotic and
had never received treatment (``treatment naive'' or
``TN'').\160\ The concerns about treating genotype 3 patients
was especially true in March 2013, when Gilead's pricing team
only appeared to be evaluating results for 12 weeks of
treatment, which had an SVR of just 56% for genotype 3 patients
who were treatment-naive.\161\ Treatment-experienced genotype 3
patients showed an even lower SVR for 12 weeks--30%--and just
62% for 16 weeks.\162\
---------------------------------------------------------------------------
\160\ Appendix E, Ex. 32, Gilead Sciences, Inc., 2013-2015 HCV
Launch Commercial Plan, April 4, 2013, GS-0013503, at GS-0013509.
\161\ Appendix E, Ex. 30, Gilead Sciences, Inc., Sofosbuvir U.S.
Pricing & Contracting Strategy, SVP Briefing, March 25, 2013, GS-
0019128, at GS-0019176.
\162\ Appendix E, Ex. 32, Gilead Sciences, Inc., 2013-2015 HCV
Launch Commercial Plan, April 4, 2013, GS-0013503, at GS-0013508. The
FDA ultimately approved using Sovaldi for 24 weeks in genotype 3
patients.
---------------------------------------------------------------------------
Gilead also would have been aware that its drug faced
shortfalls in other patient populations. People with subtype
genotype1b and cirrhosis had lower SVR rates (82% and 80%,
respectively) than those with subtype gentoype1a and non-
cirrhotic (both at 92%).\163\ For patients facing a liver
transplant, the FDA label recommended using Sovaldi with
ribavirin for 48 weeks. However, clinical trials showed SVR of
just 64% following a transplant.\164\ The cost of Sovaldi for
those patients alone would be $336,000 at wholesale
prices.\165\
---------------------------------------------------------------------------
\163\ SOVALDI Prescribing Information (2013), available at http://
www.accessdata.fda.gov/spl/data/24e7ec0a-9f1b-4b63-8e48-53a63cd7c46f/
24e7ec0a-9f1b-4b63-8e48-53a63cd7c46f.xml.
\164\ Id.
\165\ The wholesale price for Sovaldi is $84,000 for 12 weeks, and
a 48-week prescription would cost four times as much, excluding
additional costs for interferon and/or ribavirin.
---------------------------------------------------------------------------
Gilead considered adjusting the price downward for patients
with genotypes 2 and 3, but ultimately set a single price,
regardless of genotype or clinical effectiveness. Meyers would
raise this issue with senior executives less than a month
before sofosbuvir received FDA approval:
It will be important for us to have a coordinated
cross-functional characterization of the price of SOF
at launch, regardless of who we're speaking to
(advocacy groups, physicians, payers, Wall Street,
etc.). Part of that characterization (not by any means
all of it) will be addressing concerns about patients
who may require 24 weeks of SOF and thus be subjected
to 2X the cost (GT-3 patients, HIV/HCV co-infected
patients, etc.). If not handled effectively, this
concern could dominate the narrative at launch.
As you know, I raised this concern proactively with
some of our closest advisors at AASLD. Below was the
helpful advice from Nid Afdhal (which was very similar
to that of Ira Jacobson) on how to speak to the fact
that some patients may need 24 weeks [sic]
SOF has been developed for a therapy duration of 12
weeks or less, now and in the future. For the first
year of launch, there are some patient segments that
may benefit from 24 weeks of SOF. We are hopeful that
having an FDA approved indication for a longer duration
of therapy in these subgroups will induce payers to
cover SOF and leave a modest cost burden to the patient
(that Gilead can cover) [sic] \166\
---------------------------------------------------------------------------
\166\ Appendix E, Ex. 33, Email from Jim Myers to David L. Johnson,
et al., Characterization of SOF pricing at Launch (Nov. 8, 2013), GS-
0020772, at GS-0020772--GS-0020773.
In addition to the wholesale price, the presentation showed
the company beginning to consider the question of its
contracting strategy with private and public payers. Gilead's
data showed that commercial payers accounted for 52% of
Victrelis payments and 63% of Incivek payments during the
fourth quarter of 2012, with the remaining split among various
public payers.\167\ Furthermore, as Gilead observed of Incivek
and Victrelis: ``[t]hough PIs have been widely contracted,
discounts have been relatively small and geared mostly to
provide access rather than preferred status.'' \168\ That led
Gilead to ask additional strategic questions:
---------------------------------------------------------------------------
\167\ Appendix E, Ex. 30, Gilead Sciences, Inc., Sofosbuvir U.S.
Pricing & Contracting Strategy, SVP Briefing, March 25, 2013, GS-
0019128, at GS-0019159-60.
\168\ Id. at GS-0019156.
Do payers anticipate historic increases in HCV
expenditures? If so, how do they intend to control
them?
What should Gilead do to assuage payers' concerns?
Is contracting a cost of entry in HCV? Should we
contract from ``day one''? Should our contracting
strategy be proactive or reactive? Do we think it's
going to be a nominal contract?
Should we make any ``guarantees'' to create greater
predictability of expenditures for payers? \169\
---------------------------------------------------------------------------
\169\ Id. at GS-0019157.
Just as importantly, Gilead recognized that because the
Affordable Care Act (ACA) substantially expanded the number of
people who qualify for Medicaid, ``the percentage of HCV-
infected [individuals] with public coverage, specifically
Medicare and VA, will grow substantially.'' \170\ Even at that
early stage, Gilead viewed the shift to public payers ``as
important targets for policy engagement and contracting.''
\171\ The company also was concerned that its average sales
price could face ``significant downward pressure'' due to the
Medicaid expansion and transition of baby boomers onto
Medicare.\172\ The company questioned whether the WAC should
incorporate the expectation that prices would be subject to
pressure, and whether Gilead would need to engage in ``more
proactive in contracting with government payers.'' \173\
---------------------------------------------------------------------------
\170\ Id. at GS-0019161.
\171\ Id.
\172\ Id. at GS-0019163.
\173\ Id.
---------------------------------------------------------------------------
May 2013: The Second Pricing Check-in
Gilead continued its pricing discussions on May 10, 2013,
when the Sofosbuvir Pricing & Contracting Strategy Working Team
met for ``SVP Check-in II.'' The meeting was scheduled to last
90 minutes, and included presentations from Abby Ginsberg, a
senior manager of marketing sciences at Gilead, and three
representatives from the consulting firm IMS--Steve Swanson,
Tom Baker, and Kevin O'Leary.\174\
---------------------------------------------------------------------------
\174\ Appendix E, Ex. 34, Gilead Sciences, Inc., Sofosbuvir Pricing
& Contracting Strategy Working Team, SVP Check-in II, May 10, 2013, GS-
0013972, at GS-0013973.
---------------------------------------------------------------------------
Based on the documentation reviewed, this pricing check-in
was dominated by the results of a study conducted by IMS that
was intended to determine an access-optimizing pricing strategy
for the drug. The significant themes from this presentation
involved Sovaldi's ability to influence the price of future HCV
products; that a price point of $80,000--$90,000 would be
acceptable in terms of access, even without significant
contracting; and pricing concerns for genotype 3 patients and
non-standard SOC regimes.
By the time of the May 10 meeting, a strong sentiment had
emerged within the company that there was a ``clinically
justified reason for premium pricing,'' according to internal
interviews that were highlighted in the presentation.\175\
Other views discussed internally included:
---------------------------------------------------------------------------
\175\ Id. at GS-0013976.
Optimize price for G1 and develop strategies for
dealing with G2/3
Penetrate the market upfront to maximize sofo
experience
Exploring price per cure messaging is critical
Leave plenty of room in the gross to net assumptions
for Wave 2 \176\
---------------------------------------------------------------------------
\176\ Id.
Several anonymous quotes from company officials were
included in the presentation slide, such as ``Vertex moved the
conversation with managed to care [sic] to pricing per cure and
I think that we can make that argument better.'' \177\ That
statement likely reflects that until the introduction of
protease inhibitors to the market, there had not been a
sufficiently effective cure against which a reasonable pricing
method could be justified. Now that Gilead was on the cusp of
introducing a more effective cure for genotype 1 patients than
had previously been introduced, the internal view was that
Gilead should follow other companies in using a price-per-cure
method (rather than a price-per-regimen method), which would
ultimately justify higher unit pricing.
---------------------------------------------------------------------------
\177\ Id.
---------------------------------------------------------------------------
To further pinpoint a price for the product's market
introduction, IMS was hired to ``determine the access-
optimizing price point for its novel HCV therapy sofosbuvir in
support of the brand's U.S. launch,'' with a goal ``to
anticipate payer access and management strategies for
sofosbuvir in order to determine the access-optimizing pricing
strategy.'' \178\ It was charged with gauging the product's
value for providers and payers, developing the expected mix of
private and public payers with which Gilead would interact, and
prioritizing the most important accounts, both for market
access and contracting strategies.\179\
---------------------------------------------------------------------------
\178\ Id. at GS-0013981.
\179\ Id.
---------------------------------------------------------------------------
Meyers told investigative staff that IMS contacted over 90
payers and asked them what value they saw in the proposed
label.\180\ The communications were made in a double-blind
fashion--the client was not aware of the payers' identities,
and vice-versa.\181\ Payers were presented with clinical
attributes and other information about a given drug, but were
not provided the name or company developing it.\182\
---------------------------------------------------------------------------
\180\ Interview with Jim Meyers, Senior Vice President, North
America Commercial Organization, Gilead Sciences, Inc., in Washington,
D.C. (Dec. 1, 2014).
\181\ Id.
\182\ Id.
---------------------------------------------------------------------------
IMS began its portion of the presentation by highlighting
an Express Scripts report that showed drugs used to treat HCV
made up less than 1% of Express Scripts' PMPY (per-member-per-
year) drug spending in 2012. With a PMPY of $7.82, HCV was
behind the four most expensive therapy classes--inflammatory
conditions ($50.62), multiple sclerosis ($37.98), cancer
($31.93), and HIV ($20.78).\183\ The relatively low spending on
HCV drugs fit into Gilead's view that HCV was being
undertreated and was a potent commercial opportunity. Express
Scripts was a bellwether because it is the largest pharmacy
benefit manager, as measured by market share.
---------------------------------------------------------------------------
\183\ Appendix E, Ex. 34, Gilead Sciences, Inc., Sofosbuvir Pricing
& Contracting Strategy Working Team, SVP Check-in II, May 10, 2013, GS-
0013972, at GS-0013979--GS-0013980.
---------------------------------------------------------------------------
IMS asked payers not only about Sovaldi, but also
anticipated products, Harvoni and AbbVie's Viekira Pak. In the
presentation, IMS described Sovaldi as the first wave of a two-
step drug release strategy for Gilead. The second wave would be
Harvoni, which would be interferon-free and would compete with
Viekira Pak.\184\ In the executive summary, IMS laid out top
level results of the surveys, first from a clinical point of
view:
---------------------------------------------------------------------------
\184\ Id. at GS-0013983.
Wave 1 sofosbuvir was seen to be a clear winner over
the current standard of care in GT-1 and GT-2, while
GT-3 was generally not well-received (at least in
treatment naive patients)
AbbVie's regimen was highly valued, despite the
complicated regimen burden, and was favored by payers
over IFN-containing regimens, including sofosbuvir Wave
1
Wave 2 was the unanimously preferred regimen over
all profiles tested and was driven by a multitude of
clinical factors, including co-infected data, limited
side effects, once daily oral dosing, and SVR \185\
---------------------------------------------------------------------------
\185\ Id.
IMS noted that Managed Medicaid payers ``did appear
slightly less enthusiastic'' about Sovaldi's clinical
attributes.\186\ Likewise, while payers recognized a
``significant step for advancing HCV treatment,'' the
expectation of a high price was flagged by three payers that
``immediately cited their concerns that the product would be
expensive due to all the improvements relative to the current
treatment options.'' \187\
---------------------------------------------------------------------------
\186\ Id. at GS-0013985.
\187\ Id. at GS-0013986 (emphasis in original).
The executive summary then laid out ``Wave 1 Pricing
---------------------------------------------------------------------------
Strategy,'' for Sovaldi:
Pricing potential varied across payer segments
although acceptable pricing with equal access was
widely achievable at up to $80-90K; access will always
have a PA [prior authorization] to the label in HCV and
a hard step through current products was seen to be
quite difficult
Gilead could feasibly influence AbbVie's pricing by
capturing a high price with Wave 1, which is most
likely to be the price reference for AbbVie at the time
of their launch \188\
---------------------------------------------------------------------------
\188\ Id. at GS-0013983.
IMS suggested that pricing at ``$80-90K'' was
``acceptable'' and would provide ``equal access.'' \189\ IMS
also assumed that AbbVie would enter the market at a high price
and that Gilead could capture that price point by entering high
as well.\190\ The potential price point for AbbVie appears to
be a building block for the price Gilead ultimately would use
for Sovaldi:
---------------------------------------------------------------------------
\189\ Id.
\190\ Id.
If AbbVie launches before Wave 2, it will become the
new price reference and drive payer reactions to Wave 2
list prices
Despite the significantly better clinical
perception, Wave 2 will likely need to be within a 10-
15% price range to AbbVie's regimen to avoid being
disadvantaged on access because of equal SVR
For Wave 2, contracting could be valuable with
payers who might prefer AbbVie's 3-DAA based on a lower
price; the goal would be to allow Gilead to have equal
market access and compete among docs \191\
---------------------------------------------------------------------------
\191\ Id.
The presentation then turned its attention to ``Wave 2
Pricing Strategy,'' for what would eventually be called
Harvoni. IMS was even more explicit about the opportunity
Gilead had to set a high price if Sovaldi was brought to the
market first, and the pricing downside the company faced if it
---------------------------------------------------------------------------
was beaten to the market by AbbVie:
Gilead's [drug] has the first mover advantage with
Wave 1, which gives the possibility to set a higher
price reference for the market
If AbbVie's 3-DAA comes to the market before Wave 2,
it will become SoC and Wave 2 will not be able to
command a premium over it if equal market access is the
goal \192\
---------------------------------------------------------------------------
\192\ Id. at GS-0013992.
These suggested strategies show the importance that market
competition likely had on Gilead's approach to pricing and
contracting its HCV drugs. The presentation also delved into
cost issues regarding non-genotype 1 patients. Although
genotype 2, 3, and 4 patients make up a minority (20-25%) of
HCV patients in the United States, treatment costs would be
much higher given the additional amount of time needed for
treatment. For example, at the time, the only other FDA-
approved treatment for genotype 3 patients was 24 weeks of
pegylated interferon and ribavirin, which had a wholesale cost
of $18,150; whereas Sovaldi plus pegylated interferon and
ribavirin for genotype 3 patients required 24 weeks, pushing
the wholesale cost of treatment above $168,000--more than nine
times the previous SOC. This price increase was in the face of
concern from payers that genotype 3 trials demonstrated only
slight improvements to the then-current standard of care,
interferon and ribavirin; the slide characterized the data from
trials as ``seen to be weak relative to IFN/Ribavirin alone.''
\193\
---------------------------------------------------------------------------
\193\ Id. at GS-0013993 (emphasis in original).
---------------------------------------------------------------------------
IMS added additional detail to its preliminary conclusions
regarding how Gilead should engage in a contracting strategy
throughout 2014. First, IMS said that ``contracting was not
seen to be mandatory for sofosbuvir in Wave 1,'' and that
``access will likely be achieved without active payer
engagement via contracting.'' \194\ Contracting also should
only be undertaken as a ``sign of good faith.'' \195\ It
suggested a potential contracting approach in which Gilead
``[c]ontract only with the high level of control payers that
may block Wave 1 at high prices and only implement traditional
rebate +/- performance kickers.'' \196\
---------------------------------------------------------------------------
\194\ Id.
\195\ Id.
\196\ Id.
---------------------------------------------------------------------------
Furthermore, for Wave 2, i.e. Harvoni, the potential
contract approach was to ``[c]ontract selectively only with
payers preferring AbbVie to gain equal access and compete for
physicians, who will likely prefer Gilead's easier regimen.''
\197\ IMS told Gilead that ``[p]ayers expect significant
contracting opportunities when both AbbVie and Wave 2 are on
the market due to comparable SVR, which drives payers to see
interchangeability,'' although ``[p]ayers would, however,
expect Gilead to have to offer less given the improved pill
burden.'' \198\
---------------------------------------------------------------------------
\197\ Id.
\198\ Id.
---------------------------------------------------------------------------
The IMS consultation may have reinforced the internal view
that Gilead's line of drugs should be sold at a premium price.
IMS reported that payers evaluating SVR data had a ``very
strong perception of GT-2 data . . . GT-1 was also well-
received to nearly all payers though slightly less so than the
GT-2 data,'' and that the ``improved dosing/duration'' were
``very favorable drivers of value.'' \199\ IMS also reinforced
the company's expectation that it would not compete on price,
but instead on its ability to treat patients. Lastly, it shows
that Gilead expected the price it set for Sovaldi to be a
benchmark from which per-unit prices could increase.
---------------------------------------------------------------------------
\199\ Id. at GS-0013985 (emphasis in original).
---------------------------------------------------------------------------
IMS also presented analyses of how Gilead could approach
setting a price from a ``regimen pricing argument'' similar to
Gilead's first SVP Check-In two months earlier. For genotype 1
patients using Incivek, the FDA called for up to 48 weeks of
pegylated interferon/ribavirin. The new sofosbuvir regimen
would only require 12 weeks--a potential savings of more than
$27,000 at wholesale costs. Instead of passing the potential
savings onto payers, IMS suggested an approach in which the
savings would be added to sofosbuvir's topline revenue. IMS
calculated that the Incivek regimen would cost $95,766 \200\ of
which roughly $35,000 could be attributed to interferon and
ribavirin. That left roughly $25,000 of ``potential savings
capture'' from the shorter regimen of interferon and ribavirin
that could be added to sofosbuvir's price. On the slide, IMS
noted:
---------------------------------------------------------------------------
\200\ IMS used 12 weeks of Incivek plus 48 weeks of ribavirin and
interferon as a reference. See id. at GS-0014017.
Sofosbuvir will clearly benefit from comparison to
the current triple regimen cost because of shorter
duration and less INF/ribavarin [sic]
Payer price sensitivity toward regimen costs compels
a choice of pricing strategy that maximizes revenue for
a single regimen
Generally, payers will look at the cost of single
agents in terms of PMPM \201\ for underwriting
purposes, but the P&T \202\ will certainly consider
course of therapy \203\
---------------------------------------------------------------------------
\201\ ``Per Member Per Month'' is a calculation of the monthly
average cost of services provided to individuals.
\202\ ``Pharmacy and Therapeutics Committees'' are made up of
physicians, pharmacists, and other health professionals, who together
manage and update a provider's formulary, and set policies for use of
different drugs.
\203\ Appendix E, Ex. 34, Gilead Sciences, Inc., Sofosbuvir Pricing
& Contracting Strategy Working Team, SVP Check-In II, May 10, 2013, GS-
0013972, at GS-0013988 (emphasis in original).
The potential $85,000 price was included in tables with
three other price benchmarks--less than $67,000, $100,000, and
more than $120,000--showing how commercial, Medicaid, and
Medicare payers might restrict access at different price
points. Across each of the payer categories, access for
genotype 1 patients became increasingly restrictive as the
price rose. However, IMS concluded that ``most payers are
willing to accept at least $85k for GT-1 before considering
additional access restrictions over the current PIs.'' \204\
Payers were more reluctant to accept that cost for genotype 2
and 3 patients where data showed relatively minor improvements
in terms of cure rates.\205\ As IMS summarized, ``GT-2/3 posed
more difficulties to payers at the tested price points, and GT-
3 in particular pushed many payers to look for heavy
restrictions or block sofosbuvir completely.'' \206\
---------------------------------------------------------------------------
\204\ Id. at GS-0013989.
\205\ Id. at GS-0013990.
\206\ Id. at GS-0013990.
---------------------------------------------------------------------------
In a third table summarizing potential prices for Harvoni's
eventual release, IMS concluded ``[s]ofosbuvir in Wave 2 was
widely seen as achieving a $100K price point although the
competitive implications of AbbVie pricing will clearly
influence achievable pricing.'' \207\
---------------------------------------------------------------------------
\207\ Id. at GS-0013991.
---------------------------------------------------------------------------
The IMS view on pricing strategy was built at least partly
on the experience that other drug companies had in introducing
earlier HCV treatments, which IMS used as a case study.\208\
For example, in 1998 the Schering Corporation introduced
Rebetron, which combined interferon and ribavirin in a single
package.\209\ IMS observed that ``through aggressive price
increases, Schering doubled the cost of HCV therapy over 3-4
years following Rebetron launch.'' \210\ Rebetron was reported
to cost between $15,600 and $17,300 for a yearlong therapy, or
$1,300 to $1,440 a month.\211\
---------------------------------------------------------------------------
\208\ Id. at GS-0013995--GS-0013999.
\209\ Lauran Neergaard, FDA Approves Potent Hepatitis C Drug,
Associated Press (June 3, 1998).
\210\ Appendix E, Ex. 34, Gilead Sciences, Inc., Sofosbuvir Pricing
& Contracting Strategy Working Team, SVP Check-In II, May 10, 2013, GS-
0013972, at GS-0013996.
\211\ Denis Grady, Group Finds a Way to Offer a Hepatitis C Drug
for Less, N.Y. Times (June 30, 1999), available at http://
www.nytimes.com/1999/06/30/us/group-finds-a-way-to-offer-a-hepatitis-c-
drug-for-less.html.
---------------------------------------------------------------------------
July 2013: The Final Pricing and Access Recommendations
On July 31, 2013, Gilead's pricing team gave Meyers final
pricing and access recommendations. The documentation from the
July timeframe indicated a belief that price sensitivity would
begin at $90,000 and a recognition of potential public payer
restrictions. There were also deep concerns about wave 2
pricing because of prospective competition and a continued
confidence in the clinical efficacy of the drug in comparison
to the prices for existing regimens and other factors
justifying a higher price. At the time, the contracting
strategy began to take more detailed shape.
The slide presentation included analysis of the expected
tradeoffs of increasing the price of Sovaldi--revenue would
rise but the number of patients receiving the drug would
decline. (See slide below). It also showed that Gilead was
aware it was in a position to create clear savings for payers,
but chose to pursue a ``regimen neutral'' price justified by
``cost-per-cure'' calculations that resulted in greater revenue
per treatment than previous DAAs. The company had received
feedback from payers that ``[g]iven the significant
improvements in efficacy and tolerability and high level of
physician demand, SOF enjoys substantial pricing freedom in
Wave 1,'' that ``price sensitivity begins at $90k for subset of
payers [sic],'' and ``that even at a high price differential it
is unlikely they would impose step edits through inferior
regimens (PIs or simeprevir).'' \212\
---------------------------------------------------------------------------
\212\ Appendix E, Ex. 28, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Assessment, Final Recommendations--July 31st, 2013,
GS-0014018, at GS-0014026.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The presentation predicted that 24% of the payers it had
surveyed would institute access restrictions of some sort for
genotype 1 patients if Sovaldi were priced at $75,000, and that
47% would institute restrictions at $90,000.\213\ For genotype
2 patients, 33% of payers were predicted to institute
restrictions at a price of $75,000, and 43% at $90,000; for
genotype 3 patients, restrictions at the two price points were
expected to be 37% and 51%, respectively.\214\
---------------------------------------------------------------------------
\213\ Id. at GS-0014029.
\214\ Id. at GS-0014029--GS-0014030.
---------------------------------------------------------------------------
The presentation concluded that ``[t]he optimal range for
Wave 1 pricing based on revenue/uptake trade-offs is likely
$85-$95K, though other softer factors must be considered,'' and
ultimately recommended that the price be ``between $80K to $85K
per course of therapy.'' \215\ The presentation picked up on
other themes that had been discussed and analyzed in previous
presentations, including:
---------------------------------------------------------------------------
\215\ Id. at GS-0014053.
1. Gilead has considerable pricing potential with
sofosbuvir in Wave 1 without major access consequences,
but the pricing potential for future launches will be
constrained by competition
2. Long term sofosbuvir franchise value will be driven
by a high price capture opportunity in Wave 1 and a
volume capture in Wave 2 and beyond \216\
---------------------------------------------------------------------------
\216\ Id. at GS-0014053 (emphasis in original).
As noted above, one of Gilead's considerations for Wave 1
prices, i.e., Sovaldi, was the potential to achieve a high
price for Wave 2, i.e., Harvoni. The ``value capture
opportunity is in Wave 1,'' the presentation stated, and ``Wave
2 access will be enhanced with a high Wave 1 price.'' \217\ It
went on to say that ``[a]t any price, access for Wave 2
improves as the price for Wave 1 is increased, suggesting that
Wave 1 will set a price benchmark against which Wave 2 will
ultimately be evaluated.'' \218\ It also noted that the
introduction of market competition would change the pricing
environment. The ``[c]ompetitive threat from AbbVie and
[Bristol-Myers Squibb] will be critical factors for the Wave 2
market access strategy as these regimens could drive payers to
disadvantage sofosbuvir under select scenarios, especially if
efficacy is comparable among all the regimens and there is a
large price differential.'' \219\
---------------------------------------------------------------------------
\217\ Id. at GS-0014026.
\218\ Id.
\219\ Id.
---------------------------------------------------------------------------
There was particular concern about competition posed by
Bristol-Myers Squibb's drug candidate, daclatasvir, ``being
used to break up the sofosbuvir [single tablet regimen].''
\220\ Bristol-Myers was singled out several times in the
presentation as a constraining factor for the eventual pricing
of Harvoni, underscoring the need that it was important Sovaldi
``[e]stablishes high benchmark for Wave 2.'' \221\ Gilead
believed the Bristol-Myers Squibb combinations, with fewer
pills, could pose a market share risk to AbbVie, and ``could be
a threat to Gilead depending on price,'' \222\ limiting
Gilead's ability to charge a premium for Harvoni. The
presentation stated, ``[w]ave 1 pricing will impact the imputed
sub-WAC value of ledipasvir, therefore determining the value
capture opportunity for a sofosbuvir + daclatasvir
combination'' and ``[t]hese considerations re-enforce the
limitations on taking a premium in Wave 2, as a large
difference between the two regimens would make NS5A
substitution significantly more appealing to payers.'' \223\ As
noted above, the FDA approved a Daklinza-Sovaldi combination
for genotype 3 patients on July 24, 2015 that was submitted by
Bristol-Myers Squibb.
---------------------------------------------------------------------------
\220\ Id. at GS-0014027.
\221\ Id. at GS-0014052.
\222\ Id. at GS-0014027.
\223\ Id.
---------------------------------------------------------------------------
The presentation sought to assure executives that Gilead
would have ample justification to price its HCV drug at a
premium level. Gilead had weathered criticism for pricing
decisions in the recent past, coming under scrutiny for its
decision to charge $28,500 for the AIDS drug Stribild. One
activist derided Stribild's price at the time of FDA approval
as ``shockingly irresponsible,'' \224\ and 13 congressmen
expressed concern in a letter to CEO John Martin about the
effects of Gilead's drug-pricing decisions on the AIDS Drug
Assistance Program.\225\ The presentation stated ``HCV is very
much unlike HIV and, while exercising caution based on the
Stribild launch is understandable, sofosbuvir is quite
different.'' \226\ It went on to detail the ``sofosbuvir
opportunity relative to Stribild,'' with the following lists:
---------------------------------------------------------------------------
\224\ Andrew Pollack, F.D.A. Approves Once-A-Day Pill for H.I.V.,
N.Y. Times (Aug. 27, 2012), available at http://www.nytimes.com/2012/
08/28/business/fda-approves-once-a-day-pill-for-hiv.
html?_r=0.
\225\ Press Release, Office of U.S. Representative Alcee Hastings,
Hastings Expresses Concern over HIV Drug Price Increases, ADAP (Aug. 1,
2012), available at http://alceehastings.house.gov/news/
documentsingle.aspx?DocumentID=327935.
\226\ Appendix E, Ex. 28, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Assessment, Final Recommendations--July 31st, 2013,
GS-0014018, at GS-0014021.
------------------------------------------------------------------------
Sofosbuvir Wave 1 is . . . Implications
------------------------------------------------------------------------
1. Substantially better than standard of Market access in HIV is
care across metrics. significantly different
than market access in HCV
2. In a therapy area where there is Prescribing physicians are
significant unmet need. comfortable with prior
authorizations and
recognize that they are
part of ``standard
operating procedures''
3. In a therapy area where prior Stribild is not viewed by
authorizations are the norm. payers as having
substantially better
efficacy than current
products and view it
largely as a convenience
value story
4. Being researched with more rigor than Sofosbuvir demonstrates
the Stribild launch. substantially better data
in both efficacy and
convenience as well as
other metrics that are
important to payers and
represents significant
clinical value \227\
------------------------------------------------------------------------
Gilead remained confident that Sovaldi's ability to
increase SVR for most patients, coupled with reduced time on
interferon and ribavirin, was ample justification for increased
pricing: ``A price of $80-$85K does represent >30% premium to
Incivek on a molecule price [sic], however, the product is
delivering better outcomes for those dollars.'' \228\ The
presentation touched on how payers might end up justifying
paying for multiple rounds of treatment with some patients:
``[p]ayers are currently paying significantly more than the
price of Incivek to achieve an outcome, so regimen cost is
critical.'' \229\ The company also included ``future market
considerations'' justifying their pricing:
---------------------------------------------------------------------------
\227\ Id. (emphasis in original).
\228\ Id. at GS-0014022.
\229\ Id.
Healthcare reform has incentives to pay for value,
which aligns with what sofosbuvir will deliver (even if
it is not the least expensive agent)
While it is true that budgets are not infinite,
higher cost products can be preferred if actually
demonstrating strong real world outcomes \230\
---------------------------------------------------------------------------
\230\ Id.
Gilead presented multiple pricing scenarios for Sovaldi,
numbered one through five--$50,000, $60,000, $80,000, $95,000,
and $115,000 (the company assumed each would have an additional
$10,000 worth of interferon/ribavirin).\231\ Those prices were
compared to the price for Incivek plus interferon/ribavirin
``at launch'' ($81,000) and ``today'' ($99,000).\232\ The
company concluded that ``[r]elative to the current cost of
Incivek, sofosbuvir would most likely provide savings to payers
at molecule prices <$80k.'' \233\ The company relied on a cost-
per-cure justification for a higher price--``[s]avings are
still likely at a sofosbuvir product cost of $95K, especially
considering sofosbuvir's superior SVR and the significant rates
of treatment failure/abandonment associated with Incivek.''
\234\
---------------------------------------------------------------------------
\231\ Id. at GS-0014024.
\232\ Id.
\233\ Id. (emphasis in the original).
\234\ Id.
---------------------------------------------------------------------------
The company also considered the effect of selling to
substantial government payers, such as Medicaid, 340B, and the
VA, which it termed ``sub-WAC channels,'' where pricing would
be ``substantially lower than the Commercial market.'' \235\
The company expected the payer mix for treatment of HCV to be
heavily weighted toward various public payer insurance
programs, growing from 34% in 2012 to as much as 58% by
2016.\236\
---------------------------------------------------------------------------
\235\ Id. at GS-0014025.
\236\ Id. at GS-0014028.
---------------------------------------------------------------------------
Like their commercial counterparts, Gilead expected most
Medicaid and Medicare payers would likely provide ``preferred
access'' to Sovaldi if the drug were priced below $80,000.
Above that price, all three payer categories were expected to
begin implementing some sort of restrictions on access,
particularly for patients with genotype 2 or genotype 3.\237\
---------------------------------------------------------------------------
\237\ Id. at GS-0014033--GS-0014035.
---------------------------------------------------------------------------
For other payer groups, Gilead recognized that ``[n]on-
traditional segments widely vary in price sensitivity and some
degree of contracting is likely required regardless of price''
to secure access.\238\ For the VA, that meant ``discount for
access.'' \239\ For integrated delivery networks (IDN) such as
Kaiser Permanente, ``these price levels will likely not provide
access and demand contracts.'' \240\ For Departments of
Corrections, ``possible discount for access, though may not be
a Gilead target.'' \241\ A key consideration for the company
was that Gilead would be ``generally pushing the upper comfort
level for IDN payers.'' \242\
---------------------------------------------------------------------------
\238\ Id. at GS-0014036.
\239\ Id.
\240\ Id.
\241\ Id.
\242\ Id.
---------------------------------------------------------------------------
This presentation was the first in which Gilead discussed
contracting strategy in detail and its unwillingness to
discount from the WAC price to gain access on payers'
formularies and/or preferred drug lists. The company planned to
limit its contracting because ``[r]eactive contracting with low
rebates should be sufficient in many channels although
proactive strategies will be required elsewhere.'' \243\
---------------------------------------------------------------------------
\243\ Id. at GS-0014037.
---------------------------------------------------------------------------
To determine where to contract, Gilead identified ``market
influencers'' in different payer categories that were tightly
managing access to HCV drugs already on the market.\244\ In the
commercial space the market influencers included companies like
Aetna, Regence, and Blue Cross Blue Shield Michigan; in
Medicare Part D, Coventry and Emblem Health; and in managed
Medicaid states, such as Missouri, Illinois, Louisiana, and
California.\245\ For Department of Corrections and Medicaid
fee-for-service payers, the primary target was California,
which represented ``12% of the overall DOC payer segment,''
and ``10% of channel,'' respectively.\246\ Gilead planned to
use a ``proactive approach'' with Kaiser Permanente and the
VA.\247\ In all cases, the company planned to offer 5% to 10%
discounts off the WAC price.\248\
---------------------------------------------------------------------------
\244\ Id. at GS-0014031--GS-0014037.
\245\ Id. at GS-0014033, GS-0014035.
\246\ Id. at GS-0014037.
\247\ Id.
\248\ Id. at GS-0014031--GS-0014037.
---------------------------------------------------------------------------
The company examined the implications of pricing Sovaldi at
various levels, and how different prices would affect the
company's standing amongst stakeholders, the value to
shareholders and reputational risks. The lowest prices posed
the least risk, but the least financial upside.\249\ Gilead
determined that ``[w]hile pricing at $50-60K would promote
preferred status, it will result in significant unrealized
revenue.'' \250\ It continued:
---------------------------------------------------------------------------
\249\ Id. at GS-0014047.
\250\ Id. at GS-0014048.
Pricing at $50K
PROS: Gilead could build substantial ``good
will'' with the payer community and will gain
widespread ``preferred'' market access across nearly
every payer segment in the market
CONS: What Gilead could achieve at $50K would
also be achievable at much higher prices, suggesting
significant foregone revenue; despite pricing at this
level, activists are still likely to voice
dissatisfaction with the strategy
Pricing at $60K
PROS: Gilead very unlikely to face any access
issues from the major market segments and will be
enabling payers to pay substantially less per patient
on a regimen basis relative to incumbent products
CONS: Gilead not realizing a substantial
revenue amount and Wave 1 price would fall below the
access-optimizing price; furthermore, achieving more
than an $80K Wave 2 price will be unlikely, eroding
shareholder value \251\
---------------------------------------------------------------------------
\251\ Id.
At the next price level, $80,000, the company identified
``external considerations'' to be the primary risk, that is,
how consumer groups would react to the price.\252\ Gilead
concluded ``[a]t $80K, widespread parity access will be the
norm, with strong physician and patient preferences driving
significant uptake.'' \253\ It then considered the effects on
four different groups: \254\
---------------------------------------------------------------------------
\252\ Id. at GS-0014049.
\253\ Id.
\254\ The abbreviations include PA (prior authorization, which
payers can use to restrict access), PIs (protease inhibitors), SIM
(simeprevir, a.k.a. Olysio), and KOLs (key opinion leaders).
``Janssen'' refers to Johnson & Johnson's pharmaceutical arm that
developed Olysio.
Payer Considerations
Given that SOF will be cheaper than most PIs
on a regimen basis, payers are highly unlikely to
manage access at $80K (beyond PA to label), instead
placing it at parity to current treatments and leaving
the decision to physicians
Physician/Patient Considerations
SOF will be the clear favorite of physicians
and patients considering its equivalent (or cheaper)
total cost, significantly improved SVR, decreased
duration, and reduced side effect burden relative to
PIs
Competitive Considerations
An aggressive pricing strategy for
[simeprevir] could create some challenges for SOF in
some high control accounts, but a low price strategy
would be value-
destroying for Janssen
External Considerations
As with all prices, advocacy groups will
criticize pricing, likely focusing on the product cost
without accounting for the total regimen discount
While a select subset of KOLs (key opinion
leaders) will be vocal about their concerns, a change
in guidelines is highly unlikely at this price \255\
---------------------------------------------------------------------------
\255\ Appendix E, Ex. 28, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Assessment, Final Recommendations--July 31st, 2013,
GS-0014018, at GS-0014049.
At $95,000, which the company had identified earlier in the
document as an ``inflection point,'' risks from physicians,
patients, and competing companies increased. Gilead summarized
the landscape: ``[p]ayer pushback is more likely . . . but
strict management will remain difficult to the significantly
improved clinical profile.'' More specific considerations
included: \256\
---------------------------------------------------------------------------
\256\ OOP is Out of Pocket expenses; 3-DAA is triple direct-acting
antiviral; BMS is Bristol-Myers Squibb.
Payer Considerations
The majority of payers are still unlikely to
impose anything above a soft step at $95K, although
certain high-control plans such as the VA and Kaiser
may require additional contracting or cost-
effectiveness data to ensure access
Physician/Patient Considerations
Given the strength of the profile and modest
premium to PIs, physician preferences will remain
largely unchanged
Patients will continue to prefer sofosbuvir,
with most OOP (out-of-pocket) issues easily addressable
via co-pay programs
Competitive Considerations
At this price, an AbbVie premium for 3-DAA
would break the $100K threshold, which they may elect
to avoid
Irrespective of Wave 2 price, as Wave 1 price
rises, the capturable [sic] opportunity for BMS expands
\257\
---------------------------------------------------------------------------
\257\ This observation refers to Gilead's concern about daclatasvir
being paired with other companies' drugs, including sofosbuvir.
External Considerations
Advocacy group criticism will intensify but
overall impact will be similar
While increasing numbers of KOLs may voice
concern, guideline modification remains unlikely given
the modest premium to PI regimens vs. the significant
clinical improvements \258\
---------------------------------------------------------------------------
\258\ Appendix E, Ex. 28, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Assessment, Final Recommendations--July 31st, 2013,
GS-0014018, at GS-0014050.
Finally, the company considered the highest end of its
proposed price range--$115K. At that point, external risks were
considered to be at their highest (as denoted by a circle
filled with red).\259\ Other factors registered high risk, but
their respective circles were only two-thirds red, indicating
less concern.\260\ Gilead expected ``[s]trict management and
guideline restrictions may appear at $115K, with usage in GT-2
and GT-3 presenting a potential target for payers.'' \261\ More
specifically:
---------------------------------------------------------------------------
\259\ Id. at GS-0014051.
\260\ Id.
\261\ Id.
Payer Considerations
At $115K, many payers will attempt to
disadvantage sofosbuvir through tier differentials and
soft steps; while hard steps are possible, it will
remain extremely difficult to step patients through an
inferior regimen
Physician/Patient Considerations
Physicians will still prefer sofosbuvir to PI
regimens, but a limited number may reduce usage or
consider warehousing
Usage in GT-3 and, to a lesser extent, GT-2
will become increasingly difficult to justify,
particularly for TN patients
Competitive Considerations
Competitor pricing would be informed by
Gilead's access experience, and risks of discounts rise
This price translates into $38K reduction in
SOF costs if Wave 2 is only 8 weeks, heightening price
pressure from BMS
External Considerations
High levels of advocacy group criticism and
negative PR/competitive messaging could be expected at
$115K and it would be increasingly difficult to manage
at these levels
Select KOLs may intensify their push for
guideline modification \262\
---------------------------------------------------------------------------
\262\ Id. at GS-0014051.
With a price range established for senior management to
consider, the company's pricing team summarized what Gilead
should expect if the drug were priced at $80,000 to $85,000,
including the expectation that certain patients would have
problems accessing the drug, and that contracting would be
---------------------------------------------------------------------------
necessary for certain payers:
Sofosbuvir will have a PA to the label, which will
mean very limited, if any, access for treatment
experienced patients; naives will be accessible
Gilead will need to contract with the VA, Kaiser,
and likely additional plans on the fringes who may
restrict sofosbuvir
Advocacy groups will be vocal at any price and a
minority of KOLs may voice concern \263\
---------------------------------------------------------------------------
\263\ Id. at GS-0014054.
---------------------------------------------------------------------------
It also set an action plan with priorities for Gilead:
While restrictions based on fibrosis score are
unlikely, Gilead needs to be prepared to answer
questions about which patients and why
It will be critically important to communicate to
payers the clinical value that SOF creates and to be
prepared in advance to answer questions regarding in
which patients SOF should be used
Gilead should proactively identify key accounts and
develop a plan for messaging to them immediately
following launch to ensure access
Ensure that payers understand the population Gilead
is aiming to treat and to reinforce that the population
is not in the millions, as some believe \264\
---------------------------------------------------------------------------
\264\ Id.
This presentation shows that Gilead set a price as high as
it thought acceptable before significant access restrictions
would be imposed. Its analysis indicated that pricing in the
$80,000 to $85,000 range would deliver this result for the
majority of genotype 1 patients, though not for other patient
groups. As discussed later in this report, Gilead's analyses
were ultimately incorrect on this point as many payers adopted
access restrictions at the final price of $84,000. Even when
the scope of these restrictions became manifest in mid-2014,
Gilead did not alter its approach.
The presentation's final slide was devoted to patient
support programs such as co-pay coupon programs, donations to
two independent non-profit patient assistance foundations, and
patient assistance programs (PAP). These programs were designed
to ``ensure there is no gap in coverage and impact from pricing
& contracting decisions.'' \265\
---------------------------------------------------------------------------
\265\ Id. at GS-0014058.
---------------------------------------------------------------------------
In its April 2015 report, Medicines Use and Spending
Shifts, the IMS Institute states ``[m]anufacturers commonly
provide coupons when their brand is not covered on a
formulary,'' and ``[i]ncreasingly, coupons are being used
around the launch of an innovative brand to eliminate barriers
to patients considering new medicines.'' \266\ Any loss on co-
payment (typically a small percentage of a drug's price) is
made up by the insurance company's portion. Industrywide, co-
pay coupons were used for 8% of total prescriptions in 2014
compared to 3% in 2011, 5% in 2012 and 6% in 2013.\267\
However, co-pay coupons may not be used for federally funded
health care programs.\268\
---------------------------------------------------------------------------
\266\ IMS Institute for Healthcare Informatics, Medicines Use and
Spending Shift, at 25.
\267\ Id.
\268\ Office of the Inspector General, U.S. Department of Health
and Human Services, Special Advisory Bulletin: Pharmaceutical
Manufacturer Copayment Coupons, September 2014, available at http://
oig.hhs.gov/fraud/docs/alertsandbulletins/2014/
SAB_Copayment_Coupons.pdf.
---------------------------------------------------------------------------
The copay coupons, used to pay the deductibles or
coinsurance for commercial customers, were expected to cost the
company between $10 million and $15 million, depending on the
WAC price ($60,000 to $100,000).\269\ The Foundation support
would cost $100 million at $60,000, with costs growing about $5
million for every incremental price increase of $10,000.\270\
The PAP did not add additional costs, but instead was foregone
revenue--it was a cost of goods sold for 6,000 uninsured
patients and 6,000 pre-transplant patients.\271\ Although this
presentation outlined the company's initial approach to its
patient support programs, the strategy of providing such
benefits evolved as payer access restrictions began to be
imposed, as discussed in section 4 of this report.
---------------------------------------------------------------------------
\269\ Appendix E, Ex. 28, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Assessment, Final Recommendations--July 31st, 2013,
GS-0014018, at GS-0014058.
\270\ Id.
\271\ Id.
---------------------------------------------------------------------------
The timeline in the March presentation discussed above
indicates that the pricing and access recommendations would
next have been provided to the GPC for a final review. However,
interviews and documents that Gilead provided to investigative
staff do not clearly indicate whether the GPC was involved in a
final review.
August 2013: The Board is Briefed on Sovaldi's
Launch and Pricing
On August 1, 2013, the day after the final pricing team
recommendation, Meyers and Bill Symonds, Gilead's vice
president for liver diseases, presented ``an update on the
status of the clinical trials involving sofosbuvir and . . .
the preparations taken for the anticipated U.S. launch of
sofosbuvir.'' \272\ Meyers' presentation, ``U.S. HCV Launch
Update,'' gave a high-level overview of the market, pricing and
Gilead's launch timeline to the board of directors.\273\ During
the meeting, members of the board ``asked a number of questions
that were answered by management.'' \274\ After Meyers and
Symonds left the room, the board and Kevin Young, the executive
vice president for commercial operations, ``further discussed
the anticipated launch of sofosbuvir.'' \275\
---------------------------------------------------------------------------
\272\ Appendix E, Ex. 35, Gilead Sciences, Inc., Minutes of Regular
Meeting of Board of Directors, August 1, 2013, GS-0019671, at GS-
0019672.
\273\ Appendix E, Ex. 31, Gilead Sciences, Inc., U.S. HCV Launch
Update, August 1, 2013, GS-0014059.
\274\ Appendix E, Ex. 35, Gilead Sciences, Inc., Minutes of Regular
Meeting of Board of Directors, August 1, 2013, GS-0019671, at GS-
0019672.
\275\ Id.
---------------------------------------------------------------------------
The presentation by Meyers and Symonds began with a review
of the market, specifically, Gilead's estimate that there were
4.1 million people in the United States with HCV, but that only
1.7 million were diagnosed. In addition, the presentation noted
that of the 1.7 million diagnosed with HCV, 381,000 were being
cared for by a health provider, and just 73,000 were currently
being treated with drugs.\276\ The presentation underscored the
need to boost marketing efforts around HCV and disease
awareness; ``HCV-infected patients account for only 17% of the
patient volume of HCV treaters,'' which ``[i]ncreases the
importance of implementing a broad disease awareness/medical
education platform and of increasing patient awareness of new
treatment options.'' \277\
---------------------------------------------------------------------------
\276\ Appendix E, Ex. 31, Gilead Sciences, Inc., U.S. HCV Launch
Update, August 1, 2013, GS-0014059, at GS-0014061.
\277\ Id. at GS-0014063.
---------------------------------------------------------------------------
Meyers reiterated the need for sofosbuvir to be established
as the SOC and ``backbone of HCV therapy at initial launch,''
because the more that physicians waited for interferon-free
therapies for genotype 1 patients, ``the less established SOF
will be at the time of competitive IFN-free launches.'' \278\
Broad market access, growing the pool of patients seeking
therapy, and deploying disease awareness advertising were also
deemed ``critical success factors.'' \279\ The board also was
guided through disease awareness and branded marketing
materials that would accompany Sovaldi at launch, and was
informed that Gilead's U.S. sales force of 144 people was 30%
larger than the next closest competitor, Vertex.\280\
---------------------------------------------------------------------------
\278\ Id. at GS-0014067.
\279\ Id. at GS-0014067.
\280\ Id. at GS-0014069--GS-0014071.
---------------------------------------------------------------------------
The next topic for Myers was payer access restrictions and
pricing comparisons, emphasizing the need to set a high price
for Sovaldi in order to set a price platform from which to
launch Harvoni. The presentation stated that Gilead would be
``[b]etter off pricing SOF at initial launch for GT-1 patients,
as there will be varying degrees of access restrictions for GT-
2/3 patients regardless of where we price,'' and that
``[w]herever we want to end up in terms of pricing for SOF/LDV,
we have to get most of the way there in the initial pricing of
SOF.'' \281\ The ``[l]argest incremental gain in SVR is at
initial launch, and this is what payers value.'' \282\ The
company would ``need to keep prescribing in the hands of
physicians, not payers, and to contract for open/parity access
only when necessary.'' \283\
---------------------------------------------------------------------------
\281\ Id. at GS-0014076.
\282\ Id.
\283\ Id. at GS-0014076.
---------------------------------------------------------------------------
August 2013: Answering Follow-up Questions
On August 26, 2013, a presentation was given entitled
``Sofosbuvir Pricing and Market Access Assessment: Response to
Follow Up Question.'' The presentation built on the July 31st
presentation where Meyers was provided a final recommendation
from Gilead's pricing team to senior management.\284\
---------------------------------------------------------------------------
\284\ Appendix E, Ex. 36, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Assessment: Response to Follow Up Question, August
26, 2013, GS-0013857.
---------------------------------------------------------------------------
The presentation delved into ``the potential impact of
discounting on demand into the financial modeling.'' \285\ It
studied payer, patient, and provider reactions to a gross-to-
net price that reflect contracted discounts.\286\ The impact of
discounting did ``not change the overall conclusion from the
financial analysis: [w]ithin a $70K-$95K SOF price range
patient impact increases as price is increased but not enough
to offset revenue gains.'' \287\ It continued, ``[a]ssuming a
gross SOF price between $75K and $90K the current budgeted
level of mandatory and supplemental discounting could
theoretically support enough contracting to regain the majority
of the predicted patient losses.'' \288\ But, ``[g]iven the
competitive timing executing these contracts in a timely manner
may be challenging . . . assum[ing] supplemental discounts
could be in place by Q3.'' \289\
---------------------------------------------------------------------------
\285\ Id. at GS-0013858.
\286\ Id. at GS-0013860.
\287\ Id. at GS-0013859.
\288\ Id.
\289\ Id. at GS-0013859.
---------------------------------------------------------------------------
Gilead assumed its discounts for HCV drugs would be lower
than for other product lines--17% for HCV drugs versus a range
of 20% to 41% for its other units.\290\ The presentation
assumed that supplemental discounts would be offered only to
``the most price sensitive accounts'' in Medicare, Medicaid,
and commercial payer segments.\291\ The presentation used
several percentages for projected discounts for each payer
segment.\292\ Subsequent tables and graphs show that the
patient impact, i.e., lost patient starts, would be reduced by
discounting across all price levels, and that revenue would
increase during Wave 1. ``Incorporating the impact of
discounting on patients [sic] demand increases the forecast and
reduces estimated patient loss significantly,'' the
presentation states.\293\ At an $85,000 price point, with a 6%
supplemental discount applied, Gilead projected patient losses
of 10% in 2014, 8% in 2015, and 11% in 2016 compared to a
$65,000 price point.\294\ An ``alternative version'' at the end
of the presentation shows that implementing 15% supplemental
discount for commercial payers would have reduced patient start
at a WAC price of $85,000 to 5% in 2014, 2% in 2015, and 3% in
2016; revenue in each of those years was expected to remain
higher than without discounting.\295\
---------------------------------------------------------------------------
\290\ Id. at GS-0013880.
\291\ Id. at GS-0013861.
\292\ Id.
\293\ Id. at GS-0013862.
\294\ Id. at GS-0013861, GS-0013863.
\295\ Id. at GS-0013887.
---------------------------------------------------------------------------
However, as detailed in Sections 4 and 5 of this report,
very few payers agreed to Gilead's discount offers for Sovaldi.
The discount offers were viewed negatively because of their
small size and because they were tied to loosening access
restrictions to treatment that would have increased patient
volume, offsetting any cost savings for the payer.
A note at the bottom of the page appears to show how the
company's assumptions about discounting had evolved from the
``June Forecast'' price of $60,000. Discounts appear to be
lower, meaning a greater share of the gross price would be
captured in the net price:
Gross to Net in June forecast was 22% in 2014; updated
gross-to-net assumptions of 13% in 2014 are used for
all scenarios with Wave 1 pricing at or below $60K and
17% for all scenarios with Wave 1 pricing about $60K
\296\
---------------------------------------------------------------------------
\296\ Id. at GS-0013862.
Two slides in the presentation's appendix (see below)
further detail how Gilead calculated its gross-to-net
assumptions.\297\ Mandatory discounting for government programs
would account for the majority of the discounts (8.1%).
Supplemental discounts to commercial payers and others would
account for 4.8%, and other discounts (for example, cash
discounts and inventory management agreements, which are
referred to as IMAs) would account for 5% of the discounting.
References to FSS apply to the Federal Supply Schedule, the
contracting system for the VA, Department of Defense, and other
federal agencies such as the Bureau of Prisons (see Section
4).\298\ The slides also reinforce that Gilead planned to limit
supplemental discounting except with certain key accounts.
---------------------------------------------------------------------------
\297\ Id. at GS-0013881 and GS-0013882.
\298\ U.S. Department of Veterans Affairs, available at VA Federal
Supply Schedule Service: General FAQs, http://www.fss.va.gov/faqs/
general.asp#q001 (last visited Sept. 1, 2015).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The presentation examined what it considered the ``highly
unlikely'' scenario of Johnson & Johnson pricing simeprevir at
$20,000 per course of treatment, its impact on Gilead's revenue
from Sovaldi, and how it ``would put negative attention on SOF
at the recommended price.'' \299\ Focusing on Sovaldi's price,
the presentation concluded that if simeprevir were priced at
$20,000, Gilead would need to triple the number of patient
starts in 2014 to 37,500 people in order to achieve the same
revenue as it would if simeprevir were priced at $60,000.\300\
Similarly, the presentation concluded that ``[o]ur Wave 1 goal
of a high price remains consistent''--and Harvoni ``Wave 2
strategy may require more caution.'' \301\
---------------------------------------------------------------------------
\299\ Appendix E, Ex. 36, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Assessment: Response to Follow Up Question, August
26, 2013, GS-0013857, at GS-0013865.
\300\ Id. at GS-0013866.
\301\ Id. at GS-0013867.
---------------------------------------------------------------------------
November 2013: Sovaldi's Price is Set by Top Executives
One of the final pricing documents provided by Gilead is
the ``Sofosbuvir Pricing and Market Access Recommendation,''
dated November 15, 2013. This presentation recommended that
Sovaldi be priced at $81,000 or $27,000 per bottle.\302\ This
is the price that Meyers and Young would provide to the
company's senior management three days later for final
approval.
---------------------------------------------------------------------------
\302\ Appendix E, Ex. 37, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Recommendation, November 2013, GS-0014079, at GS-
0014079.
---------------------------------------------------------------------------
This presentation is light on details compared to previous
presentations, and very little new information is presented,
save for the following:
The optimal range for Wave 1 pricing based on
revenue/uptake trade-offs is likely $85-$95K, though
other softer factors must be considered
If we price lower it opens up a window for
competitors to pair up with SOF and come in at a lower
regimen cost than our FDC
Even if we priced lower, such as $70k, it would not
mitigate the high cost of a 24 week regimen (message
points being developed), and therefore we recommend we
address this on a case by case basis on a sub-WAC level
\303\
---------------------------------------------------------------------------
\303\ Id.
It is clear that Gilead was concerned about competition.
The threat of competition worked in two ways--the efficacy of
AbbVie's drug combination complicated the decision-making
process to price the product and the potential of a
daclatasvir-sofosbuvir combination put upward pressure on the
price. Lastly, the company recognized the weakness of its drug
in treating genotype 3 patients versus the interferon/ribavirin
---------------------------------------------------------------------------
SOC.
The final pricing recommendation was addressed as follows:
We recommend pricing sofosbuvir Wave 1 at $81K
($27k/bottle) per course of 12 week therapy and
contract selectively for access at target payers:
For the VA we recommend negotiating up to a 50%
discount on their volume (vs the original 40% discount)
to make up for the higher cost of treating co-infected
and IFN-ineligible patients which account for about 60%
of their population
For Kaiser we recommend negotiating up to a 10%
discount for access
Other plans will be evaluated on a one off basis
\304\
---------------------------------------------------------------------------
\304\ Id.
On November 18, 2013, Young received a slide from Meyers
and forwarded it to company officers later that night (see
slide below). In the body of the email, Young stated, ``[o]ur
recommendation for your discussion and approval is $27,000 per
28 tablet bottle'' ($81,000 for 12W).\305\
---------------------------------------------------------------------------
\305\ Appendix E, Ex. 38, Email from Kevin Young to John Martin et
al., Re: COMPANY CONFIDENTIAL (Nov. 18, 2013), GS-0020800.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
On November 23, 2013, less than two weeks before Sovaldi
received FDA approval and went on the market in the U.S., Young
sent an email to Cara Miller, the company's senior director for
public affairs stating, ``The amount to drop into the U.S.
Sovaldi press release, when you do final review is `$28,000.'
'' \306\ The price appears to have been set during an offsite
meeting held in the days prior with the company's leadership
team--CEO John Martin, President and COO John Milligan, Chief
Scientific Officer Norbert Bischofberger, CFO Robin Washington,
Executive Vice President for Corporate and Medical Affairs
Gregg Alton, and Young.\307\ No notes or further record of this
meeting has been provided.
---------------------------------------------------------------------------
\306\ Appendix E, Ex. 39, Email from Kevin Young to Cara Miller,
Re: CONFIDENTIAL (Nov. 24, 2013), GS-0020946, at GS-0020947.
\307\ Id.; Appendix E, Ex. 38, email from Kevin Young to John
Martin et al., COMPANY CONFIDENTIAL (Nov. 18, 2013), attaching
Sofosbuvir (SOF) Pricing chart, GS-0020800, GS-0020801.
---------------------------------------------------------------------------
On November 24, 2013, Young was in Tokyo, Japan and
exchanged emails with Martin, who noted the per-bottle price of
$28,000 would be ``be easy from the press release, from 28 days
and $28,000.'' \308\ Young responded, ``I think $28,000 is
right. Its [sic] where I wanted to be and I think we all
collectively circled this price point. What I've really
appreciated is how we have stepped carefully through this with
the Board and [the leadership team] over two years.'' \309\
Martin ended the back-and-forth saying ``I'm pleased where we
are too.'' \310\
---------------------------------------------------------------------------
\308\ Appendix E, Ex. 39, Email from Kevin Young to Cara Miller,
Re: CONFIDENTIAL (Nov. 24, 2013), GS-0020946.
\309\ Id.
\310\ Id.
---------------------------------------------------------------------------
Those emails appear to be the final decision points in a
pricing process. During that time, company officials engaged in
a series of presentations that examined a complex matrix of
tradeoffs regarding revenue, volume, marketing, reactions from
payers, patients, and advocates, potential market competition,
and how Sovaldi's price ultimately would affect pricing of
Gilead's successor drug, Harvoni. Staff repeatedly requested
documentation regarding the final pricing decision, but Gilead
refused such requests. Accordingly, it was not clear what
factors ultimately influenced the final decision to increase
the price from the final recommendation of $27,000 per bottle
to $28,000 per bottle.
However, it was clear that as senior leadership finalized
the price for Sovaldi, the company was already anticipating
protests over the price. ``Let's not fold to advocacy pressure
in 2014,'' Young wrote in an email on November 19, 2014, to
Meyers, the company's chief spokesman, Coy Stout, and Kristie
Banks, a senior director for business development and contract
compliance.\311\ ``Let's hold our position whatever competitors
do or whatever the headlines.'' \312\
---------------------------------------------------------------------------
\311\ Appendix E, Ex. 40, Email from Kevin Young to Jim Meyers et
al., Re: ADAP and Sofosbuvir (Nov. 19, 2013), GS-0020802, at GS-
0020802.
\312\ Id.
---------------------------------------------------------------------------
International Pricing of Sovaldi Was Significantly Lower Than in the
United States
As noted in the senators' July 2014 letter to Gilead, the
pricing strategy for Sovaldi in non-U.S. markets contemplated
significant lower prices than what would be set for U.S.
consumers. For example, the senators noted that Gilead had
reportedly reached an agreement with Egypt to sell Sovaldi for
roughly $900 per course of treatment.
In a written response to the senators, Gilead explained
that it engaged in separate pricing approaches for developed-
and less-developed countries. In developed countries, Gilead
negotiated with individual countries and payers. Based on
information provided by Gilead, Table 3 shows the wholesale
price for Sovaldi in those developed countries was at
significant discount to the U.S. price (per 12-week course of
treatment).\313\
---------------------------------------------------------------------------
\313\ Appendix F, Gilead Sciences, Inc., Response to Chairman
Wyden/Senator Grassley letter dated July 11, 2014, narrative answer to
question 21 (Sept. 9, 2014).
Table 3--Wholesale Price of Sovaldi in Developed Countries Outside the
United States
------------------------------------------------------------------------
Country Price
------------------------------------------------------------------------
Austria..................... $63,189.70
Canada...................... $50,525.00
Denmark..................... $56,449.40
Finland..................... $54,381.20
France...................... $72,508.00
Germany..................... $63,198.70
Luxembourg.................. $62,149.90
Norway...................... $53,043.90
Sweden...................... $51,453.60
Switzerland................. $59,594.80
United Kingdom.............. $57,100.20
------------------------------------------------------------------------
Source: Gilead Sciences, Inc., Response to Chairman Wyden/Senator
Grassley letter dated July 11, 2014, narrative answer to question 21,
September 9, 2014 (Appendix F)
In formulating its strategy for pricing for European
countries, Gilead's commercial pricing team sought to achieve
``the highest price we can get accepted in early launch markets
(UK, Germany, France).'' \314\ At the time, the team expected
the United Kingdom to set the European price floor and Germany
to set the ceiling,\315\ although Gilead put great weight on
negotiating an early European price point with the French
Temporary Authorization of Use (ATU) program at $74,000 in
October 2013.\316\ This program allows access to drugs for
serious illness prior to final marketing authorization
approval,\317\ and was seen as an important benchmark for
European negotiations.\318\ Under this program, companies are
granted a price premium, averaging 12%.\319\ However, even at
this price, a senior Gilead official cautioned that ``. . . we
should be careful saying that the price is comparable with
existing treatment. It's actually at a significant premium
(although entirely justifiable on its merits.)'' \320\
---------------------------------------------------------------------------
\314\ Appendix E, Ex. 41, Gilead Sciences, Inc., ``EAME SOF Price
Recommendations'' (Gilead slide presentation), September 11, 2013, GS-
0019913, at GS-0019914.
\315\ Id.
\316\ Appendix E, Ex. 42, Email from Kevin Young to Jim Meyers and
Derrell Porter (Oct. 19, 2013), GS-0020285, at GS-0020285.
\317\ A. Degrassat-Theas et al., Abstract, Temporary authorization
for use: does the French patient access programme for unlicensed
medicines impact market access after formal licensing?, 31
PharmacoEconomics 335, 335-43 (April 2013), available at http://
www.ncbi.nlm.nih.gov/pubmed/23529210.
\318\ Appendix E, Ex. 42, Email from Kevin Young to Jim Meyers and
Derrell Porter (Oct. 19, 2013), GS-0020285, at GS-0020285--GS-0020287.
\319\ A. Degrassat-Theas et al., Abstract, Temporary authorization
for use: does the French patient access programme for unlicensed
medicines impact market access after formal licensing?, 31
PharmacoEconomics 335, 335-43 (April 2013), available at http://
www.ncbi.nlm.nih.gov/pubmed/23529210.
\320\ Appendix E, Ex. 43, Email from Paul Carter to Cara Miller
(Oct. 11, 2013), GS-0020212, at GS-0020212--GS-00200213.
---------------------------------------------------------------------------
In less-developed countries, Gilead employed a different
set of strategies. Initially, it followed a ``tiered pricing
structure based on a country's health care and other resources
and the severity of the HCV prevalence within that country.''
\321\ How these factors were weighted was not explained, but
Gilead confirmed that it had signed a treatment agreement with
the Egyptian government in July 2014 at a list price equivalent
to $908.04 per course of treatment.\322\
---------------------------------------------------------------------------
\321\ Appendix F, Gilead Sciences, Inc., Response to Chairman
Wyden/Senator Grassley letter dated July 11, 2014, narrative answer to
question 21 (Sept. 9, 2014).
\322\ Id.
---------------------------------------------------------------------------
As Gilead noted in its written response, it also was
pursuing a parallel strategy for these same less-developed-
country markets based on the licensing of generic production
and marketing of sofosbuvir-based drugs. Indeed, shortly after
the response was provided, Gilead entered into licensing
agreements with seven Indian pharmaceutical companies to
produce and market sofosbuvir (Sovaldi) and ledipasvir/
sofosbuvir single tablet regimen (Harvoni) in 91 developing
countries.\323\ As explained by Meyers and Andy Rittenberg,
corporate counsel for Gilead, in the October 30th interview,
this model also has been used by Gilead for HIV/AIDS drugs.
According to Mr. Rittenberg, these generic manufacturers would
be licensed to manufacture and sell these drugs even in
countries in which Gilead had previously reached pricing
agreements.\324\
---------------------------------------------------------------------------
\323\ Press Release, Gilead Sciences, Inc., Gilead Announces
Generic Licensing Agreements to Increase Access to Hepatitis C
Treatments in Developing Countries, (Sept. 15, 2014), available at
http://www.gilead.com/news/press-releases/2014/9/gilead-announces-
generic-licensing-agreements-to-increase-access-to-hepatitis-c-
treatments-in-developing-countries.
\324\ Interview with Jim Meyers, Senior Vice President, North
America Commercial Organization, Gilead Sciences, Inc., in Washington,
D.C. (Oct. 30, 2014).
---------------------------------------------------------------------------
The generic manufacturers would set their own prices even
to the point of undercutting Gilead's own country-specific
price agreement--a point reiterated in the company's fact
sheet, which states that ``(t)he generic drug companies may set
their own prices. . . .'' \325\ The license agreement for these
generic manufacturing arrangements posted by Gilead on its
website establishes a 7% royalty to be paid to Gilead Sciences
Limited, an Irish corporation, on net sales of products in
these 91 countries.\326\ According to the most recent version
of the company's fact sheet, these generic licensing agreements
have now been expanded to include 11 Indian companies for
distribution in 101 developing countries.\327\
---------------------------------------------------------------------------
\325\ Gilead Sciences, Inc., Fact Sheet, Chronic Hepatitis C
Treatment Expansion: Generic Manufacturing for Developing Countries,
August 2015, available at http://www.gilead.com//media/files/pdfs/
other/hcvgenericagreementfactsheet.pdf?la=en.
\326\ Gilead Sciences, Inc., License Agreement, Execution Copy,
September 15, 2014, (Section 4.1, page 8), available at http://
gilead.com//media/files/pdfs/other/2014_original_hcv_
licensing_agreement.pdf?la=en.
\327\ Gilead Sciences, Inc., Fact Sheet, Chronic Hepatitis C
Treatment Expansion: Generic Manufacturing for Developing Countries,
August 2015, available at http://www.gilead.com//media/files/pdfs/
other/hcvgenericagreementfactsheet.pdf?la=en.
---------------------------------------------------------------------------
The cost of these drugs outside of the U.S. is
significantly below the U.S. price--a fact that was actively
considered by Gilead in pricing them in Canada. In a
presentation prepared by the Gilead Sciences Canada, the
company concluded that the expected Canadian wholesale price of
$55,000 would not draw cross border patients and that the
structure of the Gilead distribution system would limit the
risk of mail order arbitrage.\328\ Gilead concluded that U.S.
patients would not cross the border to incur a final expected
out-of-pocket expense of some $64,000.\329\
---------------------------------------------------------------------------
\328\ Appendix E, Ex. 44, Gilead Sciences, Inc., Canadian
Sofosbuvir Pricing Considerations, September 30, 2013, GS-0020086, at
GS-0020087.
\329\ Id. at GS-0020091.
---------------------------------------------------------------------------
Sticking to the Plan: Harvoni Builds on the
Price Set for Sovaldi
After the successful launch of Sovaldi, Gilead turned its
attention to pricing Harvoni, the second wave of HCV drugs
involving sofosbuvir. In a series of presentations, Gilead
described how it would ``[s]ecure market share leadership,
while growing the market,'' through ``[e]ffective portfolio
management/prioritization in wake of successive launches,
[r]esponding to competitors' attempts to fragment the market
through scientific dialogue with prescribers, [e]nsuring parity
access in a payer environment that desires market
fragmentation,'' and ``[a]ccelerating Market Development
efforts to grow the market.'' \330\ The ultimate goal for the
time period was to ``[m]aximize [t]otal [f]ranchise [v]alue.''
\331\
---------------------------------------------------------------------------
\330\ Appendix E, Ex. 45, Gilead Sciences, Inc., 2015-2016 HCV
Commercial Plan, April 22, 2014, GS-0014083, at GS-0014085 (emphasis in
original).
\331\ Id. at GS-0014086 (emphasis in original).
---------------------------------------------------------------------------
As it considered pricing Harvoni at $96,000 for a 12-week
course of therapy, which the majority of patients was expected
to need, the company projected that its HCV drugs would
generate more than $30 billion in net revenue between 2015 and
2018.\332\ The company ultimately set Harvoni's price at
$94,500.\333\
---------------------------------------------------------------------------
\332\ Appendix E, Ex. 46, Gilead Sciences, Inc., Topics for
Discussion--LDV/SOF U.S. Pricing, August 4, 2014, GS-0019000, at GS-
0019026.
\333\ Stephanie M. Lee, Is $1,125 Hepatitis Pill from Bay Area
Drugmaker Worth It?, San Francisco Chronicle (Oct. 11, 2014), available
at http://www.sfgate.com/health/article/Is-1-125-hepatitis-pill-from-
Bay-Area-drugmaker-5815341.php.
---------------------------------------------------------------------------
Harvoni was expected to face competition that would make
large price jumps difficult. One of the challenges was to
``[p]rotect against price erosion from Wave 1T2, and 2T3.''
\334\ As it set out to price Harvoni, the company viewed its
position as one of ``modest pricing power for the LDV/SOF,
although avoiding restrictions with all accounts will be
difficult to achieve.'' \335\ The company also was loath to
offer broad discounts, because they ``do not offer offsetting
share benefits for Gilead; however, this does not mean there
are not some payers where discounting will be profitable.''
\336\
---------------------------------------------------------------------------
\334\ Appendix E, Ex. 45, Gilead Sciences, Inc., 2015-2016 HCV
Commercial Plan, April 22, 2014, GS-0014083, at GS-0014097.
\335\ Appendix E, Ex. 47, Gilead Sciences, Inc., U.S. HCV Pricing
Update, SVP Update Meeting, July 21, 2014, GS-0018861, at GS-0018862.
\336\ Id.
---------------------------------------------------------------------------
Gilead's main selling point for Harvoni has been that for
certain patients--specifically, those who were treatment-naive
and free of cirrhosis--it would be a single-pill, interferon-
free therapy that could be curative in eight weeks. However,
Gilead expected that just 21% to 46% of patients using its
drugs would fit in that category and receive the eight-week
therapy.\337\ Gilead expected 14% to 32% of its Harvoni revenue
to come from eight-week patients.\338\ The remainder would be
on 12 weeks (45% to 70%) or in the case of treatment
experienced patients with cirrhosis, 24 weeks (9%).\339\ Gilead
has repeatedly said that Harvoni lowered the cost of treatment,
but it did so only for the least sick, i.e., those with the
lowest viral load counts and the healthiest livers.\340\ In
terms of sticker prices, Gilead would now be charging $94,500
for a 12-week treatment, up from $84,000 for Sovaldi, and more
than 30% higher than the price of Incivek.
---------------------------------------------------------------------------
\337\ Id. at GS-0018878.
\338\ Id. at GS-0018894--GS-0018895.
\339\ Id. at GS-0018878.
\340\ Id.
---------------------------------------------------------------------------
In addition to boosting awareness of sofosbuvir and gaining
access to payers' formularies, the company would seek to
``[e]ducate governments about economic advantages of
investments in HCV cure and of HCV budget increases in 2015-
2016,'' and ``[a]ccelerate patient flow through the HCV
waterfall.'' \341\ In other words, ensure patients were tested
and received treatment at an earlier disease stage, ``to drive
longer term sustainable growth.'' \342\ Specifically, the
company was seeking to ``[e]ncourage a shift towards more
patients being candidates for treatment'' to ``drive rapid SOF
uptake across all indicated patient types.'' \343\
---------------------------------------------------------------------------
\341\ Appendix E, Ex. 45, Gilead Sciences, Inc., 2015-2016 HCV
Commercial Plan, April 22, 2014, GS-0014083, at GS-0014095 (emphasis in
original).
\342\ Id.
\343\ Appendix E, Ex. 48, Gilead Sciences, Inc., 2014-2015 U.S. HCV
Franchise BPOA (Draft), GS-0014143 at GS-0014146.
---------------------------------------------------------------------------
Gilead was aware of ``[n]egative noise regarding price and
potential access limitations.'' \344\ It also knew that
``[b]udget impact'' would ``shape reimbursement decisions in
certain markets, with growing desire to prioritize care''
amongst patients.\345\ Gilead singled out Medicaid, noting that
``[w]hile this will grow to 15% of the treated population,
coverage may continue to be challenging based on state-level
budget constraints,'' and that the program was ``[h]ighly cost
constrained and predominately cost-focused.'' \346\ Gilead
expected HCV treatment ``to drive a significant increase in
2015 federal Medicare Part D spending and annual individual
beneficiary premiums.'' \347\ It also was aware that ``[t]he
Wave 2 launches will add significantly to the total spend on
HCV,'' with its projections topping $15 billion in 2015, alone,
compared to less than $2 billion in 2013 (see slide
below).\348\ Gilead stated in a slide titled ``PR
Considerations'' presented in July that ``[g]iven that the LDV/
SOF is >$1000/pill for all scenarios under consideration,
negative stakeholder reactions and media scrutiny can be
expected to continue in the months prior to AbbVie's launch.''
\349\ Similar to its approach with Sovaldi, Gilead examined how
different prices would affect ``soft'' factors ranging from
negotiations with insurers, to the possibility that
``[d]iscussions of U.S. government price controls gain
traction.'' \350\
---------------------------------------------------------------------------
\344\ Id.
\345\ Appendix E, Ex. 45, Gilead Sciences, Inc., 2015-2016 HCV
Commercial Plan, April 22, 2014, GS-0014083, at GS-0014088.
\346\ Appendix E, Ex. 48, Gilead Sciences, Inc., 2014-2015 U.S. HCV
Franchise BPOA (Draft), GS-0014143 at GS-0014157.
\347\ Appendix E, Ex. 49, Gilead Sciences, Inc., Updated Slides--
Wave 2 Pricing, GS-0018965, at GS-0018992.
\348\ Appendix E, Ex. 47, Gilead Sciences, Inc., U.S. HCV Pricing
Update, SVP Update Meeting, July 21, 2014, GS-0018861, at GS-0018891.
\349\ Id. at GS-0018906 (emphasis omitted).
\350\ Appendix E, Ex. 46, Gilead Sciences, Inc., Topics for
Discussion--LDV/SOF U.S. Pricing, August 4, 2014, GS-0019000, at GS-
0019013.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In addition, Gilead received direct feedback from payers
such as CVS/Caremark, Molina Healthcare, Atrius Health,
California Medicaid, UnitedHealth Group, and Blue Cross Blue
Shield of Michigan, all of which had representatives on
Gilead's payer advisory board.\351\ In October 2014,
``[a]dvisors found Sovaldi and LDV/SOF's clinical profile
compelling; however, the cost per population and impact on the
plan's budgets [sic] are large concerns for advisors,'' which
the presentation listed under ``similarities'' with previous
advisory boards.\352\ And as Gilead was seeking to expand the
number of patients, Joel Brill, the CEO of Predictive Health
LLC, warned ``[t]here is a need to narrow the patient
population, because if you tell us that all patients need to be
treated, our budgets cannot afford that,'' which was put under
a category in the presentation of ``budget sustainability.''
\353\
---------------------------------------------------------------------------
\351\ Appendix E, Ex. 50, Gilead Sciences, Inc., Managed Markets
Hepatitis C Virus (HCV) Payer Advisory Board Final Report, October 3,
2014, GS-0018760, at GS-0018768--GS-0018769.
\352\ Id. at GS-0018774.
\353\ Id. at GS-0018777.
---------------------------------------------------------------------------
Gilead recognized that Sovaldi had fundamentally changed
the HCV market in 2014. It estimated that, based on 120,000 new
patients and an average treatment cost of $89,300, ``[o]verall
additional spending on HCV treatments in the U.S. in 2014 is
estimated $10.7 [billion],'' which ``[r]eflects a 280% increase
in national HCV [per member per month] spending from $0.87 in
2013 to $4.2 in 2014,'' while ``[a]nnual increases in PMPM have
typically ranged from 3% to 4%.'' \354\ In addition, the
company expected HCV spending to push down earnings-per-share
by double-digit percentages for the largest health insurers,
UnitedHealth, WellPoint, Aetna and Humana, which ``could drive
payers to push back on cost or change coverage going forward.''
\355\ The slide below summarizes Sovaldi's financial impacts to
private payers during 2014: \356\
---------------------------------------------------------------------------
\354\ Appendix E, Ex. 47, Gilead Sciences, Inc., U.S. HCV Pricing
Update, SVP Update Meeting, July 21, 2014, GS-0018861, at GS-0018908.
\355\ Id. at GS-0018908--GS-0018909.
\356\ Id. at GS-0018891.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Gilead prioritized outreach to certain health care
providers based on the number of HCV patients they were seeing
and treating. For providers who were already prescribing
Sovaldi, the company's ``[b]ehavioral [o]bjective'' was to
continue and expand use of the drug.\357\ For providers who
were not using Sovaldi, the company planned to initiate sales
calls and urge them to begin prescribing.\358\
---------------------------------------------------------------------------
\357\ Appendix E, Ex. 48, Gilead Sciences, Inc., 2014-2015 U.S. HCV
Franchise BPOA (Draft), GS-0014143, at GS-0014151--GS-0014153.
\358\ Id.
---------------------------------------------------------------------------
The company also broke down consumer and patient groups
into high, medium and low priorities. Within the high priority
category were diagnosed patients whose average age was 50 and
were employed, insured, ``more educated'' and with an annual
income of $60,000.\359\ Gilead's ``behavioral objective'' with
these patients was to ``[e]ngage patients to re-think their Hep
C, [a]ctivate urgency to treat, [d]rive linkage to treating
specialists, [a]sk provider for treatment by name.'' \360\
Community service providers and allied health care providers in
clinical settings were designated a ``low-medium''
priority.\361\ Gilead estimated that there were 9,000 community
health clinics that would need to be engaged to ensure the
company's treatments were used.\362\ It expected that ``[t]o
activate [community health workers, Gilead would] need to
educate about evolving treatment paradigm, cure, importance of
linkage to HCV care.'' \363\
---------------------------------------------------------------------------
\359\ Id. at GS-0014154.
\360\ Id.
\361\ Id. at GS-0014155.
\362\ Id.
\363\ Id.
---------------------------------------------------------------------------
Finally, Gilead ranked payers, with commercial, Medicare,
and VA rated as ``high'' priorities, and Medicaid as a
``medium'' priority. Corrections were rated as a ``low-med''
priority, as were integrated delivery networks like Kaiser
Permanente ``depending on risk.'' \364\ Payers participating in
exchanges were ``low'' priority, with the company noting that
``[o]nly 6% of treated patients will come from exchange plans
by 2016,'' and that while coverage was similar to commercial
and managed care Medicaid plans, exchanges are ``generally more
restrictive, and with higher cost-sharing.'' \365\ Two months
later, the company would observe that payers would be reluctant
to block access to new HCV drugs, ``instead, payers may pick
two `winners' and generate rebates off the volume.'' \366\
---------------------------------------------------------------------------
\364\ Appendix E, Ex. 45, Gilead Sciences, Inc., 2015-2016 HCV
Commercial Plan, April 22, 2014, GS-0014083, at GS-0014157.
\365\ Appendix E, Ex. 48, Gilead Sciences, Inc., 2014-2015 U.S. HCV
Franchise BPOA (Draft), GS-0014143, at GS-0014156--GS-0014157.
\366\ Appendix E, Ex. 47, Gilead Sciences, Inc., U.S. HCV Pricing
Update, SVP Update Meeting, July 21, 2014, GS-0018861, at GS-0018865.
---------------------------------------------------------------------------
In regards to determining the price point for Harvoni,
Gilead studied $84,000, $115,000 and $145,000. Notably, Gilead
labeled the $145,000 price point as ``unacceptably expensive.''
\367\ In a survey of payers, $84,000 was viewed as
``reasonable,'' while $115,000 was viewed as ``at the top end
of value alignment'' and ``pushing the upper limit.'' \368\
However, like when it priced Sovaldi, Gilead was aware that
market competition, particularly for genotype 1 patients, would
restrict the company's ability to capture higher prices with
its second wave drug, Harvoni.
---------------------------------------------------------------------------
\367\ Id. at GS-0018866.
\368\ Id.
---------------------------------------------------------------------------
Gilead was concerned that since Bristol-Myers Squibb was
exploring a combination of its own drug with sofosbuvir that it
would create competition over price and possibly undercut
Harvoni if priced it too high: ``As a consequence, if LDV/SOF
is priced at a significant premium to the alternative,
physicians will allocate a substantial share of prescriptions
to the DCV+SOF combination.'' \369\ Likewise, the company spent
a significant amount of effort comparing its price to different
price points for AbbVie's Viekira Pak, and the trade-offs
between market access and revenue maximization.\370\
---------------------------------------------------------------------------
\369\ Id. at GS-0018863.
\370\ Id. at GS-0018869.
---------------------------------------------------------------------------
It also studied what Wall Street analysts expected in terms
of a price for Harvoni, and the ``potential impact on estimate
earnings,'' which would affect equity investment.\371\
Documents show that the company had had an interest in
analysts' opinions on Harvoni's price during the lead-up to
Sovaldi's release. On October 31, 2013, Robin Washington
received a lengthy ``buy-side survey'' from health care analyst
Mark Schoenebaum that contained financial and pricing
predictions that had been collected from 203 respondents.\372\
These analysts expected that the gross price for a 12-week
regimen of Sovaldi would be $85,400; the price of Harvoni was
expected to be $94,000.\373\
---------------------------------------------------------------------------
\371\ Appendix E, Ex. 46, Gilead Sciences, Inc., Topics for
Discussion--LDV/SOF U.S. Pricing, August 4, 2014, GS-0019000, at GS-
0019009--GS-0019010.
\372\ Appendix E, Ex. 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, at GS-0020496--GS-0020497.
\373\ Id.
---------------------------------------------------------------------------
On September 9, 2014, the company discussed its contracting
strategy with a price of $94,500, specifying specific discounts
for various payer groups and payers: \374\
---------------------------------------------------------------------------
\374\ Appendix E, Ex. 52, Gilead Sciences, Inc., HCV Wave 2
Contracting Recommendations, September 9, 2014, GS-0019058, at GS-
0019060--GS-0019063.
------------------------------------------------------------------------
Segment Discount Approach Commentary
------------------------------------------------------------------------
Kaiser Permanente 20% Proactive
------------------------------------------------------------------------
Integrated Delivery Networks 8%-10% Proactive Henry Ford is
(Geisinger, University of reactive only
Pittsburgh Medical Center,
Selective, Henry Ford)
------------------------------------------------------------------------
Departments of Corrections 10%-20% Proactive Contract with
(CA, FL, NY, OH, MI, AZ & listed State
University of Texas Medical DOC's at a
Branch) discount of 10-
20%. UTMB will
receive 340B
pricing and a 15%
supplemental
discount on
eligible
utilization (10%
on Commercial
utilization)
------------------------------------------------------------------------
FFS Medicaid 4-10% Proactive Independent states
Medicaid Pools will be
Magellan and SSDC negotiated if
they are listed
as ``select
payers'' or
reactive, as
needed
Independent States:
Discounts will be
Magellan Independent States: tiered based on
FL, MO, TN, TX, VA the coverage
levels (fibrosis
level)
All other independent .......... .......... - F2-F4 (8%)
states: - Prior
CA, CO, GA, IL, IN, MA, OH Authorization to
Label (10%)
------------------------------------------------------------------------
Managed Medicaid See PROACTIVE
Commentar for
y PerformRx
and
Envision
Rx
- At launch, for
------------------------------------------------------------------------
VA/DOD 10% (plus Proactive VA discounts will
26% be proactively
statutory submitted via TPR
discount)
------------------------------------------------------------------------
340B Statutory Proactive All 340B accounts
Discounts will receive
statutory
discounts with
the exception of
UTMB and Puerto
Rico DOH
------------------------------------------------------------------------
Healthcare exchanges Equal to Proactive Exchange
commercia utilization will
l be included in
discounts commercial
account contracts
at the commercial
discount rate
------------------------------------------------------------------------
Source: Appendix E, Ex. 52, Gilead Sciences, Inc., HCV Wave 2
Contracting Recommendations, September 9, 2014, GS-0019058, at GS-
0019060--GS-0019063
Gilead further broke down its priority accounts by tier.
Standing alone at the top tier was Express Scripts, which
Gilead estimated had 233,900 HCV patients.\375\ The second tier
included Humana (43,700 HCV patients), Optum Rx (78,900 HCV
patients), WellPoint (76,520 HCV patients), and CVS Caremark
(22,035 HCV patients).\376\ With most of the largest national
accounts, Gilead planned to begin contracting negotiations at a
5% rebate, generally maxing out at between 8% and 12%.\377\
These highest priority accounts were followed by eight pages of
tables with dozens more accounts that, because of size or other
reasons, were deemed a lower priority by Gilead.\378\ Rebate
strategies varied widely, ranging from no rebate to 12% (see
slide below).\379\
---------------------------------------------------------------------------
\375\ Id. at GS-0019069.
\376\ Id.
\377\ Id.
\378\ Id. at GS-0019068--GS-0019078.
\379\ Id.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The company appears to have been strict in its limits for
rebate negotiations. For example, while the company was willing
to provide Kaiser Permanente with a higher discount than other
payers (20%), Kaiser had ``articulated expectations of a rebate
as high as 30% to 49%.'' \380\ In notes on the contracting
approach for Kaiser, the company states ``the rebate may be
extended by BU and Executive Leadership above 20%.'' \381\ It
is not clear who or what ``BU'' is in this instance. Similar
notations can be found for other accounts, as well.
---------------------------------------------------------------------------
\380\ Id. at GS-0019082.
\381\ Id.
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Gilead estimated that about 360,000 of the 1.2 million-
person state prisoner population were infected with HCV, but
the company planned to limit its contracting approach to the
most populous state systems. The company had already secured
contracts with California and Texas and would seek to contract
with only the five largest Departments of Corrections that
remained, because the company saw diminishing benefits in
smaller prison systems. The five states--Florida, New York,
Ohio, Michigan, and Arizona--represented ``42% of non-
contracted inmate lives.'' \382\ In focusing on the prison
population, Gilead saw an ``[a]bility to treat inmates before
they are released and potentially treated through Medicaid.''
\383\ Risks included ``[s]pillover to other non-contracted
state DoCs,'' and potentially ``miss[ing] out on treatment
opportunities arising from public policy changes.'' \384\ The
company noted it would ``[s]upport HCV treatment in DoC segment
by providing reduced price which will stretch the existing DoC
budgets.'' \385\
---------------------------------------------------------------------------
\382\ Id. at GS-0019094.
\383\ Id. at GS-0019098.
\384\ Id. at GS-0019096.
\385\ Id. at GS-0019098.
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Gilead also studied what factors payers and physicians
would focus on when making a conclusion as to what price point
was palatable. Payers appeared to provide the company with some
conflicting views with respect to the price of Harvoni. For
example, the company expected that for ``scenarios with the
same net price, access is more favorable for a high WAC/high
discount approach,'' than lower WAC and lower rebates.\386\
However, a key finding with its payer advisory board indicated
that SVR rates were a focal point; ``[a]lthough advisors
initially responded negatively to the cost of the regimen, most
advisors responded positively to data presented as cost per
SVR.'' \387\ As an example, when members of Gilead's payer
advisory board were asked during a May 2014 meeting to ``price
each regimen based on the clinical profile as if they were the
manufacturer,'' the average was $102,855, with a range of
$84,000 to $126,000.\388\ William Cardarelli, director of
pharmacy at Atrius Health, believed the controversy over the
drugs' prices would be short-lived: ``The best thing you can do
is help us figure out who gets treated and not position
yourselves as treating everyone at diagnosis. This too will
pass, the hysteria will die down; there's something new every
year. The government has the attention of a 2-year-old.'' \389\
---------------------------------------------------------------------------
\386\ Appendix E, Ex. 47, Gilead Sciences, Inc., U.S. HCV Pricing
Update, SVP Update Meeting, July 21, 2014, GS-0018861, at GS-0018910.
\387\ Appendix E, Ex. 50, Gilead Sciences, Inc., Managed Markets
Hepatitis C Virus (HCV) Payer Advisory Board Final Report, October 3,
2014, GS-0018760, at GS-0018772.
\388\ Id. at GS-0018797.
\389\ Id. at GS-0018773.
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Notably, physicians did not assign great importance to the
price of the drug, which Gilead was keenly aware of throughout
its process of pricing Sovaldi and Harvoni. A survey of payers
ranked net cost as the second most important issue for
management of therapies.\390\ Physicians, meanwhile, ranked
five clinical attributes ahead of cost: SVR, tolerability,
adverse events, treatment duration, and ease of administration
ahead of a patient's out-of-pocket expenses.\391\ Such
divergence was one of the reasons that Gilead was focused on
keeping decisions in the hands of providers.
---------------------------------------------------------------------------
\390\ Appendix E, Ex. 47, Gilead Sciences, Inc., U.S. HCV Pricing
Update, SVP Update Meeting, July 21, 2014, GS-0018861, at GS-0018926.
\391\ Id. at GS-0018926, GS-0018943.
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Gilead's Marketing to Doctors and Patients
Part of Gilead's strategy was to seed demand by having
patients approach their health care providers (HCPs) for
treatment, and to convince providers of the drug's merits so
they would ``expand their definition of `treatment candidates'
so that they reengage untreated patients for SOF.'' \392\ At
the same time, the company needed ``access and advocacy'' to
eliminate ``barriers'' to treatment and medical society
treatment guidelines, as well as KOLs (key opinion leaders) to
advocate on behalf of the products.\393\ To that end, the
company's top goal was to quickly establish sofosbuvir as the
standard of care for all genotype 1, genotype 2, and genotype 3
patients, and to ``sustain launch trajectory by growing treated
patient pool,'' specifically, increasing treated patients 73%
beginning in November 2013.\394\
---------------------------------------------------------------------------
\392\ Appendix E, Ex. 29, Gilead Sciences, Inc., Gilead HCV U.S.
BPOA, October 2012, GS-0013489, at GS-0013493.
\393\ Id. at GS-0013493.
\394\ Id. at GS-0013490.
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As Gilead began to consider how to price its soon-to-be-
approved drug, the company refined its commercial pitch to
ensure that it would be financially successful. A 44-page
presentation on April 4, 2013 titled ``2013-2015 HCV Launch
Commercial Plan,'' shows that Gilead wanted to maximize the
opportunities, and minimize the threats through a combination
of advertising, brand placement, lobbying, public relations and
marketing, developing supporters in the medical and patient
advocacy communities, targeted speeches at medical conferences,
published articles in medical journals, and extensive
salesforce training on a country-by-country basis taking into
account national requirements. These initiatives would be led
by the company's Commercial Planning and Operations department,
whose job it would be to marshal the resources of employees in
departments ranging from public affairs to research and
development, medical affairs and sales.\395\
---------------------------------------------------------------------------
\395\ Appendix E, Ex. 32, Gilead Sciences, Inc., 2013-2015 HCV
Launch Commercial Plan, April 4, 2013, GS-0013503, at GS-0013527--GS-
0013534.
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In order to prepare the market for sofosbuvir's launch,
Gilead planned to court providers using a branded campaign to
sell ``HCV Treaters, Past Treaters and high potential Non-
Treaters'' on the clinical efficacy of Sovaldi through in-
office visits, journals, and online material.\396\ Each
category of ``treater'' was prioritized based on the potential
for providers to take up ``target behaviors'' to ``quickly
adopt sofosbuvir as SOC, re-engage untreated patients in their
practice and discuss sofosbuvir with them, [and] become
advocates for sofosbuvir and increasing treatment rates.''
\397\ The company further analyzed the groups in terms of the
number of patients, prescriptions for interferon, and speed
with which they began using previous protease inhibitors. The
most valuable ``customer group'' for the company's sales force
were 660 ``high value current PI (protease inhibitor)
treaters.'' Based on prescription data for other HCV drugs, the
company estimated that these providers had an average of 26
patients per provider--more than five times as many as the next
category of 4,452 ``Community PI Rxers.'' \398\ One goal was to
ensure that Gilead's sales resources were being used to
convince providers to prescribe sofosbuvir.
---------------------------------------------------------------------------
\396\ Id. at GS-0013494.
\397\ Id. at GS-0013497.
\398\ Id. at GS-0013498.
---------------------------------------------------------------------------
In addition, a cornerstone of Gilead's strategy to court
the medical community was its ``[s]peaker [f]aculty and
[t]raining.'' \399\ Gilead recruits, trains and retains third-
party health care professionals that are part of a ``Speakers
Bureau'' to communicate on behalf of the company's products and
the diseases they treat. In order to incentivize experts to
speak on behalf of their products, Gilead will pay speaking
fees and reimburse travel expenses for the speakers.\400\
Gilead reported paying speaking fees of $2.1 million for
Harvoni and $2.9 million for Sovaldi in 2014.\401\ An analysis
by investigative staff shows that Gilead made 2,630 payments to
293 providers in 46 states for ``compensation for services
other than consulting, including serving as faculty or as a
speaker at a venue other than a continuing education program,''
related to Sovaldi or Harvoni.\402\ The average payment was
$1,379, and the median payment was $2,500.\403\
---------------------------------------------------------------------------
\399\ Appendix E, Ex. 48, Gilead Sciences, Inc., 2014-2015 U.S. HCV
Franchise BPOA (Draft), GS-0014143, at GS-0014163.
\400\ Gilead Sciences, Inc., 2009 Pocket Guide to Gilead's Business
Conduct Manual, at 17-19, available at http://phx.corporate-ir.net/
External.File?item=UGFyZW50SUQ9MjE0Mjl8Q2hpbGR
JRD0tMXxUeXBlPTM=&t=1 [hereinafter Gilead, 2009 Pocket Guide].
\401\ Gilead Sciences, Inc., Sunshine Act/Open Payments Compliance:
Reporting Period: January 1 to December 31, 2014, available at http://
www.gilead.com/responsibility/sunshinepercent20act percent20open
percent20payments percent20compliance (last visited Sept. 10, 2015).
\402\ Data available from Gilead Sciences, Inc., 2014 Non-Research
Speaker Payments (spreadsheet), available at http://goo.gl/iTu3Ld
(accessed July 14, 2015).
\403\ Id.
---------------------------------------------------------------------------
These speakers use materials, slides and handouts that have
been approved and are tightly controlled by Gilead:
Speakers may not edit, reorder, or hide any slides or
otherwise modify the content emphasis, balance or
context of the material in the slides. Speakers must
move through the on-label deck, displaying every slide.
They need not verbalize all content on every slide but
should address points of interest or relevance for the
particular audience or setting. A substantial portion
of the presentation must be devoted to the presentation
and discussion of this slide deck. Speakers may only
use their own slides in exceptional circumstances and
if they are pre-approved by Gilead.\404\
---------------------------------------------------------------------------
\404\ Gilead, 2009 Pocket Guide, at 17-19.
Gilead aimed to conduct 2,500 to 2,750 speaker programs
related to its HCV treatments with as many as 400 speakers
onboard by the third quarter of 2014.\405\ Presentations
promoting Harvoni were approved by the company within two days
of the FDA's approval of the drug, and speeches began within
two weeks after approval.\406\
---------------------------------------------------------------------------
\405\ Appendix E, Ex. 48, Gilead Sciences, Inc., 2014-2015 U.S. HCV
Franchise BPOA (Draft), GS-0014143, at GS-0014163.
\406\ Id. at GS-0014163--GS-0014165.
---------------------------------------------------------------------------
Convincing providers was only part of the equation for
Gilead as the company wanted patients who had long been told to
wait for development of more effective cures to go to their
providers seeking help. These combined efforts would ``need to
drive more patients into care and increase referral rates,''
and ``overcome inertia towards non-treatment.'' \407\
---------------------------------------------------------------------------
\407\ Appendix E, Ex. 29, Gilead Sciences, Inc., Gilead HCV U.S.
BPOA (Oct. 2012), at GS-0013492, GS-0013493.
---------------------------------------------------------------------------
Gilead recognized that years of warehousing had shrunk the
annual number of people receiving HCV treatment to 56,000
annually.\408\ To combat the low number of patients, Gilead
calculated that Sovaldi, and its would-be competitor, Olysio,
needed to increase the number of annual treatments to be
viable: ``Sofosbuvir and simeprivir launch must increase
treated pool by 41K patients to be consistent with forecast.''
\409\ The document does not indicate that Gilead ever expected
the two drugs to be used in an off-label combination as AASLD
ultimately recommended for patients who could not tolerate
interferon.
---------------------------------------------------------------------------
\408\ Id. at GS-0013490.
\409\ Id.
---------------------------------------------------------------------------
To foster demand, the company planned to use a non-branded
disease awareness advertising campaign to target baby boomers
to ask providers about new HCV treatments.\410\ The working
document had many components ranging from geography (``20
states capture 75% of Baby Boomer population'') to effective
types of media (``TV, Internet, and radio have the highest
reach to Boomers'') to potential advantages to using a
spokesperson (``Credible individual that baby boomers can
relate to (e.g. Sally Field for Boniva)'').\411\ The company
would measure the campaign's success based on rating points and
other tracking metrics, response to the campaign demonstrated
by seeking out more information, and, finally, action as
demonstrated by provider visits and drug prescriptions.\412\
---------------------------------------------------------------------------
\410\ Id. at GS-0013499.
\411\ Id. at GS-0013500.
\412\ Id. at GS-0013499--GS-0013502.
---------------------------------------------------------------------------
While not explicitly discussed in this presentation, one
example of the awareness campaign includes the website
www.hepchope.com, which Gilead set up in addition to a toll-
free phone number 1-844-4HepcHope. The toll-free number is
staffed from 9 a.m. to 9 p.m. by health educators employed by
Gilead in Foster City, California, where the company is based.
When calling, the caller is asked to provide an email or
physical mailing address with which Gilead and its partner
companies can send educational information about HCV (see
below), strategies for finding a provider and discussing the
disease, and information about Gilead's HCV treatments.
The caller is further asked how they heard about the
hotline/website, and are advised that, while their privacy will
be protected, Gilead may use their information for market
research. Callers can be transferred to Gilead's ``Support
Path'' program, which is designed to help ``patients get
started on therapy and move toward treatment completion,''
through on-call nurses, financial assistance for drug
purchases, and prepared forms such as ``letters of medical
necessity'' that providers send to insurers.\413\ Like
HepCHope, the program provides valuable and detailed market
intelligence for Gilead. For example, a presentation in
September 2014 analyzing Medicaid fee-for-service programs says
a ``majority of states are managing HCV with strict criteria,''
pointing to ``953 unique patients on Support Path.'' \414\
---------------------------------------------------------------------------
\413\ Gilead Sciences, Inc., Support Path, available at http://
www.mysupportpath.com/ (accessed Nov. 10, 2015).
\414\ Appendix E, Ex. 52, Gilead Sciences, Inc., HCV Wave 2
Contracting Recommendations, September 9, 2014, GS-0019058, at GS-
0019104.
---------------------------------------------------------------------------
On the website, clicking ``learn more about a treatment
option for Hepatitis C'' links to a website advertising
Harvoni. According to an advertising industry website, a Gilead
commercial that advertises the HepCHope phone number and
website had aired at least 9,816 times as of November 18,
2015.\415\
---------------------------------------------------------------------------
\415\ Gilead Sciences, Inc., HepCHope.com TV Commercial, ``Forget
Me Not,'' available at http://www.ispot.tv/ad/7Ba0/hepchope-com-get-me-
not (accessed Nov. 18, 2015).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Meyers told investigative staff that the company never
launched a branded campaign for Sovaldi on television. Instead,
the company provided visual materials to physicians and
advertised in medical journals. Meyers said the print campaign
started in February 2014 and lasted roughly a month-and-a-half,
at which point the company noted an unexpected volume
surge.\416\ Examples of print advertisements for Sovaldi can be
found in the July 2014 and September 2014 issue of Esquire
magazine.\417\ The purpose of the ads was to build disease
awareness, Meyers said, but Gilead was experiencing such large
volume that it was not deemed necessary.\418\
---------------------------------------------------------------------------
\416\ Interview with Jim Meyers, Senior Vice President, North
America Commercial Organization, Gilead Sciences, Inc., in Washington,
D.C. (October 30, 2014).
\417\ Gilead Sciences, Inc., Sovaldi (advertisement), Esquire
Magazine, at 44-45 (July 2014 Esquire Magazine (Sept. 2014), at 128-
129.
\418\ Interview with Jim Meyers, Senior Vice President, North
America Commercial Organization, Gilead Sciences, Inc., in Washington,
D.C. (October 30, 2014).
---------------------------------------------------------------------------
Gilead has advertised a great deal for Harvoni--ads for the
drug have aired 8,224 times as of November 18, 2015.\419\
---------------------------------------------------------------------------
\419\ Gilead Sciences, Inc., Harvoni TV Commercial, ``I am Ready,''
available at http://www.ispot.tv/ad/786d/harvoni-i-am-ready#moreData
(accessed Nov. 18, 2015).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In addition, the company needed to ensure that policymakers
were aware of HCV as a public health issue, so it would be a
higher priority for government outlays. The company planned to
boost government awareness by ``creating tools necessary to
engage policymakers in advocating and elevating HCV as a major
public health issue and increase budgets accordingly.'' \420\
To that end, before launching the drug, Gilead planned to
``articulate the unmet needs and disease burden of HCV to
multiple stakeholders including physicians, health policy
makers, payers, and advocates,'' and ``develop evidence of HCV
disease burden and a plan for raising HCV as a national health
priority.'' \421\
---------------------------------------------------------------------------
\420\ Appendix E, Ex. 32, Gilead Sciences, Inc., 2013-2015 HCV
Launch Commercial Plan, April 4, 2013, GS-0013503, at GS-0013533.
\421\ Id. at GS-0013519.
---------------------------------------------------------------------------
Gilead believed sofosbuvir's shortening and simplification
of treatment for genotype 1 patients would be appealing to
providers, who in turn would be more likely to prescribe the
drug than they had been with predecessor therapies. However,
because relatively few physicians routinely prescribed drugs
for HCV, the company would need to convince more providers to
pursue treatment for their patients. By increasing the number
of prescribing providers, more patients would become potential
consumers. To that end, the company would ``strive for rapid
inclusion in guidelines'' from medical organizations that would
raise its profile in the medical community.\422\ The company
planned to target the Conference on Retroviruses and
Opportunistic Infections (CROI), the European Association on
the Study of the Liver (EASL), the International Society for
the Pharmacoeconomics and Outcomes Research (ISPOR), the Asian
Pacific Association for the Study of the Liver (APASL), and the
American Association for the Study of Liver Disease
(AASLD).\423\
---------------------------------------------------------------------------
\422\ Id. at GS-0013510.
\423\ Id. at GS-0013528.
---------------------------------------------------------------------------
As the drug was launched, Gilead wanted to ``ensure payers
and national health authorities are supportive of the value
offered by SOF-based regimens,'' and its goal was ``from the
outset, SOF-based regimens should be considered first for all
GT2/3 and GT1 TN patients.'' \424\
---------------------------------------------------------------------------
\424\ Id. at GS-0013519.
---------------------------------------------------------------------------
The goal following launch would be to ``maintain SOF value
and eliminate access barriers with payers,'' by working to
``protect price erosion in advance of SOF/LDV launch, and
maintain value in GT2/3,'' and ``work to ensure restrictions
are not imposed in key markets.'' \425\ At the same time, the
push for patients would be sharpened with efforts to ``increase
the numbers of patients accessing treatment,'' and ``encourage
treating physicians to initiate SOF-based regimens in the
majority of patients for whom previously no treatment was
offered.'' \426\ Over the course of three years, the company
wanted to ``increase referral of diagnosed patients to treating
physicians,'' and ``support efforts to increase delivery of HCV
care beyond specialists who treat today.'' \427\
---------------------------------------------------------------------------
\425\ Id. at GS-0013522.
\426\ Id.
\427\ Id.
---------------------------------------------------------------------------
At the same time that Gilead was laying out plans to
maximize sales of sofosbuvir, it also recognized potential
commercial threats, including:
HCPs (health care providers) may wait for IFN-free
regimens in GT1
Apathy for Tx (treatment/treating) early disease due
to limited data on benefits of treating earlier
Payers may limit access and force declining value
Potential for market fragmentation with launches of
competitive regimens
Low government prioritization of HCV in many
countries \428\
---------------------------------------------------------------------------
\428\ Appendix E, Ex. 32, Gilead Sciences, Inc., 2013-2015 HCV
Launch Commercial Plan, April 4, 2013, GS-0013503, at GS-0013510.
The company planned to prioritize targeting sofosbuvir for
genotype 1 patients in Europe and the U.S. as that genotype was
predominant in both regions. In the U.S., as well as in France,
Germany, and Italy, secondary emphasis would be given to
genotype 2 patients, reflecting the second largest bloc in the
countries' respective patient populations. Similarly, for Spain
and the United Kingdom, the company would focus on genotype 3
patients, based on the number of prospective
prescriptions.\429\ Gilead also singled out two ``special
populations'' to target: pre-transplant patients (of which the
company estimated to be 6,400 in the U.S., and 4,800 in the EU)
who would receive up to 48 weeks of sofosbuvir, and patients
with both HIV and HCV, of which there were an estimated 55,000.
As the company noted, most of these patients were already under
the care of specialists, and had ``fewer barriers to initiating
treatment vs mono-infected'' patients with only HCV.\430\
---------------------------------------------------------------------------
\429\ Id. at GS-0013511--GS-0013513.
\430\ Id. at GS-0013511--GS-0013514.
---------------------------------------------------------------------------
In its April 4th commercial plan, Gilead had defined its
commercial opportunity, strategy, and initiatives. Its success
in the U.S. ultimately would be measured post-launch by ``key
metrics'' on a monthly and quarterly basis.\431\ These metrics
included ``ex-factory units,'' i.e., sales directly from the
factory to distributors, total prescriptions of Sovaldi,
revenue, and ``forecast attainment.'' \432\ No other
documentation of this meeting has been provided, despite
repeated requests that Gilead provide supporting documents.
---------------------------------------------------------------------------
\431\ Id. at GS-0013537.
\432\ Id.
---------------------------------------------------------------------------
Once the drug was launched, a series of metrics would be
used to measure success in the United States and across the
world. The company planned to ``establish and communicate
unified launch success metrics,'' and ``track success metrics''
that would be communicated monthly.\433\ Among those metrics
were physician surveys to determine brand awareness; profile
constructs of patients being prescribed the drug; message
testing; tracking various prescription data, including new-to-
brand prescriptions, new proscriptions, total prescriptions,
and longitudinal (i.e., geographic) prescriptions; \434\
revenues, respectively; factory-to-distributor sales;
monitoring the prescriber base; and attaining forecast
goals.\435\ Many of these same metrics would be repeated in the
``EAME'' market comprising Europe, Asia, and the Middle
East.\436\
---------------------------------------------------------------------------
\433\ Id. at GS-0013532.
\434\ These were referred to in the presentation as NBRx, NRx, TRx,
LRx, respectively.
\435\ Appendix E, Ex. 32, Gilead Sciences, Inc., 2013-2015 HCV
Launch Commercial Plan, April 4, 2013, GS-0013503, at GS-0013536--GS-
0013537.
\436\ Id. at GS-0013538.
---------------------------------------------------------------------------
Impact of AASLD/IDSA HCV Treatment Recommendations
In late January 2014, on the heels of Sovaldi's 2013
launch, an advisory committee under the auspices of the
American Association for the Study of Liver Diseases (AASLD)
and the Infectious Disease Society of America (IDSA) issued
guidance on the treatment of HCV.\437\ The panel declared
sofosbuvir as the ``recommended'' regimen for treatment-naive
genotype 1 patients who were eligible to receive interferon
regardless of subtype.\438\ Simeprevir, a drug manufactured by
Gilead's competitor Johnson & Johnson as Olysio, was declared
``acceptable'' for subtype 1b and some subtype 1a
patients.\439\ The endorsement effectively rendered Sovaldi the
new standard of care for HCV. It should be noted that the FDA
labels required interferon to be administered with both Sovaldi
and Olysio for genotype 1 patients, though for shorter periods
than previous therapy regimens.
---------------------------------------------------------------------------
\437\ American Association for the Study of Liver Disease &
Infectious Diseases Society of America, HCV Guidance: Recommendations
for Testing, Managing, and Treating Hepatitis C (2014), available at
http://www.hcvguidelines.org.
\438\ Id. at 18.
\439\ Id. at 19.
---------------------------------------------------------------------------
In addition, the panel made a recommendation that
sofosbuvir (Sovaldi) and simeprevir (Olysio) could be
administered together for genotype 1 patients who could not
tolerate interferon.\440\ This recommendation was based largely
on a single phase 2 clinical trial of 167 patients known as
COSMOS. This combination was not officially approved by the FDA
until October 2014 and did not conform to the FDA label for
either drug until then.\441\ Nonetheless, an increasing number
of physicians prescribed this off-label regimen in order to
address the continuing treatment obstacles to interferon. By
some estimates, the combination represented upwards of 1/3 of
all Sovaldi prescriptions by the end of the 2nd quarter of
2014.\442\ When faced with the expert panel's recommendation,
many payers accepted the off-label regimen, but then faced the
double cost of two expensive HCV drugs being co-prescribed. The
wholesale price of the two together was roughly $150,000.\443\
---------------------------------------------------------------------------
\440\ Id. at 18.
\441\ Johnson & Johnson's Janssen division applied to the FDA for
approval to use the two in combination on May 7, 2014, citing the
COSMOS study. Press Release, Johnson & Johnson, Janssen Submits
Supplemental New Drug Application to U.S. FDA for Olysio TM
(Simeprevir) for Once-Daily Use in Combination with Sofosbuvir for 12
Weeks for the Treatment of Adult Patients With Genotype 1 Chronic
Hepatitis C (May 7, 2014), available at http://www.
investor.jnj.com/releasedetail.cfm?releaseid=846096. FDA approved the
combined use on November 5, 2014. Anna Edney, J&J Wins U.S. Approval
for Hepatitis C Combo With Gilead, Bloomberg (Nov. 5, 2014), available
at http://www.bloomberg.com/news/articles/2014-11-05/j-j-wins-u-s-
approval-for-hepatitis-c-combo-with-gilead.
\442\ Hepatitis C Online, Medications to Treat HCV, Simeprevir
(Olysio), http://www.
hepatitisc.uw.edu/page/treatment/drugs/simeprevir-drug (last visited
Nov. 11, 2015).
\443\ Id.
---------------------------------------------------------------------------
Gilead pointed to this off-label use as a major factor in
payers' growing complaints about the cost of Sovaldi during
2014. In its written response to the senators' letter, Gilead
stated that it opposed the recommendation of using the two
drugs together.\444\ While it is true that a significant number
of patients were given the Sovaldi/Olysio combined regimen, it
appears that this was done by physicians to address one of the
drawbacks inherent in Sovaldi, which was its continued reliance
on interferon for the largest cohort of HCV patients, i.e.,
those with genotype 1. With the advent of the all-oral Harvoni
and Viekira Pak products, use of the combination decreased
dramatically.\445\
---------------------------------------------------------------------------
\444\ Appendix F, Gilead Sciences, Inc., Response to Chairman
Wyden/Senator Grassley letter dated July 11, 2014, narrative answer to
questions 17, 18d (Sept. 9, 2014).
\445\ Id.
---------------------------------------------------------------------------
Finally, it is important to note that without the AASLD/
IDSA expert panel recommendation, the combination off-label use
would not likely have occurred at the levels of use seen in
2014.
Potential conflicts of interest could have played a role in
the AASLD/IDSA's recommendations for Sovaldi and the Sovaldi/
Olysio combination, and a number of panel members reported that
they received compensation and/or research funding from the two
manufacturers.\446\ However, we located no direct evidence of
influence on panel members and, as noted above, the
recommendation on the Sovaldi/Olysio combination was contrary
to Gilead's longer-term interests and its corporate position as
explained in its written response. Members of the panel
interviewed indicated that their primary concern in making the
recommendation was addressing the need for improved treatment
regimens that did not rely upon interferon and providing better
outcomes compared to the prior regimens.
---------------------------------------------------------------------------
\446\ Appendix F, Gilead Sciences, Inc., Response to Chairman
Wyden/Senator Grassley letter dated July 11, 2014, narrative answer to
questions 18a, 18b (Sept. 9, 2014); American Association for the Study
of Liver Diseases & Infectious Diseases Society of America,
Recommendations for Testing, Managing, and Treating Hepatitis C,
Disclosure Information (2014), available at https://web.archive.org/
web/20140428013944/http:/www.hcvguidelines.org/disclosure_information.
Section 4: The Financial Burden of Treating HCV and Resulting Access
Restrictions
Investigative staff closely examined how Sovaldi, Harvoni,
and other recent therapies for HCV affected three different
federal public payer programs--Medicaid, Medicare, and the
Bureau of Prisons. These programs have a disproportionate
population of the nation's HCV patients and are an important
part of the nation's health care system. As noted at various
points in this report, Gilead's two drugs have dramatically
increased the amount spent on HCV care. These programs combined
to spend at least $5.2 billion for Gilead's HCV therapies in
calendar year 2014 before rebates--$4.4 billion attributable to
Sovaldi and more than $800 million to Harvoni, which only
gained FDA approval in mid-October of that year.\447\ Through
the first six months of the year, Medicare reports having paid
$4.4 billion, before rebates, for Gilead's HCV therapies,
compared to just $200 million for all other drugs approved to
treat the disease. As a result, these public payers, as well as
traditional insurance plans, adopted access restrictions to
limit the number of patients who could benefit from this new
class of HCV therapies. The nature and extent of these
restrictions appear to go well beyond what Gilead anticipated
in its pricing process.
---------------------------------------------------------------------------
\447\ The pharmaceutical spending data collected from Medicare Part
D and state Medicaid programs represent outlays before mandatory
(Medicaid) or voluntary/supplemental (Medicaid and Part D) rebates were
applied. Federal law limits the disclosure of pricing information in a
form that discloses the identity of a specific manufacturer or
wholesaler, subject to limited exceptions. See 42 U.S.C.
Sec. Sec. 1395w-102, 1395w-104, 1396r-8.
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Medicaid and Prescription Drug Purchasing
Medicaid is a jointly funded state-federal program that
provides health insurance to over 72.4 million low-income
Americans.\448\ In order to receive federal financial
participation, states must establish and administer their
Medicaid programs within broad federal guidelines under which
states have flexibility to determine the type, amount,
duration, and scope of services they provide.
---------------------------------------------------------------------------
\448\ Department of Health and Human Services, Centers for Medicare
& Medicaid Services, Medicaid & CHIP: August 2015 Monthly Applications,
Eligibility Determinations and Enrollment Report at 2 (2015)
[hereinafter HHS, Medicaid & CHIP Report], available at http://
medicaid.gov/medicaid-chip-program-information/program-information/
downloads/august-2015-enrollment-report.pdf.
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States generally provide a comprehensive set of benefits
consisting of mandatory benefits such as inpatient and
outpatient hospital care and physician services as well as
optional services including prescription drugs.\449\ While
prescription drug coverage, including coverage for HCV
treatments, is considered an optional benefit, every state has
chosen to cover outpatient prescription drugs for nearly all of
their Medicaid enrollees.\450\ As a result, due to the unique
structure of the Medicaid drug program, state Medicaid programs
can be particularly sensitive to the cost of drugs.
---------------------------------------------------------------------------
\449\ Benefits, Medicaid.gov, available at http://www.medicaid.gov/
medicaid-chip-program-information/by-topics/benefits/medicaid-
benefits.html.
\450\ Prescription Drugs, Medicaid.gov, available at http://
www.medicaid.gov/medicaid-chip-program-information/by-topics/benefits/
prescription-drugs/prescription-drugs.html.
---------------------------------------------------------------------------
The Medicaid Drug Rebate Program was created by the Omnibus
Budget Reconciliation Act of 1990 to help offset the cost of
certain outpatient dugs.\451\ Under the program, drug
manufacturers are allowed to enter into a national rebate
agreement with the Secretary of the Department of Health and
Human Services to offer certain rebates to states' Medicaid
programs in exchange for guaranteed state Medicaid coverage of
FDA-approved drugs sold by the drug manufactures. The basic
Medicaid rebate for brand name drugs is the greater of: (1) the
difference between the drug's average manufacturer price (AMP)
during the drug's rebate period--typically the previous
calendar quarter--and the drug's best price or (2) 23.1% of the
drug's AMP.\452\ Under the Medicaid Drug Rebate Program, drug
manufactures would owe an additional rebate on brand name drugs
when they raise prices faster than the inflation rate.\453\
According to the Centers for Medicare & Medicaid Services
(CMS), approximately 600 drug manufactures are currently
participating in the Medicaid Drug Rebate Program, including
Gilead.\454\ In addition to the basic and additional Medicaid
drug rebate, state Medicaid programs collaborate through
purchasing pools to negotiate supplemental drug rebates with
drug manufactures.\455\
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\451\ Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-
508, Sec. 4401, 104 Stat. 1388.
\452\ Medicaid Drug Rebate Program, Medicaid.gov, available at
http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/
Benefits/Prescription-Drugs/Medicaid-Drug-Rebate-Program.html.
\453\ Id.
\454\ Id. (see link to Drug Manufacturer Contact Information file).
\455\ See, e.g., NMPI--National Medicaid Polling Initiative,
Provider Synergies, available athttp://www.providersynergies.com/
services/medicaid/default.asp?content=NMPI.
---------------------------------------------------------------------------
Medicaid has faced significant costs for treating
individuals infected with HCV. Historically, Medicaid
eligibility was limited to certain low-income children,
pregnant women, parents of dependent children, the elderly, and
individuals with disabilities.\456\ However, under the
Affordable Care Act of 2010, states were provided with enhanced
federal funding to extend coverage to low-income adults--many
of whom were previously uninsured.\457\ As a result of this
policy, enrollment in Medicaid has ballooned by more than 12
million since October 2013 to a total of more than 71 million
enrollees today.\458\ Medicaid is now the single largest health
insurer in the country, covering more individuals than Medicare
or any other private insurer.
---------------------------------------------------------------------------
\456\ Julia Paradise, Kaiser Family Foundation, The Kaiser
Commission on Medicaid and the Uninsured, Medicaid Moving Forward 2
(2015), available at http://kff.org/health-reform/issue-brief/medicaid-
moving-forward.
\457\ Patient Protection and Affordable Care Act, Pub. L. No. 111-
148, 124 Stat. 119 (2010).
\458\ HHS, Medicaid & CHIP Report, at 2.
---------------------------------------------------------------------------
As a result of the sheer size and complex health needs of
the Medicaid population and the program's unique drug rebate
program, the impact of Sovaldi and Harvoni on state Medicaid
programs has been particularly deep. The impact can be best
seen when examining state Medicaid budgets and program coverage
policies.
State Medicaid programs typically pay for outpatient drugs
in one of two ways--either through a fee-for-service (FFS)
payment made directly to the pharmacist, or through a capitated
payment made directly to a managed care organization (MCO),
which then manages payment to the pharmacist.\459\ In both
cases, upon entering the market, Sovaldi had a demonstrable
financial impact described with greater detail in the following
pages.
---------------------------------------------------------------------------
\459\ Brian Bruen & Katherine Young, Kaiser Family Foundation, The
Kaiser Commission on Medicaid and the Uninsured, Paying for Prescribed
Drugs in Medicaid: Current Policy and Upcoming Changes 1, 3 (2014),
available at https://kaiserfamilyfoundation.files.wordpress.com/2014/
05/8593-paying-for-prescribed-drugs-in-medicaid-current-policy-and-
upcoming-changes.pdf.
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The Outsized Impact of Gilead's HCV Drugs on
State Medicaid Drug Spending
The financial impact of Gilead's line of HCV drugs on state
Medicaid programs has been dramatic. Shortly after Harvoni was
approved by the FDA, the National Association of Medicaid
Directors (NAMD) wrote to Congress on October 28, 2014 that
``the challenge Sovaldi and other new hepatitis C medications
pose for the Medicaid program is the intersection of a high-
cost therapy and a potentially large population eligible for
therapy.'' \460\
---------------------------------------------------------------------------
\460\ Appendix D, Ex. 2, Letter from Darin J. Gordon and Thomas J.
Betlach, National Association of Medicaid Directors, to Congress (Oct.
28, 2014) at 3.
---------------------------------------------------------------------------
According to NAMD, during its first year on the market,
states were largely unsuccessful in securing supplemental
rebates for Sovaldi. In its letter to Congress, NAMD wrote,
``states are not well positioned to secure meaningful
supplemental rebates for Sovaldi. . . . To date, supplemental
rebates states have secured for Sovaldi are minimal, with any
further concessions predicted on unrestricted access to the
drug.'' \461\ In fact, just five state Medicaid programs
reported that they reached supplemental rebate agreements with
Gilead for Sovaldi in 2014.\462\
---------------------------------------------------------------------------
\461\ Id.
\462\ See Appendix A.
---------------------------------------------------------------------------
Thus, in order to manage the costs of Sovaldi and Harvoni,
which made up the majority of pharmaceutical spending to treat
HCV, state Medicaid programs developed access restrictions to
control costs in a constrained budget environment,\463\ pitting
patients seeking therapy against those agencies ``weighing
complex ethical questions, scientific evidence and public
health needs to maximize appropriate access to new
treatments.'' \464\ A recent study of HCV patients in four Mid-
Atlantic states showed that Medicaid recipients were more
likely than those with Medicare or commercial insurance to have
their prescriptions for DAAs rejected, or have their treatment
delayed.\465\
---------------------------------------------------------------------------
\463\ See Appendix B for a compilation of access restrictions
supplied by the Oregon Health & Sciences University.
\464\ Appendix D, Ex. 2, Letter from Darin J. Gordon and Thomas J.
Betlach, National Association of Medicaid Directors, to Congress (Oct.
28, 2014) at 4.
\465\ Vincent Lo Re, et al., American Association for the Study of
Liver Diseases (AASLD) Abstract, Incidence and Determinants of Denial
of DAA Treatment for Chronic HCV Infection by Insurance Type During the
First 6 Months of the Modern HCV Treatment Era, 62 Hepatology 1382A
(2015) available at http://www.aasld.org/sites/default/files/TLM-2015-
LakeBreaking
Abstracts.pdf.
---------------------------------------------------------------------------
To better quantify and qualify the financial impacts of
these drugs on individual state programs, investigative staff
requested quantitative and qualitative data from Medicaid
programs in all 50 states and the District of Columbia
regarding a series of issues related to HCV infections,
pharmaceutical spending, interactions with Gilead, and the
financial impact of Sovaldi and Harvoni on state Medicaid
spending. State Medicaid programs were asked to provide:
Total spending (pre-rebate) on Sovaldi and Harvoni in
CY2014
The number of prescriptions filled for Sovaldi and Harvoni
during CY2014
The number of unique recipients who were dispensed Sovaldi
and Harvoni during CY2014
The top 25 drugs, in terms of aggregate spending, in
CY2014
The rank of Sovaldi and Harvoni in the state's
pharmaceutical spending
The estimated number of enrollees infected with HCV
The estimated number of enrollees in each state's Medicaid
program
Whether the state signed a supplemental rebate agreement
with Gilead in CY2014
All 51 programs responded to the information request,
providing valuable data showing how state Medicaid programs
were affected by the price of Sovaldi and Harvoni (see Appendix
A). State Medicaid programs reported that $1.3 billion was
spent on Sovaldi during CY2014, prior to any statutory or
supplemental rebates. For this cumulative outlay for Sovaldi in
2014, state agencies reported that just 16,281 enrollees
received the drug, constituting less than 2.4% of at least
698,000 Medicaid recipients nationwide believed to carry the
disease (map 1 shows the percentage of enrollees who were
treated with Sovaldi during CY2014 on a state-by-state
basis).\466\ Oklahoma and Indiana are examples of states that
spent heavily on HCV drugs in 2014 to treat small portions of
Medicaid enrollees infected with the disease (see graph).
---------------------------------------------------------------------------
\466\ The estimate of 698,000 enrollees was derived from data
reported by states to staff. The actual number of Medicaid enrollees
infected with HCV is likely significantly higher, because seven states
did not provide estimates--Hawaii, Idaho, Louisiana, North Dakota,
Ohio, South Dakota, Utah. See Appendix A.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The data collected by investigative staff show that outlays
for Sovaldi ranked it among the top five pharmaceutical
spending items for 33 different state Medicaid agencies (see
map 2).\467\ Fourteen states reported that Sovaldi was the top
pharmaceutical cost for their FFS, MCO or combined
programs.\468\ Fifteen more reported that Sovaldi was the
second highest cost.\469\ Four more states reported that
Sovaldi ranked third, fourth or fifth in their pharmaceutical
spending for CY2014.\470\
---------------------------------------------------------------------------
\467\ See Appendix A. Gilead valued this type of spending rank
data. In April 2014, the company requested state-by-state ranks for
Sovaldi from Magellan Medicaid Administration, a contractor that
negotiated rebates on behalf of 25 state agencies. When a Magellan
official questioned the relevance of such data to the company, William
Dozier, a senior manager for national accounts, wrote that the data
were ``relevant to the Gilead.pricing committee [sic] because it shows
the impact current pricing has on Medicaid.'' Appendix D, Ex. 3, Email
from Eric Kimelblatt to Christopher J. Andrews and William Dozier,
``Re: Sovaldi Data'' (Apr. 15, 2014).
\468\ Connecticut, Georgia, Hawaii, Kentucky, Maryland,
Massachusetts, Minnesota, New Jersey, New Mexico, New York, North
Dakota, Oklahoma, Tennessee, Utah. See Appendix A.
\469\ Arizona, Florida, Indiana, Louisiana, Maine, Missouri,
Montana, Nevada, North Carolina, Ohio, Oregon, Pennsylvania, Rhode
Island, Vermont, Wyoming. See Appendix A.
\470\ Colorado, Illinois, Kansas, South Dakota. See Appendix A.
---------------------------------------------------------------------------
Researchers at the Brigham and Women's Hospital found that
spending on Sovaldi accounted for more than 6.6% of the
pharmaceutical program budgets for state Medicaid programs in
Connecticut, New York and Massachusetts.\471\ Oregon's Medicaid
program, which spent $591.2 million in 2014, expected that HCV
treatment would make up a significant portion of its future
drug spending:
---------------------------------------------------------------------------
\471\ Joshua M. Liao and Michael A. Fischer, New England Journal of
Medicine, Early Patterns of Sofosbuvir Utilization by State Medicaid
Programs, September 24, 2015, (figure 1) available at http://
www.nejm.org/doi/full/10.1056/NEJMc1506108.
Based on historical utilization and assumptions
regarding provider capacity, we concluded approximately
500 patients would be treated annually at a projected
cost of $51 million per year for the first six
years.\472\
---------------------------------------------------------------------------
\472\ Appendix D, Ex. 4, Letter from Lynne Saxton to the Honorable
Ron Wyden and the Honorable Chuck Grassley, (Oct. 19, 2015), at p. 2.
Investigative staff received responses from 48 state
programs to the question regarding supplemental rebates, and
only five reported reaching a supplemental rebate agreement
with Gilead during 2014.\473\ This illustrates that Gilead's
supplemental rebate terms for Sovaldi were not accepted by the
vast majority of state Medicaid programs. The states that
reached agreement with Gilead estimated having roughly 15,000
enrollees infected with HCV, less than 2.2% of Medicaid
enrollees believed to be infected with the disease.\474\ As
referenced above and discussed in more detail below, in the
absence of acceptable rebate offers, many states reacted to the
high cost of Sovaldi and Harvoni by restricting access to the
sickest patients and requiring that patients be under the care
of hepatologists or other specialists prior to receiving the
drugs.
---------------------------------------------------------------------------
\473\ Louisiana, South Dakota, and Wisconsin did not provide a
response to this question. Georgia, Maine, Minnesota, Vermont, and
Wyoming agreed to supplemental rebate terms. See Appendix A.
\474\ See Appendix A.
---------------------------------------------------------------------------
The high cost of Sovaldi and Harvoni has exerted a strain
on state Medicaid budgets, and is predicted to continue to do
so. For example:
Washington's Medicaid director wrote that ``if [the Health
Care Authority] were to pay for hepatitis C treatment
for all Medicaid clients infected with hepatitis C, the
cost would be three times the current total pharmacy
budget [of roughly $1 billion].'' Taking into account
rebates with Gilead, the state anticipates spending
more than $242 million in FY2016 alone to treat
eligible Medicaid patients.\475\
---------------------------------------------------------------------------
\475\ Appendix D, Ex. 5, Letter from MaryAnne Lindeblad to the
Honorable Ron Wyden and the Honorable Chuck Grassley (Sept. 23, 2015),
at 2.
---------------------------------------------------------------------------
Georgia reported to investigative staff that $30.4 million
was spent to treat 329 patients with Sovaldi during
2014.\476\ The patients treated with Sovaldi
represented less than 6% of the estimated 6,000
enrollees who have been diagnosed with HCV.\477\ In an
August presentation to the state legislation, the
Georgia Department of Community Health reported that
$40.8 million had been spent on Harvoni through the
first six months of 2015 and projected that $80 million
would be spent on hepatitis C drugs during FY2016 with
an expectation that the budget impact would continue
through FY2017.\478\
---------------------------------------------------------------------------
\476\ Georgia reported spending $7.5 million on Harvoni and $6.2
million on Olysio in 2014. See Appendix A.
\477\ See Appendix A.
\478\ Georgia Department of Community Health, Hepatitis C Overview,
Medicaid and SHBP (Aug. 11, 2015), p. 7-9, available at http://
dch.georgia.gov/sites/dch.georgia.gov/files/Hepatitis%
20C%20presentation.pdf.
---------------------------------------------------------------------------
Pennsylvania estimated that ``the cost could range from
$2.87 billion to $3.05 billion paid to the dispensing
providers, or $1.58 billion to $1.73 billion after the
federal drug rebates are collected.'' \479\ There are
an estimated 31,000 enrollees in Pennsylvania's
Medicaid program diagnosed with HCV.\480\
---------------------------------------------------------------------------
\479\ Appendix D, Ex. 6, Letter from Theodore Dallas to the
Honorable Ronald L. Wyden and the Honorable Charles E. Grassley, (Oct.
2, 2015) at 2.
\480\ See Appendix A.
---------------------------------------------------------------------------
New York's MCOs and FFS alone spent more than $363 million
on Sovaldi.\481\
---------------------------------------------------------------------------
\481\ See Appendix A.
In addition, several states wrote to Senators Grassley and
Wyden, or otherwise communicated to investigative staff, that
they were compelled to undertake unusual financial arrangements
with MCOs, seek targeted budgetary authority for the management
of costs related to managing HCV treatment, and, in at least
---------------------------------------------------------------------------
one case, enact new legislation. For example:
The Iowa Department of Human Services ``has incorporated
the cost of specialty drugs (including HCV medications)
in its current and future Medicaid budget requests.''
\482\
---------------------------------------------------------------------------
\482\ Appendix D, Ex. 7, Letter from Charles M. Palmer to Peter
Gartrell, (Feb. 9, 2015), at 1.
---------------------------------------------------------------------------
Arizona ``added an additional $30 million in funding to
the capitation rates [for managed care organizations]
to address the additional costs of Sovaldi and Harvoni,
for total funding of $45 million.'' \483\
---------------------------------------------------------------------------
\483\ Appendix D, Ex. 8, Letter from Thomas J. Betlach to Peter
Gartrell (July 17, 2015), at 2.
---------------------------------------------------------------------------
Florida established ``kick payments'' for HCV drugs in
mid-2014 after managed care plans expressed concern
that costs for treating the disease would exceed what
had been expected at the time capitation rates were set
for the year.\484\
---------------------------------------------------------------------------
\484\ Appendix D, Ex. 9, Letter from Justin M. Senior to the
Honorable Orrin G. Hatch and the Honorable Ron Wyden (Oct. 19, 2015),
at 2. ``A kick payment is a rate mechanism to manage the uncertainty of
the number of people who will need high cost Hepatitis C treatment. A
kick payment allows the Medicaid program to pay the health plans based
on expected costs for each enrollee who is prescribed the drugs for
treatment.'' Id.
---------------------------------------------------------------------------
Kentucky reported in a letter to the senators that the
state's ``spending related to HCV has increased to
about 7 percent of its total Medicaid budget, providing
new hepatitis C drugs to a relatively small number of
patients.''\485\
---------------------------------------------------------------------------
\485\ Appendix D, Ex. 10, Letter from Samantha McKinley to the
Honorable Charles E. Grassley and the Honorable Ron Wyden (Oct. 21,
2015).
Texas sent a letter to the Senators expressing its concern
---------------------------------------------------------------------------
with respect to HCV drug prices:
The state's experience with second generation HCV drugs
prompted the 84th Texas Legislature to pass a rider on
the state's appropriations act in June 2015. The rider
requires [The Health and Human Services Commission] to
estimate the potential cost of all new outpatient drug
products prior to covering the products. All products
with an estimated annual cost of greater than $500,000
must be submitted to the Legislative Budget Board for
review. This requirement may increase the amount of
time between approval of a new treatment by the FDA and
provision of that treatment to Medicaid clients.\486\
---------------------------------------------------------------------------
\486\ Appendix D, Ex. 11, Letter from Andy Vasquez to the Honorable
Ron Wyden and the Honorable Charles E. Grassley (Aug. 14, 2015), at 3.
---------------------------------------------------------------------------
The letter went on to say:
The rebate revenue from manufacturers lessens the
impact of second generation HCV drugs on the state's
Medicaid budget. However, given the exorbitant price of
these medications, the rebates are insufficient and
these drugs jeopardize the solvency of the state's
Medicaid and public health programs. Manufacturers
lowering the price at which these drugs are sold to
providers would be more beneficial than rebates to the
Texas Medicaid program and would also benefit its
state-funded health program.\487\
---------------------------------------------------------------------------
\487\ Id. at 4.
In a letter to Senators Wyden and Grassley, Oregon's
---------------------------------------------------------------------------
Medicaid director stated:
What we face is not a drug cost problem; it is a drug
price problem. State Medicaid programs are limited in
our ability to control pharmacy benefit expenditure,
particularly as federal law requires us to provide a
pathway to coverage for all FDA-approved drugs, no
matter how minimal the likely benefit per dollar spent.
While federally mandated rebates help, they provide
limited relief.\488\
---------------------------------------------------------------------------
\488\ Appendix D, Ex. 4, Letter from Lynne Saxton to the Honorable
Ron Wyden and the Honorable Chuck Grassley, (Oct. 19, 2015), at 2.
Kentucky is preparing to begin HCV screening tests at
county health departments, partly due to the rising use of
injectable drugs in the state, which has contributed to the
---------------------------------------------------------------------------
spread of the disease:
Given the current cost of the newer treatment options
and to remain fiscally responsible we will be forced to
make difficult decisions regarding who does and does
not get access to treatment medications upon
diagnosis.\489\
---------------------------------------------------------------------------
\489\ Appendix D, Ex. 10, Letter from Samantha McKinley to the
Honorable Charles E. Grassley and the Honorable Ron Wyden, (Oct. 21,
2015), at 2.
One of the tools that Kentucky, and many other states, has
used to prioritize treatment and manage costs is establishing
prior authorization criteria.\490\
---------------------------------------------------------------------------
\490\ Id.
---------------------------------------------------------------------------
Adoption of Prior Authorizations in Response to HCV Drug Pricing by
State Medicaid Programs
In light of Sovaldi's high price and an inability to
negotiate suitable supplemental rebate terms that would
moderate program costs, more than half the nation's state
Medicaid programs implemented prior authorization (PA)
criteria, which restrict access in order to the drug to control
costs.
With the assistance of the Oregon Health & Sciences
University's Center for Evidenced-based Policy (``OHSU''),
investigative staff examined how the PAs were structured for
Sovaldi, and later, Harvoni and Viekira Pak.\491\ OHSU
conducted an initial survey of publicly available data on state
Medicaid programs' approval of Sovaldi between May 30, 2014 and
September 24, 2014.\492\ Within this period--roughly six and
nine months after introduction of Sovaldi, respectively--OHSU
found:
---------------------------------------------------------------------------
\491\ See Appendix B.
\492\ See Appendix B, tables 1(a) and 1(b).
27 state Medicaid programs had adopted PA criteria for the
drug;
24 state Medicaid programs of those that adopted PA
criteria adopted PAs based on disease severity as
measured by Metavir fibrosis scores;
19 of the programs that managed the disease on the basis
of fibrosis scores allowed use of the drug for only the
most advanced stages of disease with fibrosis scores of
F3 or F4; and
Other PA criteria included prescription by or consultation
with a specialist in liver disease, alcohol and drug
use screening, interferon-free eligibility, achievement
of early viral response to initial treatment, no prior
treatment with sofosbuvir, and once-in-a-lifetime
access.\493\
---------------------------------------------------------------------------
\493\ See Appendix B.
After OHSU's review, some states' programs that researchers
listed as not having PAs for Sovaldi or Harvoni subsequently
implemented restrictions. For example, Nebraska adopted PA
criteria for Sovaldi that limited prescriptions of the drug to
patients with a Metavir score of F3 or F4.\494\ Likewise,
following FDA approval of Harvoni and Viekira Pak, Texas set PA
criteria requiring patients have a F3 or F4 fibrosis score, in
addition to other restrictions such as treatment by a
specialist and demonstrating sobriety.\495\
---------------------------------------------------------------------------
\494\ Nucleotide Analog NS5B Polymerase Inhibitor (Sovaldi -
sofosbuvir) Prior Authorization Criteria, available at https://
nebraska.fhsc.com/Downloads/NEcriteria_Sovaldi-201409.pdf.
\495\ Texas Medicaid/CHIP Vendor Drug Program, Medicaid Fee-For-
Service Prior Authorization Criteria and Policy (Antiviral Agents for
Hepatitis C Virus) (Mar. 2015), available at https://
paxpress.txpa.hidinc.com/hepc_initial_request.pdf.
---------------------------------------------------------------------------
OHSU also performed a survey of publicly available state
Medicaid program restrictions on the use of Harvoni, which was
introduced on October 10, 2014, shortly after the Sovaldi
survey was completed.\496\ This second survey also included the
use of Viekira Pak, the most direct, all-oral, competing
regimen for genotype 1. The OHSU survey of Harvoni/Viekira Pak
restrictions was conducted between April 30, 2015 and May 5,
2015, roughly six-to-nine months after introduction. The OHSU
survey found:
---------------------------------------------------------------------------
\496\ Appendix B, tables 2(a) and 2(b).
33 state Medicaid programs had adopted criteria governing
the use of these two drugs;
25 of those that adopted PA criteria also adopted PAs
based on disease severity;
19 had requirements that patients have fibrosis scores of
F3 or F4; and
Other criteria included alcohol sobriety and drug use
screening, prescription or consultation by a
specialist, once-in-a-lifetime access, viral response
to initial treatment, and informed consent.\497\
---------------------------------------------------------------------------
\497\ Appendix B, tables 2(a) and 2(b).
Texas was one of 13 state Medicaid programs reported in the
survey to have placed Viekira Pak on its preferred drug list
(PDL), meaning that it was essentially the default medication
unless patients could not tolerate the drug or it was not
indicated for use with the patient's HCV genotype. The state's
pharmaceutical and therapeutics committee chose Viekira Pak for
the PDL ``based on the understanding that both Harvoni and
Viekira Pak were effective treatments, but because AbbVie
submitted more aggressive rebates to HHSC's [Health and Human
Services Commission] PDL vendor, Viekira Pak was more cost
effective.'' \498\ Even with the discounts, the state expects
spending on HCV therapies will total $194 million through
FY2018.\499\ The program estimates that 17,325 Medicaid
enrollees are infected with the virus.\500\
---------------------------------------------------------------------------
\498\ Appendix D, Ex. 11, Letter from Andy Vasquez to the Honorable
Ron Wyden & the Honorable Charles E. Grassley (Aug. 14, 2015), at 2.
\499\ See id. at 3.
\500\ Appendix A, table 1.
---------------------------------------------------------------------------
The Medicare Prescription Drug (``Part D'') Benefit:
An Overview
Prior to the 2003 enactment of the Medicare Modernization
Act, the Medicare program lacked a prescription drug benefit.
As a result, one-third of all Medicare enrollees lacked
prescription drug coverage with many of these beneficiaries
deciding to forgo some of their prescribed medications due to
high cost.\501\ In the year the law was passed, a quarter of
Medicare seniors did not fill at least one prescription due to
high costs, and a third spent $100 or more per month on drugs.
---------------------------------------------------------------------------
\501\ Sebastian Schneeweiss et al., The Effect of Medicare Part D
Coverage on Drug Use and Cost Sharing Among Seniors Without Prior Drug
Benefits, 28 Health Affairs w305, w305-w316 (2009), available at http:/
/content.healthaffairs.org/content/28/2/w305.full.
---------------------------------------------------------------------------
The three groups of Medicare enrollees most vulnerable to
out-of-pocket drug costs were those without prescription
coverage, low-income seniors, and the complex chronically ill
(those with three or more complex conditions). Seniors with
access to prescription coverage typically received it from
employers, through private, individual purchase of Medigap,
Medicare Part C (then Medicare+
Choice) plans, or through Medicaid, with the former method
prevalent among higher-income seniors, and the latter two more
common among the low-income.\502\ Since the creation of Part D,
the program has only grown. As of 2014, 37 million Medicare
beneficiaries received drug coverage through Part D, roughly
69% of the Medicare program's beneficiaries.\503\
---------------------------------------------------------------------------
\502\ Dana Gelb Safran, Prescription Drug Coverage and Seniors:
Findings From a 2003 National Survey, Health Affairs W5-152, W5-160
(Apr. 2005), available at http://content.health
affairs.org/content/early/2005/04/19/hlthaff.w5.152.short.
\503\ Medpac, Status Report on Part D, Report to the Congress:
Medicare Payment Policy, at 347 (Mar. 2015), available at http://
www.medpac.gov/documents/reports/chapter-14-status-report-on-part-d-
%28march-2015-report%29.pdf?sfvrsn=0.
---------------------------------------------------------------------------
Part D relies on private insurers, known as Prescription
Drug Plans (PDPs), to deliver the prescription drug benefit to
beneficiaries.\504\ Medicare Advantage plans can also offer a
prescription drug benefit. Medicare beneficiaries choose from a
range of PDPs offering benefits in their geographic region, and
pay a premium subsidized by Medicare. Medicare covers about 75%
of the cost of the drug benefit and the remainder is paid by
the beneficiary. However, low-income beneficiaries receive a
more substantial subsidy. In each of the 34 regions, PDPs
compete based on premiums, the availability of prescription
drugs, pharmacy networks, and quality.\505\
---------------------------------------------------------------------------
\504\ Some Medicare Advantage plans also provide drug coverage in
addition medical benefits.
\505\ Medpac, Part D Payment System (2014), at 2, available at
http://www.medpac.gov/documents/payment-basics/part-d-payment-system-
14.pdf?sfvrsn=0 [hereinafter Medpac, Part D Payment System].
---------------------------------------------------------------------------
The amount Medicare pays a PDP is directly related to bids
submitted by each plan to the CMS. A plan's bid is an estimate
of its costs to provide the drug benefit to enrollees in the
next year.\506\ To determine payment to plans, CMS calculates a
national average bid, and each plan then receives a payment
equal to that national average. If an individual plan's bid is
higher than the national average, the difference is made up by
an increase in the size of that plan's premium paid by
enrollees. As a result of this payment structure, large
increases in projected drug costs not only affects a plan's
ability to offer affordable drug coverage, but also affects all
Part D enrollees and the overall spending by Medicare.
---------------------------------------------------------------------------
\506\ The bid is subsequently adjusted by a number of factors
including the enrollees' health statuses.
---------------------------------------------------------------------------
The plans themselves are also unique. Medicare sets a
standard drug benefit design but allows for individual plans to
vary the structure so long as the plan meets certain actuarial
equivalence tests. Low-income beneficiaries also receive even
greater cost-sharing protection than provided by the standard
benefit. In 2015, the standard benefit includes a $320
deductible; coverage for 75% of drug expenses up to a benefit
level of $2,960; and a catastrophic coverage for costs above a
total drug spending threshold of $7,061.76.\507\ Above the
latter level, a beneficiary is required to pay 5% of the costs
of drugs, with 95% borne by the Medicare program.\508\ As a
result, the higher an enrollee's annual drug spend, the greater
the proportion of their costs will be paid for by Medicare.
This arrangement is of particular importance in the context of
increased utilization of high-cost drugs and their impact on
Medicare spending.
---------------------------------------------------------------------------
\507\ Medpac, Part D Payment System, at 1-2.
\508\ Id.
---------------------------------------------------------------------------
The coverage between the $2,960 and $7,061.76 thresholds is
known as the Part D coverage gap or ``donut hole.'' Prior to
the enactment of the ACA, Part D offered no drug coverage
between these two thresholds; the ACA phases out the coverage
gap over time. In 2015, 55% of the cost of brand name drugs
purchased in the coverage gap will be paid for on behalf of
beneficiaries (50% through discounts provided by manufacturers
and 5% through a subsidy provided by Medicare).\509\
---------------------------------------------------------------------------
\509\ Id.
---------------------------------------------------------------------------
Unlike FFS Medicare for hospitals and physicians, Part D
prices for health services are not set administratively, but
rather are set through negotiations between PDPs (or often PBMs
on behalf of PDPs) and drug manufacturers. The government is
prohibited by law to interfere in these negotiations.\510\ The
outcome of these negotiations and the size of price discounts
PDPs receive from manufacturers are the result of multiple
factors including the bargaining power of the PDPs (or PBMs),
the level of competition among drug manufacturers, and
alternative therapies available to patients.
---------------------------------------------------------------------------
\510\ Medicare Prescription Drug, Improvement, and Modernization
Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066 (42 U.S.C. Sec. 1395w-
111(i)).
---------------------------------------------------------------------------
Part D relies on private negotiations between Part D
prescription drug plans and drug manufacturers to establish the
price of drugs offered to Medicare beneficiaries. Many factors
influence the outcome of these negotiations and the ultimate
price of drugs that is borne by both Medicare and Part D
enrollees. Two particularly important factors affecting the
size of a rebate are: (1) the presence of similar drugs in the
market, and (2) the Part D plan's ability to steer enrollees
toward one manufacturer's drug over another.
In the instance where only one drug is on the market,
manufacturers have little incentive to offer price discounts or
rebates if the manufacturer is confident the plan will include
the drug on its formulary and physicians will prescribe the
drug to their patients. This dynamic changes significantly if a
competitor enters the market with a drug in the same
therapeutic class. In that case, both manufacturers have an
incentive to offer price discounts or rebates in the hope that
a plan places the manufacturer's drug on the plan's formulary.
The Congressional Budget Office (CBO) has found, ``rebates tend
to be higher in therapeutic classes containing more drugs that
are close substitutes.'' \511\
---------------------------------------------------------------------------
\511\ Congressional Budget Office, Competition and the Cost of
Medicare's Prescription Drug Problem (2014), at 28, available at
https://www.cbo.gov/sites/default/files/45552-PartD.pdf.
---------------------------------------------------------------------------
Manufacturers also provide price discounts or rebates if a
plan adjusts its benefit design to increase the likelihood
patients will be prescribed its drug over a competitor's drugs.
The CBO found that ``[t]he ability to steer beneficiaries
toward preferred drugs gives Part D plan sponsors leverage when
negotiating drug prices.'' \512\ Manufacturers ``tend to offer
the largest rebates to plan sponsors that actively steer a
large share of beneficiaries to their drugs.'' \513\ Without
multiple, similar drugs on the market, the needed leverage to
extract price discounts or rebates from drug manufacturers does
not exist and as a result, Medicare and Part D enrollees will
typically pay for higher drug costs.
---------------------------------------------------------------------------
\512\ Id. at 27.
\513\ Id.
---------------------------------------------------------------------------
Sovaldi, Harvoni, and the Impact on Medicare
Medicare Part D has been lauded as a successful addition to
the Medicare benefit. However, recent spending growth and
future projections of Part D spending show costs increasing
considerably. The 2015 Medicare Trustees report states that
Part D spending growth from 2013 to 2014 was 12.1%, compared to
6.5% over the previous eight years.\514\ According to the CBO,
Part D spending growth will far outpace traditional Medicare
fee-for-service spending growth over the next ten years. CBO
notes that Parts A and B spending will increase by 89% between
2014 and 2025. Part D will see spending growth over the same
time period of 168%.\515\
---------------------------------------------------------------------------
\514\ The Boards of Trustees, Federal Hospital Insurance and
Federal Supplementary Medical Insurance Trust Funds, 2015 Annual
Report, at 106, available at http://www.cms.gov/Research-Statistics-
Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/
Downloads/TR2015.pdf.
\515\ Congressional Budget Office, March 2015 Medicare Baseline, by
Fiscal Year, (Mar. 9, 2015), available at https://www.cbo.gov/sites/
default/files/cbofiles/attachments/44205-2015-03-Medicare.
pdf.
---------------------------------------------------------------------------
Increased spending growth leads to higher premiums for Part
D enrollees and additional fiscal pressure on the federal
budget. Because each plan's bid contains the plan's cost of
providing drug therapies to expected enrollees and these bids
are proprietary, it is difficult to assess an individual drug's
impact on plans' bids. However, the Medicare Trustees report
specifically notes a projected acceleration in per capita
benefits for 2015 because ``additional plan spending for
several high-cost drugs to treat hepatitis C was not factored
into plan bids for the 2014 plan year, resulting in significant
reconciliation payments from Part D to plans in 2015.'' \516\
---------------------------------------------------------------------------
\516\ Id.
---------------------------------------------------------------------------
Data analyzed by investigative staff shows that in the 18
months since Gilead's HCV drugs gained FDA approval, Medicare
spent nearly $8.2 billion on pre-rebate spending on Sovaldi and
Harvoni. (See Graph 2 below, and Appendix C for corresponding
tables). Part D's spending before rebates on Sovaldi in 2014
was greater than any individual drug paid for by Medicare's
Part D or Part B programs during 2013 and the same can be said
for pre-rebate spending Harvoni through the first six months of
2015.\517\
---------------------------------------------------------------------------
\517\ Nexium, which is prescribed for treatment of heartburn, was
the top drug by total expenditures (before rebates) for Part D at $2.5
billion; Rituximab, which is used to treat cancer and rheumatoid
arthritis, was the top drug by total expenditures for Part B at $1.5
billion. CMS, Medicare Provider Utilization and Payment Data: Part D
Prescriber, Part D Prescriber National Summary table, CY 2013,
available at https://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Part-D-
Prescriber.html; MedPac, Report to Congress: Medicare and the
Healthcare Delivery System (June 2015), at 66 (Table 3-1), available at
http://www.medpac.gov/documents/reports/chapter-3-part-b-drug-payment-
policy-issues-%28june-2015-report%29.pdf?sfvrsn=0.
---------------------------------------------------------------------------
Graph 2--Monthly Part D Spending on Hepatitis C Drugs (Jan. 2014-June
2015)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In 2014, Medicare spent $4.8 billion on HCV drugs prior to
rebates, $3.1 billion of which was spent on Sovaldi, and nearly
$700 million more on Harvoni, which was on the market for
roughly 12 weeks after being approved in October by the
FDA.\518\ Medicare's spending on HCV drugs through the first
six months of 2015 indicates that the aggregate cost of
treating the disease is likely to grow. Medicare's pre-rebate
spending for HCV drugs in 2015 had already reached $4.6 billion
by the end of June, more than 95% of which was attributable to
Gilead drugs ($3.7 billion for Harvoni; $669 million for
Sovaldi).\519\
---------------------------------------------------------------------------
\518\ See Appendix C.
\519\ See Appendix C.
---------------------------------------------------------------------------
In the 18 months that Gilead's drugs have been on the
market, Medicare's monthly spending on HCV treatments increased
more than six-fold from $116.4 million in January 2014
(Sovaldi, 76%, Olysio, 9%, Other HCV drugs, 15%) to $793.2
million in June 2015 (Harvoni, 82%; Sovaldi, 14%; Other HCV
drugs, 4%).\520\ Medicare's average pre-rebate monthly spending
on HCV drugs grew to $765 million during the first six months
of 2015, more than double the average monthly spend of $349.5
million.\521\
---------------------------------------------------------------------------
\520\ Id.
\521\ Id.
---------------------------------------------------------------------------
By way of comparison, Medicare's pre-rebate spending on HCV
drugs for calendar year 2013 was $396 million, of which $238
million was spent on DAAs (Incivek, Olysio, Sovaldi, Victrelis)
according to CMS data analyzed by investigative staff.\522\
---------------------------------------------------------------------------
\522\ Id.
---------------------------------------------------------------------------
Sovaldi and Harvoni's Effect on the Federal Prison System
The Bureau of Prisons (BOP) is responsible for delivering
medically necessary health care to its inmates in accordance
with proven standards of care.\523\ As of November 5, 2015, the
BOP reported that 9,216 of the system's 198,953 inmates have
been diagnosed with HCV.\524\ The prevalence of HCV infection
in prison inmates is substantially higher than that of the
general U.S. population, in part due to the prevalence of
individuals who have used injectable drugs.\525\
---------------------------------------------------------------------------
\523\ U.S. Department of Justice, Office of the Inspector General,
The Federal Bureau of Prison's Efforts to Manage Inmate Health Care,
Audit Report 08-08 (Feb. 2008), available at https://oig.justice.gov/
reports/BOP/a0808/final.pdf.
\524\ Data provided by Federal Bureau of Prisons (Nov. 12, 2015).
\525\ Eric Chak et al., Hepatitis C Virus Infection in USA: An
Estimate of True Prevalence, 31 Liver Int'l 1090, 1090-1101 (Sept.
2011), available at http://www.ncbi.nlm.nih.gov/pubmed/21745274;
Centers for Disease Control and Prevention, Prevention and Control of
Infections with Hepatitis Viruses in Correctional Settings (Jan. 2003),
available at, http://www.cdc.gov/mmwr/PDF/rr/rr5201.pdf.
---------------------------------------------------------------------------
In fiscal year 2014, the year Sovaldi became available to
treat prisoners infected with HCV, the BOP's spending on HCV
drugs increased 14%, even though the number of patients treated
decreased 52%. By comparison, in fiscal year 2012, before the
Gilead pharmaceuticals had been introduced as a viable
treatment option, the BOP spent $4.4 million on treatment of
369 HCV cases (see table 4 below). In fiscal year 2014, after
the introduction of Sovaldi, the BOP spent $5.9 million on the
treatment of only 183 HCV inmates. Moreover, in fiscal year
2015 YTD with the use of both Sovaldi and Harvoni as HCV
treatment, the BOP has spent nearly $13.7 million to treat just
222 HCV-diagnosed inmates. In fiscal year 2014, Gilead's drugs
accounted for 46% of the BOP's HCV spending; by fiscal year
2015, Gilead's drugs accounted for 91% (see table 5 and graph 3
below).
Table 4--Bureau of Prisons Spending on HCV Medications
----------------------------------------------------------------------------------------------------------------
Fiscal Year HCV Medication Purchases Patients Treated
----------------------------------------------------------------------------------------------------------------
2012 $4,378,238 369
----------------------------------------------------------------------------------------------------------------
2013 $4,168,807 381
----------------------------------------------------------------------------------------------------------------
2014 $5,917,436 183
----------------------------------------------------------------------------------------------------------------
2015 $13,665,112 222
----------------------------------------------------------------------------------------------------------------
Source: Federal Bureau of Prisons
Table 5--Annual Spending by Federal Bureau of Prisons on HCV Drugs (by brand name)
----------------------------------------------------------------------------------------------------------------
Drug FY 2012 FY 2013 FY 2014 FY 2015
----------------------------------------------------------------------------------------------------------------
Harvoni $0 $0 $0 $6,885,214
----------------------------------------------------------------------------------------------------------------
Sovaldi $0 $0 $2,700,783 $5,556,731
----------------------------------------------------------------------------------------------------------------
Olysio $0 $0 $166,802 $778,636
----------------------------------------------------------------------------------------------------------------
Pegylated Interferon $1,803,072 $483,808 $990,854 $258,574
----------------------------------------------------------------------------------------------------------------
Viekira Pak $0 $0 $0 $92,622
----------------------------------------------------------------------------------------------------------------
Ribavirin $384,057 $310,715 $191,671 $71,049
----------------------------------------------------------------------------------------------------------------
Daklinza $0 $0 $0 $14,399
----------------------------------------------------------------------------------------------------------------
Victrelis $532,772 $2,115,613 $1,100,593 $7,888
----------------------------------------------------------------------------------------------------------------
Incivek $1,658,337 $1,258,671 $766,733 $0
----------------------------------------------------------------------------------------------------------------
Total $4,378,238 $4,168,807 $5,917,436 $13,665,112
----------------------------------------------------------------------------------------------------------------
Source: Federal Bureau of Prisons
Overall system medical costs have been increasing.
According to data provided by the BOP, the BOP's total medical
spending in fiscal year 2013 was $1.062 billion, of which $82.3
million was for pharmaceuticals; in 2014, total medical
spending was $1.097 billion, of which pharmaceutical spending
comprised $96.1 million; and in 2015, total medical spending
was $1.147 billion, of which pharmaceutical spending was $108.4
million.
To most effectively deal with the rising cost of HCV
treatment, the BOP's Health Services Division (HSD) issued
Clinical Practice Guidelines (CPGs) on the Evaluation and
Management of Chronic Hepatitis C Virus Infection.\526\ Based
on perceived risk for complications or progression of the
disease, these guidelines prioritize inmates into four levels
of treatment. According to a 2015 BOP memorandum, inmates with
the highest priority (priority 1) have the most advanced HCV
with rapidly progressing liver disease including:
---------------------------------------------------------------------------
\526\ Federal Bureau of Prisons, Evaluation and Management of
Chronic Hepatitis C Virus (HCV) Infection (July 2015), available at
https://www.bop.gov/resources/pdfs/hepatitis_c.pdf.
Cirrhosis (end-stage liver disease);
Liver transplant candidates or recipients;
Patients with liver cancer or comorbid conditions
associated with HCV;
Patients being cared for with immunosuppressant
medications; and
Prisoners who were receiving treatment when they entered
the system.\527\
---------------------------------------------------------------------------
\527\ Id. at 7.
Several agencies, including the BOP, are required to
maintain a Department of Veterans Affairs (VA) Schedule
contract as a condition of receiving payment. The Veterans
Health Care Act of 1992 \528\ authorizes the VA to negotiate
drug prices on behalf of many government agencies, including
the BOP. The VA's National Acquisition Center negotiates and
establishes Federal Supply Schedule (FSS) prices for the
Department of Defense, VA, the Public Health Service, and the
U.S. Coast Guard (known as the ``Big 4'') receiving at least a
24% discount from the weighted average price of a single form
and dosage unit paid by wholesalers to a manufacturer. This
price is known as the Federal Ceiling Price (FCP).
---------------------------------------------------------------------------
\528\ 38 U.S.C. Sec. 8126.
---------------------------------------------------------------------------
Many of the FSS contracts are renegotiated on a five-year
period, allowing for contractual modifications as new drugs or
generics enter the market, with all covered drug pricing to be
renegotiated at the end of every calendar year. If the BOP
desires, it can enter into discussions with manufacturers for
additional discounts, called Temporary Price Reductions (TPR),
based on market share or access, but granting of a TPR to an
agency like the BOP is completely discretionary by the
manufacturer. The BOP is therefore rarely involved in one-on-
one negotiations with individual companies, and has relatively
little control over the prices it receives for pharmaceutical
products.\529\
---------------------------------------------------------------------------
\529\ Telephone interview of BOP staff (Aug. 27, 2015).
---------------------------------------------------------------------------
Graph 3--Monthly Hepatitis C Drug Spending by Federal Bureau of Prisons
(Aug. 2013-Sept. 2015)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Access Restrictions by Non-Public Payers
The OHSU survey conducted between May 30, 2014 and
September 24, 2014 included several non-state payers to compare
PA restrictions with state Medicaid programs.\530\ OHSU found
that non-state payers adopted similar PA restrictions. Publicly
available criteria for Sovaldi used by Aetna, CIGNA, Regence
BlueCross BlueShield, and Anthem BlueCross BlueShield were
reported in the survey.\531\ All PA restrictions for non-state
payers included some level of disease severity, with the two
BlueCross Blue Shield plans requiring F3 or F4 scores.\532\
Aetna required early viral response to initial treatment.
Several required alcohol sobriety and drug use screening and
patient treatment support and management programs. All required
determination of interferon ineligibility.\533\ In
communications with investigative staff separate from the OHSU
survey, state program officials, as well as other payers,
indicated that such restrictions were overwhelmingly based on
concerns related to the cost impacts of sofosbuvir-based
treatment on their programs.\534\
---------------------------------------------------------------------------
\530\ See Appendix B, Table 1b.
\531\ Id.
\532\ Id.
\533\ Id. At the time of the survey, no publicly available criteria
were found for United Health Care, another major payer.
\534\ See Appendix D.
---------------------------------------------------------------------------
As described earlier, in order to help patients with
private insurance offset the cost of co-pays and other coverage
assistance, Gilead budgeted funds for its patient assistance
programs. Through the first week of July 2014, Gilead reported
providing co-pay coupons, worth an average of $919, to 18,618
unique patients.\535\ The money was used to reduce co-payments,
which means that patients had a lower cost burden, but does not
offset the amount of money that insurers end up paying for the
drug.\536\ Gilead reported providing free product worth $225
million through the PAP to 3,568 unique patients (an average of
$62,709 per patient), or roughly 5.4% of patients treated with
Sovaldi up to that point.\537\ The company said it did not have
access to foundation assistance data, nor did the company
disclose the names of the foundations or the amount they were
provided. All of the costs related to operating the PAP,
including manufacturing costs of the free product provided
through it, copay coupons, and a patient support program called
MySupportPath, are accounted for as operating expenses (sales
and marketing operational expenses). The copay coupons offset
Gilead's product revenue.\538\ The company had already
anticipated by late 2013 that the PAP program should be
monitored; in the context of Gilead's approach to AIDS Drug
Assistance Programs, Young wrote to Meyers, Stout, and Banks,
``Let's monitor PAP very carefully. I do worry that people
might attempt to stretch applications for PAP. We might see
some strange behaviors we need to address early.'' \539\
---------------------------------------------------------------------------
\535\ Appendix F, Gilead Sciences, Inc., Response to Chairman
Wyden/Senator Grassley letter dated July 11, 2014, narrative answer to
question 20 (Sept. 9, 2014).
\536\ Id.
\537\ Id.
\538\ Id.
\539\ Appendix E, Ex. 40, Email from Kevin Young to Jim Meyers, Coy
Stout, Re: ADAP and Sofosbuvir (Nov. 19, 2013), GS-0020802.
---------------------------------------------------------------------------
Gilead announced on July 1, 2015 that it would exclude some
insured patients from the PAP program. Advocates, including the
AIDS Healthcare Foundation, viewed Gilead's denial of patient
access to HCV treatment through the PAP program as a
``bargaining strategy'' or ``punitive measure against health
insurers,'' and ultimately an attempt to force payers into
further opening access to Gilead's HCV drugs.\540\ In a letter
addressed to ``Community Partner'' from Gilead's Coy Stout,
vice president, managed markets, the company detailed its
changes:
---------------------------------------------------------------------------
\540\ Senate Finance Committee Interview of Emalie Huriaux,
Director of Federal and State affairs, Project Inform (July 10, 2015);
see also AHF Criticizes Gilead for Blacklisting Hepatitis C Patients
from Drug Assistance Programs to Punish Insurers, Aids Healthcare
Foundation (July 23, 2015), available at http://cqrcengage.com/
aidshealth/app/document/8671298;jsessionid=gAma-
5LojCWfh42hyhRCL98y.undefined.
[P]atients who are insured and who do not meet their
payer's coverage criteria will no longer be eligible
for support via Gilead's Patient Assistance Program.
Patients who fall within the category of ``Insured and
Did Not Meet Payer Criteria'' are patients whose
insurance providers limit access to Sovaldi/Harvoni
---------------------------------------------------------------------------
based on, but not limited to, the following:
Fibrosis score restrictions
Preferring or exclusively covering another product
on formulary (i.e., Viekira Pak preferred)
Limiting coverage to a maximum treatment duration
or denying subsequent treatment after a patient has
failed therapy
Step-therapy requirements
Clinical criteria (e.g., psychiatric requirements,
drug and alcohol testing)
It is important to note that a very small number of
patients fall into this category. Support Path experts
will continue to treat each patient case individually
and consider a number of variables when assessing
patients for our free drug program.
The company justified the changes as followed:
In the interest of facilitating patient access in the
period immediately following the launch of Sovaldi and
Harvoni, the Gilead Patient Assistance Program (PAP)
made these medications available to virtually all
patients who met financial and other program
requirements. Gilead also implemented significant
discounts for its HCV therapies across different payer
groups. While many payers responded to these discounts
by opening access broadly, some payers have continued
to restrict access despite the discounts. As a result,
our PAP criteria enabled continued restrictions by some
payers by providing a generous route for them to deny
access and refer patients they have chosen not to
cover. While we have approved many of these patients in
the past, we feel it is necessary to establish more
specific guidelines for patient eligibility. Our PAP
was designed to help uninsured patients with the most
need, and changes are necessary to remain true to that
mission. We believe these changes also will help
increase access among those payers who continue to
restrict access.\541\
---------------------------------------------------------------------------
\541\ Appendix D, Ex. 12, Letter from Coy Stout, Vice President,
Managed Markets, Gilead Sciences, Inc., to Community Partner (July 1,
2015).
The price of Sovaldi constituted a large burden--notably
among state Medicaid programs, Medicare, and the BOP--and
triggered access restrictions across public and private payers,
thus limiting the number of HCV-infected patients who could
access the new treatment options. In response to these
restrictions, Gilead stayed firm in its initial contracting
strategy by offering only small discounts in return for opening
patient access, and limiting its PAP program.
Section 5: Patients' and Payers' Reactions to the Price of Sovaldi
Gilead may not have anticipated the scope and depth of the
resulting restrictions as it was attempting to price Sovaldi in
a way that would not ``hinder patient access to uncomfortable
levels,'' \542\ but it should not have been surprised by
negative reactions--particularly after the price was
announced--as patient groups, public and private payers, and
others began to provide direct feedback on the price, as
detailed in this section.
---------------------------------------------------------------------------
\542\ Appendix E, Ex. 28, Gilead Sciences, Inc., Sofosbuvir Pricing
and Market Access Assessment, Final Recommendations--July 31st, 2013,
GS-0014018, at GS-0014020.
---------------------------------------------------------------------------
By September 2014, as it considered a price for Harvoni,
the company had done its own analysis of access restrictions
that state Medicaid programs had put in place for Sovaldi:
More than half of the states are limiting coverage
to the sickest patients (i.e. F3-F4)
Additional strict criteria including one per
lifetime treatment, patient certifications, and drug/
alcohol testing
Budget concerns driving strict management through
[prior authorization] requirements
Staffing for [prior authorization] requirements
has also impacted coverage decisions (i.e. IL Medi)
Appeals require court hearings in WI, AR, IL \543\
---------------------------------------------------------------------------
\543\ Appendix E, Ex. 52, Gilead Sciences, Inc., HCV Wave 2
Contracting Recommendations, September 9, 2014, GS-0019058, at GS-
0019107.
``Extreme budget constraints drive strict criteria for
treatment and an unstable formulary review process inhibiting
access to Sovaldi,'' the presentation concluded.\544\
Furthermore, the company expected that ``[h]ighly restrictive
criteria to control costs and F3-F4 restrictions will likely
remain.'' \545\
---------------------------------------------------------------------------
\544\ Id.
\545\ Id. at GS-0019108.
---------------------------------------------------------------------------
The presentation shows that Gilead was clearly aware that
the cost of providing Sovaldi to Medicaid patients had become--
and would continue to be--problematic, even though executives
believed $84,000 was a fair price that would be readily
accepted by the marketplace, given their belief in the clinical
efficacy of the product. Meyers said that Gilead had spoken to
many major payers and received positive feedback, and that
negative press about Sovaldi's price only took off after the
spike in the off-label combination of Sovaldi and Olysio.\546\
However, even before the product was introduced to market,
Gilead officials were informed of significant concerns about
the price.
---------------------------------------------------------------------------
\546\ Interview with Jim Meyers, Senior Vice President, North
America Commercial Organization, Gilead Sciences, Inc., in Washington,
D.C. (Oct. 30, 2014).
---------------------------------------------------------------------------
For many payers, particularly in Medicaid, the combination
of price and an influx of patients seeking treatment for HCV
was a major part of the concerns--and the warnings--that Gilead
received. The material that follows shows that Gilead officials
were told, and in some cases repeatedly, about the potential
negative consequences that a high price for Sovaldi and future
HCV treatments could have on the American health system, public
payers, private payers, and ultimately, patients who would be
denied treatment. The communications--in the form of meetings,
phone calls, and written communications--began more than two
months before Gilead received its approval for Sovaldi in
December 2013, and continue into 2015.
Concerns Before and Shortly After FDA Approval
One of the first warnings about the potential impacts of
high HCV drug prices came during a meeting of the FDA's
Antiviral Drugs Advisory Committee.\547\ The administrative
hearing, which took place less than two months before the FDA's
approval of Sovaldi, was one of the final steps in the agency's
review process. Gilead was represented at the hearing by John
McHutchison, William Symonds, and Diana Brainard, all of whom
are either executives or senior managers in the company's liver
disease unit.\548\ The hearing allowed members of the committee
to ask questions of the company with respect to its research,
and in turn, receive input from the public.
---------------------------------------------------------------------------
\547\ U.S. Food and Drug Administration, Center for Drug Evaluation
and Research, Meeting Agenda, Antiviral Drugs Advisory Committee
Meeting (Oct. 25, 2013), available at http://www.fda.gov/downloads/
AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/Antiviral
DrugsAdvisoryCommittee/UCM375281.pdf.
\548\ Id. At the time, McHutchinson was Senior Vice President for
liver diseases; Symmonds was Vice President for liver diseases; and
Brainard was Senior Director of liver diseases.
---------------------------------------------------------------------------
Lynda Dee, a Baltimore attorney who for more than a decade
has advocated on behalf of people infected with AIDS and HCV,
was among those in attendance. For many years, she led a
coalition of advocacy groups that has met with drug companies
prior to drugs being released to the market. These advocacy
group meetings were intended to provide companies with a
``patient perspective'' about the positive and negative impacts
of drugs on consumers--clinically, financially, socially--and
provide a forum to advocate for lower prices.\549\
---------------------------------------------------------------------------
\549\ Telephone interview with Lynda Dee (November 2014).
---------------------------------------------------------------------------
``[O]h, happy day,'' Dee said of Sovaldi's pending
approval, according to a transcript of the meeting.\550\ Dee
ticked off the positives of the drug and the company, one by
one. The groups she was representing, AIDS Action Baltimore and
the Fair Pricing Coalition (FPC), both received grant funding
from Gilead. She was supportive of the company's study
protocols. She also had a personal interest in her attendance:
---------------------------------------------------------------------------
\550\ U.S. Food and Drug Administration, Center for Drug Evaluation
and Research, Meeting Transcript, Antiviral Drugs Advisory Committee,
at 212-216 (Oct. 25, 2013) [hereinafter FDA Meeting Transcript],
available at http://www.fda.gov/downloads/AdvisoryCommittees/
CommitteesMeetingMaterials/Drugs/AntiviralDrugsAdvisoryCommittee/
UCM382913.pdf (statement by Lynda Dee).
---------------------------------------------------------------------------
``I'm actually cured of HCV using sofosbuvir, and I'm
really elated to see this day come. And I think that most
everybody in the HCV community feels that way.'' \551\ However,
she had concerns about price:
---------------------------------------------------------------------------
\551\ Id.
I also hope that--you know, it's America. There are no
rules about what you can charge. But it would be a
shame that this drug would not be accessible to people
because it cost too much. I would urge you. I would say
I would beg you to consider pricing this drug
reasonably. We all know that it's going to be cost-
effective, but that scale of what's cost-effective is I
---------------------------------------------------------------------------
think an unreasonable way to look at it.
I mean, if the price of telaprevir \552\ and boceprevir
\553\ I think is already exorbitant. I mean, if you
could price it even close to what those drugs are, I
think that would be reasonable under the circumstances,
and you'd still make a fortune. The volume that you're
going to get for this is I think it's outstanding. . .
.
---------------------------------------------------------------------------
\552\ The cost of a 12-week treatment of telaprevir is $49,200,
which does not include the cost of pegylated interferon and ribavirin,
which are used in combination with telaprevir. Hepatitis C Online,
Medications to Treat HCV, Telaprevir (Incivek), available at http://
www.
hepatitisc.uw.edu/page/treatment/drugs/telaprevir-drug (last visited
Sept. 28, 2015).
\553\ The cost of boceprevir is $26,400 for a 24 week course,
$35,200 for a 32 week course, and $48,400 for a 44 week course. These
prices do not include the cost of pegylated interferon and ribavirin,
which must be used in combination with boceprevir. Hepatitis C Online,
Medications to Treat HCV, Boceprevir (Victrelis), available at http://
www.hepatitisc.
uw.edu/page/treatment/drugs/boceprevir-drug (last visited Sept. 28,
2015).
[T]hank you for the good work and I hope we can get
this drug out to people and as many people that need it
as possible.\554\
---------------------------------------------------------------------------
\554\ FDA Meeting Transcript at 215-16 (statement by Lynda Dee).
An early call for lower pricing was also made during a day-
long meeting between the FPC and Gilead at the company's Foster
City, California, headquarters. Gilead was represented by
McHutchison, David Johnson, vice president of marketing for the
liver diseases business unit, Janice Tam, medical affairs, Coy
Stout, vice president for managed markets; Bill Guyer, medical
affairs; Cara Miller, medical affairs; and Michele Rest,
medical affairs.\555\ The coalition planned to urge Gilead to
set the price for Sovaldi at or below the roughly $60,000 price
of Victrelis and Incivek, protease inhibitors that were then
the prevailing standard of care.\556\
---------------------------------------------------------------------------
\555\ Appendix D, Ex. 13, Meeting Agenda, HCV Fair Pricing
Coalition Meeting (Oct. 3, 2013) (prepared by Cara Miller).
\556\ Appendix D, Ex. 14, Meeting Agenda, ``FPC Gilead 10-3-13
Meeting Agenda (FOR FPC ONLY)'' (Oct. 3, 2013) (prepared by Lynda Dee).
---------------------------------------------------------------------------
Gilead's account of the meeting matches the FPC's agenda.
Johnson sent a detailed summary of the FPC meeting to many of
the company's most senior officials. Johnson described the
meeting as a ``collaborative'' dialogue, noting ``they also
emphasized that they want both a reasonable price and a
comprehensive patient support program,'' and specifying that
``they hope Gilead will price sofosbuvir at or below current
SOC ($60K).'' \557\ The email went on to foreshadow concerns
that many state Medicaid programs would raise after the
approval of Sovaldi and Harvoni:
---------------------------------------------------------------------------
\557\ Appendix E, Ex. 53, Email from Cara Miller to Gregg Alton,
FW: FPC Ad Board Feedback (Oct. 4, 2013), GS-0020133, at GS-0020133--
GS-0020134.
While they understand the clinical value of sofosbuvir
(and believe it is a ``very good drug''), they feel the
cost-effectiveness argument will not matter in the
current environment as states, insurers, physicians and
patients are focused on the ``right now'' costs and not
what the potential cost-savings may be down the road.
This will be particularly true as more new compounds
become available. They also are focused on the
potential impact of a high price on VA/Correctional
formularies--particularly as they expect Merck and
Vertex to significantly lower the price for boceprevir/
telaprevir in advance of our launch. It's possible that
when a patient hears a high price, they may immediately
assume they can't afford treatment and not pursue any
further dialogue with their physicians regarding
treatment. Similarly, a physician may make a value
judgment as to whether it is worth putting a patient
with high-risk behaviors on treatment. Education of
both physicians and patients is critical. Patients have
to advocate for themselves so educating them on how to/
what to ask for will be key. Currently, patients are
getting majority [sic] of their information from media,
not from their doctors. Additional barriers to care
include a lack of federal leadership and policy, and
routine testing for HCV.\558\
---------------------------------------------------------------------------
\558\ Id. at GS-0020134.
The email's recipients included high-level Gilead
executives.\559\
---------------------------------------------------------------------------
\559\ Coy Stout, Bill Guyer, Cara Miller, Jim Meyers, Kevin Young.
Id. Other attendees of the meeting were Vice President for Public
Affairs Amy Flood, Senior Vice President of Medical Affairs Hans
Reiser, and Executive Vice President for Clinical Research and
Development Operations Andrew Cheng. The email also was forwarded by
Cara Miller to Executive Vice President, Corporate and Medical Affairs
Gregg Alton. Id.
---------------------------------------------------------------------------
A month later, according to minutes Dee provided to
investigative staff, the coalition held a teleconference on
December 6, 2013, the day that FDA approved Sovaldi. The
minutes show that coalition members expressed
``disappointment'' about the $84,000 list price of the drug.
Gilead was represented on the call by Guyer, Johnson, Miller
and Stout.\560\
---------------------------------------------------------------------------
\560\ Appendix D, Ex. 15, ``Gilead 12-6-13 Call Notes'' (prepared
by Lynda Dee).
---------------------------------------------------------------------------
On April 14, 2014, four months after Sovaldi had been
approved by the FDA, the FPC sent a follow-up letter to Gilead.
The letter was addressed to Stout and Rest, as well as Kristie
Banks, senior director for business operations and contract
compliance; Jim Drew, director, business operations and
contract compliance and Flood.\561\ The letter reiterated the
coalition's call for the company to lower Sovaldi's price to
improve access for HCV patients:
---------------------------------------------------------------------------
\561\ Appendix D, Ex. 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).
We should remind you of our original warning that, even
though new DAAs are a major improvement that may be
cost-effective in the long run, our healthcare system
lacks this particular downstream thinking. Both
government and industry payer programs operate under
short-term budget constraints that are incapable of
absorbing the costs of Sovaldi for every patient they
---------------------------------------------------------------------------
cover who needs access to this medication.
We had hoped Gilead would be satisfied with cornering
the larger volume market. By all accounts, Gilead will
dominate the DAA market for years to come. This has
made Sovaldi's price all the more unconscionable.
Gilead is already close to recouping the Pharmasset
purchase price of Sovaldi, even before the fixed-dose
combination with ledipasvir is on the market. We still
hope Gilead will consider a larger volume market
strategy--one that will make a respectable profit for
the company, while being priced so that it is
accessible for the millions of patients for whom
Sovaldi is indicated.\562\
---------------------------------------------------------------------------
\562\ Id.
In all, the FPC's message on pricing was directly
communicated to at least a dozen Gilead employees in a private
meeting, public forum, phone conference, and letter, in
addition to multiple press releases and media interviews given
by coalition members that received national press attention.
Early concern about Sovaldi pricing was not limited to
patient advocates. On November 5, 2013, exactly a month before
the FDA granted approval, Meyers sent an email to 16 people
within the company with the ``Synopsis of feedback from top HCV
advisors at AASLD.'' \563\ Meyers subsequently forwarded the
email to John Martin, John Milligan, and Norbert
Bischofberger.\564\ Over the course of six pages, Meyers
summarized discussions with doctors attending the annual
meeting of liver experts, which had been held during the first
five days of November in Washington, D.C. Portions of the email
touched on potential pricing issues the company could face:
---------------------------------------------------------------------------
\563\ Appendix E, Ex. 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.
\564\ Id.; see also id. (email from Jim Meyers to John Martin,
Synopsis of feedback from top HCV advisors at AASLD (Nov. 14, 2013));
Appendix E, Ex. 55, Email from Jim Meyers to John Milligan, Synopsis of
feedback from top HCV advisors at AASLD (Nov. 8, 2013), GS-0020765;
Appendix E, Ex. 56, Email from Jim Meyers to Norbert Bischofberger,
Synopsis of feedback from top HCV advisors at AASLD (Nov. 7, 2013), GS-
0020753.
Ira Jacobson was approached after the Gilead Symposium
by a physician (GI) who works with Empire Blue Cross
Blue Shield whom [sic] told him that Empire is ``scared
to death'' by the pending launch of SOF. He indicated
they put aside $500 million for the PI's and ended up
spending $1.1 billion. When Ira asked the payer
representative what they'd do with a decompensated
cirrhotic who was prescribed 24-48 weeks of SOF + RBV,
he replied ``we'd cover it for 12 weeks, it's on the
patient after that.'' Ira was very concerned with this
response. He went on to say that he was happy to help
us in our efforts with payers in any way that he could.
Mark Sulkowski volunteered that the buzz at AASLD is
that SOF will be the highest priced pill in the history
of the pharmaceutical industry. ''Everyone is
speculating.'' [sic] \565\
---------------------------------------------------------------------------
\565\ Id. (included in all emails above).
---------------------------------------------------------------------------
Controversy After the Price Was Set
Following the drug's approval on December 6, 2013, news
outlets trumpeted the arrival of Sovaldi and the potential
positive benefits for long-suffering hepatitis patients.
Multiple outlets, ranging from national newspapers to regional
outlets and trade press, noted the high price, the controversy
it had created, and the potential barriers it would pose for
patients seeking access to the drug. On December 7, the New
York Times reported:
[T]he greater convenience and effectiveness comes at a
price. Gilead said the wholesale cost of Sovaldi, which
is known generically as sofosbuvir, would be $28,000
for four week--or $1,000 per daily pill. That
translates to $84,000 for the 12 weeks of treatment
recommended for most patients, and $168,000 for the 24
weeks needed for a hard-to-treat strain of the virus.
``This is unbearable to the health care system and it
is completely unjustified,'' said Michael Weinstein,
president of the AIDS Healthcare Foundation, which runs
treatment clinics in the United States and abroad and
has previously clashed with Gilead on the price of its
drugs for H.I.V. The Initiative for Medicines, Access
and Knowledge, a legal group based in New York,
recently filed a motion to try to block patenting of
the drug in India. If it succeeds, generic
manufacturers in India will be able to manufacture
cheap copies of the drug for distribution there and in
some other developing countries. Gilead said the price
was fair given the drug's higher cure rate and that the
total cost for the 12-week regimen was ``consistent
with, and in some cases lower than'' the cost of some
other regimens for hepatitis C. It said it would offer
financial assistance to some patients.\566\
---------------------------------------------------------------------------
\566\ Andrew Pollack, New Hope in Hepatitis As F.D.A. Allows Pill,
N.Y. Times, Dec. 7, 2013, at B1.
---------------------------------------------------------------------------
Ten days later, the Columbus Dispatch (Ohio) reported:
The advances come at a high cost. Sovaldi carries a
wholesale-price tag of $1,000 a pill, or $84,000 for a
full course. How much insurers will cover remains
uncertain, as does when they'll pay for it. People can
live normally with the virus and without serious liver
damage. But once it starts to damage the liver--and
especially after the onset of cirrhosis--treatment
becomes more difficult. ``People will want to get rid
of hep C because it's there, but whether everybody is
going to be offered treatment at this cost, we don't
know,'' [said Dr. William M. Lee, a hepatitis C expert
and clinical professor of internal medicine at Ohio
State University's Wexner Medical Center.] \567\
---------------------------------------------------------------------------
\567\ Misti Crane, New Drugs Close in on Hep C Cure, Columbus
Dispatch, Dec. 16, 2013, at 1A.
On December 30, 2013, National Public Radio produced a
story about Sovaldi titled ``$1,000 Pill For Hepatitis C Spurs
Debate Over Drug Prices,'' in which reporter Richard Knox
interviewed Alton and Camilla Graham, a former Vertex executive
and hepatitis C specialist at Beth Israel Deaconess Hospital in
---------------------------------------------------------------------------
Boston:
RICHARD KNOX: Graham, who's at Beth Israel Deaconess
Hospital in Boston, notes that Gilead paid $11 billion
to acquire a smaller company that developed Sovaldi.
She thinks Gilead should be allowed to recoup that
investment. But . . .
CAMILLA GRAHAM: You only need about 150,000 people to
recover that cost. And so, you know, if you're treating
two million people, once you've recovered your cost,
then I think--I don't want to say it's unfair, but it
does start feeling more exploitative.
RICHARD KNOX: She thinks once Gilead has recovered its
investment cost, it ought to cut the price of Sovaldi.
GREGG ALTON: That's very unlikely that we would do
that. I appreciate that thought.
RICHARD KNOX: Again, that's Gregg Alton of Gilead
Sciences.
GREGG ALTON: Really you need to look at the big
picture. Those who are bold and go out and innovate
like this and take that risk, there needs to be more of
a reward on that. Otherwise it would be very difficult
for people to make that investment.
RICHARD KNOX: Alton says Gilead will help U.S. patients
pay for Sovaldi if they can't afford it and will charge
far less for a course of the drug in places such as
India, Pakistan, Egypt, and China, where most people
with hepatitis C live.
GREGG ALTON: I don't think we'll be able to get it into
the low hundreds. But I think we can get it into an
affordable range for them. It'll be from the high
hundreds to low thousands for these types of markets.
RICHARD KNOX: It took more than 10 years before many
people in developing countries got access to life-
saving HIV drugs. Advocates hope it won't take anywhere
near that long to start curing hepatitis C.\568\
---------------------------------------------------------------------------
\568\ Richard Knox, $1,000 Pill For Hepatitis C Spurs Debate Over
Drug Prices, National Public Radio, Morning Edition (Dec. 30, 2013)
(transcript available on LexisNexis).
On January 6, 2014, the pharmaceutical trade publication
---------------------------------------------------------------------------
FierceBiotech wrote:
Thomas Wei of Jefferies & Co. had initially figured
that Gilead would have to hit a peak sales estimate of
$4 billion to justify the cost of Sovaldi. Analysts
have recently been settling in around $7 billion after
calculating the returns on a pill that will cost $1,000
a day--or $84,000 for a 12-week course. But winning
here has come at a cost that may be hard to calculate.
Already whipped up by Gilead's steep prices on HIV
drugs like the newly approved Stribild, some prominent
nonprofits immediately took a swipe at Gilead's pricing
strategy.\569\
---------------------------------------------------------------------------
\569\ John Carroll, Sovaldi: Gilead Hits Pay Dirt with a
Breakthrough Hep C Drug, FierceBiotech (Jan. 6, 2014), available at
http://www.fiercebiotech.com/special-reports/sovaldi-gilead-hits-pay-
dirt-breakthrough-hep-c-drug.
On July 11, 2014, Gregg Alton, Gilead's Executive Vice
President, Corporate and Medical Affairs, acknowledged, during
an American Enterprise Institute forum, that the price of the
drug had caused controversy and a ``challenge'' to the nation's
---------------------------------------------------------------------------
medical system:
A lot of what's happening here is we have a
breakthrough, a quantum leap in the ability to treat
Hepatitis C. We can do something today that we couldn't
do last year and there's a cost associated with that.
And I think that has challenged our system. But what I
really want to say in closing is that despite all the
challenges and some of the criticism that you may be
hearing, and the friction, and I guess the shrill tone
of the conversation, there's a positive side to this,
which is we're going to cure more people of hepatitis C
this year than we ever have before.\570\
---------------------------------------------------------------------------
\570\ American Enterprise Institute, Discussion transcript, How
Will We Pay for the Price of Cures?, at 35 (July 11, 2014), available
at http://www.aei.org/wp-content/uploads/2014/07/-cost-of-
cures_154738513625.pdf.
---------------------------------------------------------------------------
Responses From Medicaid Programs to Gilead
Following the launch of Sovaldi, Medicaid programs in
states across the country were wrestling with the combination
of Gilead's high cost and the flood of patients who wanted to
take advantage of the shorter treatment regimen.
In recent years, a growing number of states have joined
``pools,'' in which several Medicaid programs join forces to
increase their market power. There are three primary pools--
National Medicaid Pooling Initiative (NMPI), Top Dollar (TOP$),
and Sovereign States Drug Consortium (SSDC).\571\ Both NMPI and
TOP$ are administered by Provider Synergies, LLC, a subsidiary
of Magellan Health Services and the SSDC is administered by the
member states.
---------------------------------------------------------------------------
\571\ For more details, see Pharmaceutical Bulk Purchasing: Multi-
State and Inter-Agency Plans, Nat'l Conf. of State Legis., http://
www.ncsl.org/research/health/bulk-purchasing-of-prescription-drugs.aspx
(last updated Jan. 2015).
---------------------------------------------------------------------------
On May 11, 2014, Gilead offered three tiers of supplemental
rebates to the Medicaid pools--6%, 8%, and 10%--that had been
approved by the company's legal department.\572\ Each tier was
tied to requirements that increased patient access, i.e., the
higher the discount, the more access was to be provided:
---------------------------------------------------------------------------
\572\ Appendix D, Ex. 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).
b 6% discount--Unique Position 1. Any PA [prior
authorization] criteria imposed is consistent with and
no more restrictive than the FDA approved label.
Additional restriction for fibrosis score (Metavir) of
F2-F4 [fibrosis levels two through four] is
permissible. PA criteria may require prescriptions be
written by Specialists (hepatologists or
---------------------------------------------------------------------------
gastroenterologists, for example).
b 8% discount--Unique Position 2. Any PA criteria
imposed is consistent with and no more restrictive than
the FDA approved label. PA criteria may require
prescriptions be written by Specialists.
b 10% discount--Unique Position 3. Any PA criteria
imposed is consistent with and no more restrictive than
the FDA approved label. Any PA criteria imposed shall
not require prescriptions by Specialists. Of note,
Gilead has stated that they are not detailing their
hepatitis portfolio to non-Specialists.\573\
---------------------------------------------------------------------------
\573\ Appendix D, Ex. 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). Brown told investigative staff that ``not detailing their
hepatitis portfolio to non-Specialists'' meant that Gilead was not
promoting Sovaldi to general practice doctors.
The relatively small discounts, coupled with requirements
to reduce restrictions for treatment, made the rebates
difficult for states to accept because of the potential
budgetary impact. Magellan's Douglas Brown, who negotiated on
behalf of NMPI and TOP$, made reference to the dynamic when he
---------------------------------------------------------------------------
shared the offer with states on May 19th:
I'm happy to have this offer in place for those states
that cannot otherwise manage utilization in this
category and are experiencing a sharp increase in total
spend. However, I expect most states to forgo this
offer and continue to actively manage this category.
Our negotiations with Gilead continue, especially for
those states that require fibrosis scores of F3 or
greater as well as other PA criteria.\574\
---------------------------------------------------------------------------
\574\ Id.
Less than three weeks later on June 5, 2014, Brown gave an
update to Gilead's William Dozier, a senior manager of national
---------------------------------------------------------------------------
accounts, warning of the backlash from state Medicaid programs:
I would say that 20 of 25 states have no interest in
the offer. [Connecticut] looks to take the 10% offer.
The other four are debating the offer (but not rushing
their decision).\575\
---------------------------------------------------------------------------
\575\ Appendix D, Ex. 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).
Gilead officials also directly met with and received
written correspondence from representatives of individual state
Medicaid programs, who indicated that access restrictions would
follow and that some were already occurring. The Ohio Medicaid
program raised concerns about the price of Sovaldi in a
teleconference with National Accounts Manager David Kaufman and
National Accounts Director Justin Crum on June 26, 2014. Price
concerns were again raised in an in-person meeting that
included the state's Medicaid director, John McCarthy, on
September 24, 2014. The second meeting included Associate
Director for Government Affairs Rebecca O'Hara, Associate
Director for Medical Sciences Paul Miner and outside counsel
Joshua R. Sanders.\576\
---------------------------------------------------------------------------
\576\ Appendix D, Ex. 20, Letter from John B. McCarthy, Director,
Ohio Department of Medicaid, to Peter Gartrell (Aug. 7, 2015).
---------------------------------------------------------------------------
In addition to his meeting with Ohio Medicaid officials,
meeting minutes show that Miner was in attendance on July 8,
2014 when the Michigan Medicaid's pharmaceutical and
therapeutics committee reviewed Sovaldi. Minutes show that
Vanita Pindolia, the vice president, of ambulatory clinical
pharmacy programs-pharmacy care management for Health Access
Plan (HAP) of Michigan, spoke directly to the price of Sovaldi:
Dr. Pindolia from HAP testified on behalf of the
Michigan Association of Health Plans. She addressed the
impact this medication will have on insurance premiums
for both private and government programs and the review
done by the Institute for Clinical and Economic Review
(ICER) for California Technology Assessment Forum
(CTAF). In the ICER report the cost effectiveness is
addressed in terms of ``cost per additional Sustained
Viral Response (SVR)''. Per ICER, if Sovaldi is
reserved to patients with advanced liver disease then
the cost of the drug is recouped as total healthcare
savings at the 20 year mark; however if Sovaldi was
used to treat all patients with positive HCV, only 66%
of drug cost is recouped with total healthcare savings
at 20 year.\577\
---------------------------------------------------------------------------
\577\ Meeting Minutes, Michigan Pharmacy and Therapeutics Committee
(July 8, 2014), available at https://michigan.fhsc.com/Downloads/
PTMinutes-20140708a.pdf.
The CTAF report Pindolia cited, was issued in March 2014,
---------------------------------------------------------------------------
concluding:
A majority of the CTAF Panel rated the new treatments
as ``low value'' compared with older drugs due to the
magnitude of the potential impact on health care
budgets of treating large numbers of patients with
these high-priced drug regimens. Because the financial
impact of using these new drugs to treat all eligible
patients with hepatitis C is untenable, policy makers
should seek avenues to achieve reductions in the
effective price of these medications. Panel members and
outside experts nearly all agreed that for both
clinical and cost reasons, not every patient with
hepatitis C needs to be immediately treated with the
new drugs. Informed, shared decision-making about the
timing of treatment should be encouraged. Given the
circumstances, it is reasonable to consider
prioritizing treatment with the new drugs for patients
who need urgent treatment and have some evidence of
liver fibrosis but do not have advanced liver
disease.\578\
---------------------------------------------------------------------------
\578\ Institute for Clinical and Economic Review, California
Technology Assessment Forum, The Comparative Clinical Effectiveness and
Value of Simeprevir and Sofosbuvir in the Treatment of Chronic
Hepatitis C Infection, at ES9 (Apr. 15, 2014), available at http://
ctaf.org/sites/default/files/u119/CTAF_Hep_C_Apr14_final.pdf.
Two days later, on September 9, 2014, Janet Zachary-Elkind,
deputy director of the Division of Program Development and
Management and a top official from New York State's Medicaid
program, sent an email to Gilead's Vice President for
Government Affairs Kacy Hutchinson that included a table that
quantified the impact that Sovaldi was expected to have on the
state's Medicaid program.\579\ The email reads:
---------------------------------------------------------------------------
\579\ Appendix D, Ex. 21, Email from Janet Zachary-Elkind to Kacy
Hutchison (Sept. 9, 2014).
As you can see, if all beneficiaries with CHC were to
be treated with Sovaldi, our total spend (amount paid
to pharmacies) would be greater than the total annual
pharmacy spend in the NY Medicaid program ($4.5B). The
second chart identifies those beneficiaries that would
meet the standardized criteria that we've developed. If
all beneficiaries that meet our standardized criteria
were to be treated, our total spend for Sovaldi would
be equal to approximately 67% of our total annual
pharmacy spend. While we can't predict the total number
of people that will be treated with Sovaldi, we
estimate that it will be somewhere between 10 and 20%
of 35,010 (the number of members identified in the
second chart) for this calendar year.\580\
---------------------------------------------------------------------------
\580\ Id.
On August 6, 2014 four company officials--Vice President
for Government Affairs Kacy Hutchinson, Vice President of
Managed Markets Coy Stout, National Account Director Justin
Crum, and National Accounts Executive Manager Tyler Hunter--met
---------------------------------------------------------------------------
with the Texas Health and Human Services Commission (HHSC):
HHSC's former Executive Commissioner, Dr. Kyle Janek,
expressed his displeasure with Gilead's pricing. He
reminded the Gilead executives and representatives of
the impact of their drug to the state budget. Given the
size of the Texas Medicaid population, Dr. Janek also
asked for a discounted rate. He referenced the Drug's
availability at a fraction of the price in other
countries and the likelihood that it would be cheaper
for Texas to fly Medicaid recipients to those countries
for treatment than to treat them in the U.S. Gilead
executives and representatives explained that the
company limited access to the drug in other countries
to citizens of those countries and then defended their
pricing model.\581\
---------------------------------------------------------------------------
\581\ Appendix D, Ex. 11, Letter from Andy Vasquez, Deputy
Director, Vendor Drug Program, Medicaid/CHIP, Texas Health and Human
Services Commission, to Hon. Ron Wyden and Hon. Charles E. Grassley at
2 (Aug. 14, 2015).
The next month, Stephanie Tran, Gilead's Associate Manager
for Medical Information, received a letter from the Texas
Health and Human Services Commission requesting clinical data
for Sovaldi and the drug that would eventually be marketed as
Harvoni. The state was seeking more information as it
considered clinical edits for HCV patients. ``With such a
significant impact on the state health care budget, there is
very little room for error,'' Andy Vasquez, the state's
director for vendor drug programs wrote.\582\ ``. . . [T]here
is still data that would be crucial to providing the most
accurate representation of cost-effective treatment, based on
available clinical evidence.'' \583\
---------------------------------------------------------------------------
\582\ Id., Attachment 1.
\583\ Id.
---------------------------------------------------------------------------
In addition to the August meeting and letter to Tran,
company officials had seven more meetings with Texas officials
between October 21, 2014 and January 16, 2015 to discuss
Gilead's rebate offers for Harvoni and Sovaldi. In addition to
Crum, Hunter and Stout, additional participants included
Associate Director for Medical Science Michelle Puyear,
Associate Director of Government Affairs Erin Smith, and
Director for Government Contracts and Pricing Kimberly
Hawkins.\584\ In all, Texas raised concerns about pricing with
at least eight different Gilead officials, yet, as cited above,
the state's P&T Committee eventually designated Viekira Pak as
the preferred therapy for HCV because ``AbbVie submitted more
aggressive rebates.'' \585\
---------------------------------------------------------------------------
\584\ Id., Attachment 2.
\585\ Id. at 2.
---------------------------------------------------------------------------
During a forum in October 2014 at The Brookings Institution
in Washington D.C., advocate Ryan Clary bookended criticism of
access restrictions imposed by commercial insurers and state
Medicaid programs with criticism about Sovaldi's price. He
called for lower prices for future HCV therapies, noting that
they were a contributing factor to Medicaid programs
restricting access to patients. Clary, the executive director
of the National Viral Hepatitis Roundtable, an advocacy
sponsored by several pharmaceutical companies, including
Gilead,\586\ delivered his remarks while sitting next to
Gilead's Chief Operating Officer, John Milligan:
---------------------------------------------------------------------------
\586\ National Viral Hepatitis Roundtable, Sponsors, available at
http://nvhr.org/content/members/sponsors (last visited July 16, 2015).
The public programs, the state Medicaids, that's a
different story. These are programs who are not in the
business to make a profit off of health care; they are
in the business to provide health care to low income
people, many in vulnerable populations, who are in a
safety net program and do the best they can with
strapped budgets. And they are having a real hard time
providing access to Hep C treatment. They don't pay
$84,000, they get significant price relief, but they
are still having issues. The problem with the state
Medicaids is they reacted so quickly to the P.R.
campaign and the misinformation and quickly implemented
really harmful--not all Medicaids, many--harmful
restrictions, that are blanket restrictions, that are
discriminatory particularly toward people who either
currently or have recently injected drugs--and those
are folks who probably would like to be cured of
Hepatitis C and not be transmitting to others--so that
needs to be dealt with. And as far as the price, my
organization and our colleagues have been on record,
the price of Sovaldi is expensive, it is too high. The
rationale makes sense, but when you look at the sheer
number of people who have Hepatitis C, who we know have
Hepatitis C, and you look at the cost of treating
everybody and curing everybody, we are not going to do
it in the next couple years, we know that--time to get
through that misinformation--but that's a really high
cost. And we've encouraged lower prices, we're hoping
that the next wave of prices--and it's not just Gilead,
we have other companies coming on board--really look at
the access problems we're having, understand that price
does play a factor treatment access and make decisions
based on that. It's a fantastic drug. This all comes
from the spirit and the hope that we can cure everyone
with Hepatitis C who wants to be treated. I vote for
the option of treating everyone with Hepatitis C.\587\
---------------------------------------------------------------------------
\587\ The Brookings Institution, Event, The Cost and Value of
Biomedical Innovation: Implications for Health Policy (Oct. 1, 2014),
available at http://www.brookings.edu/events/2014/10/01-cost-and-value-
biomedical-innnovation-hep-c#/full-event/.
---------------------------------------------------------------------------
Congress Raises Concerns
In addition to the letter sent by Senators Wyden and
Grassley that began this investigation, Gilead's CEO received a
letter in March 2014 from three senior members of the House
Energy and Commerce Committee, Henry A. Waxman, Frank Pallone,
Jr., and Diana Degette. The letter raised concern about the
cost of Sovaldi, and its use with Olysio, in an attempt by
providers to avoid the use of interferon:
These costs are likely to be too high for many
patients, both those with public insurance and those
with private insurance. Because Hepatitis C is
``concentrated in low-
income, minority patients,'' the affordability problems
are likely to be particularly acute for state Medicaid
programs and those patients served by these programs.
Colorado and Pennsylvania have already announced that
their Medicaid programs will be limiting use of the new
drug to ``only the sickest patients,'' such as those
already suffering from liver disease. California's
Medicaid program is still considering how and when to
reimburse for the drug. The large pharmacy benefit
manager Express Scripts has said it is ``encouraging
some doctors in its networks to delay prescribing
Sovaldi.'' Even in cases where public or private
insurers pay for the medication, it will impose
substantial costs on taxpayers and could cause premium
increases for those with employer or individual
coverage.\588\
---------------------------------------------------------------------------
\588\ Appendix D, Ex. 22, Letter from Hon. Henry A. Waxman et al.,
to Dr. John C. Martin, Chief Executive Officer, Gilead Sciences, Inc.
(Mar. 20, 2014).
All told, officials from Gilead received communications
from a number of policy makers, advocates, providers, and
payers regarding concerns about the high price of Sovaldi and
that because of the price, patients who could benefit would not
receive the drug. In addition, many noted their concerns about
the impact that its high price would have on public payers.
While Gilead had predicted that a negative response from
patients and advocacy groups was ``very likely'' at the price
point it selected, it may have ultimately underestimated the
extent of concerns. Investigative staff found that this
negative response was directly communicated to Gilead from 2013
through the present.
Section 6: A Competitor Drug Enters the Market
The emergence of an effective competitor--AbbVie's Viekira
Pak--altered the market for HCV drugs, as evidenced by Gilead
entering into substantial discounts with some payers. However,
even with Viekira Pak's entrance, some state Medicaid programs
asserted that Gilead continued to draw a hard negotiating line
and did not offer steep enough discounts. Thus, concerns
regarding price and access restrictions remain, and regulatory
agencies have taken various actions that may further affect the
market for HCV drugs.
Gilead's products, Sovaldi and Harvoni, were the most
widely used HCV treatments in the United States the year
following FDA approval of Sovaldi in late 2013. The primary
competitor to Sovaldi was Olysio, although the Johnson &
Johnson drug was more frequently used as an off-label,
interferon-free combination with Sovaldi than as a stand-alone
treatment.\589\ Following Harvoni's approval by the FDA in
October 2014, use of Olysio sharply declined, most likely
because Harvoni provided an interferon-free single-pill
treatment for genotype 1 patients that was significantly less
expensive than the Sovaldi-Olysio combination.\590\ As the
company prepared to release Harvoni, it was contemplating a
similar contracting strategy to what it had employed for
Sovaldi--a 4% supplemental discount for being listed on the
preferred drug list, and generally 8% for allowing
prescriptions for patients with F2-F4 fibrosis scores and 10%
for allowing authorization to the FDA label (i.e., all
patients).\591\
---------------------------------------------------------------------------
\589\ Appendix D, Ex. 23, Troyen A. Brennan et al., CVS Health
Corp., Analysis of ``Real World'' Sovaldi (sofosbuvir) Use and
Discontinuation Rates, September 2014, at Table 1.
\590\ Michelle Fay Cortez & Cynthia Koons, Johnson & Johnson
Forecasts Profit Decline on Competition, Bloomberg (Jan. 20, 2015),
available at http://www.bloomberg.com/news/articles/2015-01-20/johnson-
johnson-earnings-beat-estimates-on-prescription-sales.
\591\ Appendix E, Ex. 52, Gilead Sciences, Inc., HCV Wave 2
Contracting Recommendations, September 9, 2014, GS-0019058, at GS-
0019112.
---------------------------------------------------------------------------
On December 19, 2014, the FDA approved Viekira Pak,
manufactured by AbbVie.\592\ As discussed in Section 3 of this
report, Gilead had expected Viekira Pak to bring competition to
genotype 1 patients, the largest segment of the U.S. HCV
market. Like Harvoni, Viekira Pak can be used without
interferon, and clinical trials demonstrated that Viekira Pak
offered comparable cure rates to Harvoni.\593\ However, unlike
Harvoni, Viekira Pak is a multi-tablet regimen, rather than a
single-pill treatment. CVS Pharmacy noted that a single-tablet
regimen gave Gilead products the ``best clinical profile,'' but
that ``there was not an appreciable clinical superiority of one
product over another.'' \594\
---------------------------------------------------------------------------
\592\ Press Release, U.S. Food and Drug Administration, FDA
approves Viekira Pak to treat hepatitis C, available at http://
www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm427530.htm.
\593\ American Association for the Study of Liver Diseases and
Infections Disease Society of America, HCV Guidance: Recommendations
for Testing, Managing, and Treating Hepatitis C: Initial Treatment of
HCV Infection, available at http://www.hcvguidelines.org/full-report/
initial-treatment-hcv-infection (last updated Aug. 7, 2015).
\594\ Appendix D, Ex. 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.
---------------------------------------------------------------------------
Three days following Viekira Pak's approval, Express
Scripts Holding Co., the nation's largest pharmacy benefit
manager (PBM), announced that it would make Viekira Pak its
preferred treatment for genotype 1 and would no longer cover
Sovaldi and Harvoni for these patients.\595\ The deal was the
result of AbbVie offering discounted pricing for Viekira Pak
that exceeded discounts Gilead had offered up to that
point.\596\ Reuters reported at the time that ``AbbVie narrowed
the price gap to resemble what Western European countries pay
for Sovaldi, which runs from $51,373 in France to $66,000 in
Germany.'' \597\
---------------------------------------------------------------------------
\595\ Caroline Humer, Express Scripts drops Gilead hep C drugs for
cheaper AbbVie rival, Reuters (Dec. 22, 2014), available at http://
www.reuters.com/article/2014/12/22/us-express-scripts-abbvie-
hepatitisc-idUSKBN0K007620141222.
\596\ Id.
\597\ Id.
---------------------------------------------------------------------------
Gilead responded in January and February by entering into
discounting agreements for Harvoni and Sovaldi with CVS, \598\
Anthem, \599\ Humana, \600\ Aetna, \601\ and UnitedHealth
Group.\602\ Cigna \603\ struck agreements with Gilead for
Harvoni only. Investigative staff could not verify the discount
amounts because agreements between PBMs and drug manufacturers
are confidential. However, in February 2015, Gilead announced
that its ``gross-to-net'' deductions \604\ for HCV products
increased from 22% in 2014 to 46% in 2015, as a result of ``the
recent and ongoing round of negotiations with payers and
PBMs.'' \605\ Peter Wickersham, then-senior Vice president at
Prime Therapeutics, LLC, a PBM representing 26 million people,
described the sudden, steep discounting as unprecedented:
``Wickersham said in his 20 years in the industry he had never
seen prices for a brand-name drug category plummet so quickly
after a competing drug was introduced.'' \606\
---------------------------------------------------------------------------
\598\ Robert Langreth & Caroline Chen, Gilead Makes Exclusive Deal
With CVS For Hepatitis C Drugs, Bloomberg Business (Jan. 5, 2015),
available at http://www.bloomberg.com/news/articles/2015-01-05/gilead-
makes-exclusive-deal-with-cvs-for-hepatitis-c-medicine.
\599\ Robert Langreth, Gilead Strikes Hepatitis C Deal With Anthem,
Bloomberg Business (Jan. 8, 2015), available at http://
www.bloomberg.com/news/articles/2015-01-08/gilead-strikes-hepatitis-c-
deal-with-anthem.
\600\ Bob Herman, Humana Opts For Gilead In Hepatitis C Drug
Battle, Modern Healthcare (Jan. 14, 2015), available at http://
www.modernhealthcare.com/article/20150114/NEWS/301149943.
\601\ Linda A. Johnson, Aetna Chooses Gilead Sciences Hepatitis C
Drugs Over AbbVie's, San Jose Mercury News (Jan. 16, 2015), available
at http://www.mercurynews.com/business/ci_27337565/aetna-chooses-
gilead-sciences-hepatitis-c-drugs-over.
\602\ Caroline Humer, UnitedHealth Backs Gilead's Harvoni As
Preferred Hepatitis C Treatment, Reuters (Jan. 28, 2015), available at
http://www.reuters.com/article/2015/01/28/us-unitedhealth-gilead-
hepatitisc-idUSKBN0L12JP20150128.
\603\ Press Release, Cigna Corporation, Cigna Signs Agreement With
Gilead to Improve Affordability of Hepatitis C Treatment for Customers
and Clients (Feb. 4, 2015), available at http://newsroom.cigna.com/
NewsReleases/cigna-signs-agreement-with-gilead-to-improve-
affordability-of-hepatitis-c-treatment-for-customers-and-clients.htm.
\604\ Since filing its first Annual Report as a public company in
1996, Gilead has recognized and reported its net revenue by deducting
from gross revenue three major items: ``estimated product returns, cash
discounts, and government programs and rebates.'' Gilead Sciences,
Inc., Annual Report (Form 10-K) at 30 (Mar. 25, 1997), available at
http://www.sec.gov/Archives/edgar/data/882095/0000912057-97-009728.txt.
Gilead defined net product sales as sales ``net of estimated mandatory
and supplemental discounts to government payers, in addition to
discounts to private payers, and other related costs,'' in its annual
report for fiscal year 2014. Gilead Sciences, Inc., Annual Report (Form
10-K) at 58 (Feb. 25, 2015), available at http://www.sec.gov/Archives/
edgar/data/882095/000088209515000008/a2014form10-k.htm. In 2013, Gilead
forecast gross-to-net revenue deductions 17.9% for sofosbuvir during
2014, which included an 8.1% deduction for mandatory discounts (such as
Medicaid discounts), a 4.8% deduction for supplemental discounts (such
as discounts made per the terms of commercial contracts), and a 5%
deduction for ``Other'' discounts, including IMA fees, prompt payment
discounts, the Medicare ``donut hole,'' and copay coupons. Appendix E,
Ex. 36, Gilead Sciences, Inc., Sofosbuvir Pricing and Market Access
Assessment, Response to Follow Up Questions (Aug. 26, 2013), GS-
0013857, at GS-0013881, GS-0013883.
\605\ Gilead Sciences, Inc., Fourth Quarter 2014 Gilead Sciences
Earnings Conference Call, Webcast (Feb. 3, 2015), available at http://
investors.gilead.com/phoenix.zhtml?p=irol-event
Details&c=69964&eventID=5178585.
\606\ Robert Langreth, Hepatitis Drug Prices Fall So Low, No
Exclusives Needed, Bloomberg Business (Jan. 12, 2015), available at
http://www.bloomberg.com/news/articles/2015-01-12/prime-covers-both-
gilead-and-abbvie-liver-drugs-as-prices-plunge.
---------------------------------------------------------------------------
CVS told investigative staff that successfully negotiating
with drug manufacturers typically depends on market
competition, stating, ``When single source drugs come to
market, it is difficult to negotiate a lower cost because there
is no market competition,'' but that ``[t]he entrance of
alternative drugs in a class generally increases manufacturers'
willingness to negotiate with payors.'' \607\ CVS, like Express
Scripts, found that ``as new drugs came on to the market like
Viekira Pak, we were able to negotiate discounts.'' \608\
---------------------------------------------------------------------------
\607\ Appendix D, Ex. 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.
\608\ Id.
---------------------------------------------------------------------------
Some states also reached agreements with HCV drug
manufacturers. In January 2015, Texas' Pharmaceutical and
Therapeutics Committee selected Viekira Pak as the program's
preferred drug, both because it viewed the drug as equally
effective and ``because AbbVie submitted more aggressive
rebates . . . Viekira Pak was more cost effective.'' \609\
Texas was one of 13 state Medicaid programs that OHSU
researchers identified as having selected Viekira Pak as the
preferred drug as of May 5, 2015. By comparison, 12 state
Medicaid programs selected Harvoni as their preferred
drug.\610\
---------------------------------------------------------------------------
\609\ Appendix D, Ex. 11, Letter from Andy Vasquez to Hon. Ron
Wyden and Hon. Charles E. Grassley at 2 (Aug. 14, 2015).
\610\ Appendix B, Table 2a.
---------------------------------------------------------------------------
Despite the benefits of competition, many state Medicaid
programs remained concerned about the cost of new HCV therapies
(and the resulting costs). ``Through our multi-state rebate
contract negotiating pool we have engaged HCV product
manufacturers for various pricing level considerations.
However, these efforts have been met with little to no
success,'' Samantha McKinley, the pharmaceutical director for
Kentucky's Medicaid program, wrote to Senators Wyden and
Grassley on October 21, 2015.\611\
---------------------------------------------------------------------------
\611\ Appendix D, Ex. 10, Letter from Samantha McKinley to Hon. Ron
Wyden and Hon. Charles E. Grassley at 2 (Oct. 21, 2015).
---------------------------------------------------------------------------
State Medicaid programs reported that obtaining suitable
discounts from Gilead remained difficult even after Viekira
Pak's entrance in the market. On October 2, 2015, Theodore
Dallas, the Secretary of Human Services for Pennsylvania wrote
that even with competition, Gilead's prices were not
sufficiently reduced, and that the state has retained tight
control over approving prescriptions:
Initially, Gilead offered a very modest supplemental
rebate for Sovaldi on the condition of a guarantee of
unfettered access: no prior authorization, and no
requirements for prescriptions to be written by, or in
consultation with a medical specialist. When Gilead
introduced Harvoni and AbbVie introduced Viekira Pak to
the market, Gilead claimed willingness to negotiate
supplemental rebates but negotiations were
unproductive. Currently, Viekira Pak is designated as
preferred on the [fee-for-service preferred drug list];
Harvoni, Sovaldi, Daklinza and Technivie are designated
as non-preferred. They are covered and available when
determined to be medically necessary. All of the drugs,
including Viekira Pak, require prior
authorization.\612\
---------------------------------------------------------------------------
\612\ Appendix D, Ex. 6, Letter from Theodore Dallas, Secretary,
Department of Human Services, Commonwealth of Pennsylvania, to Hon. Ron
Wyden and Hon. Charles E. Grassley at 3 (Oct. 2, 2015).
On November 5, 2015, Andrew M. Slavitt, Acting
Administrator for CMS, published a blog post concerning access,
affordability, and innovation for prescription drugs in which
he singled out the high cost of new, highly effective HCV drugs
as an ongoing challenge.\613\ Slavitt wrote:
---------------------------------------------------------------------------
\613\ Andrew M. Slavitt, ``Prescription Drugs: Advancing Ideas to
Improve Access, Affordability, and Innovation,'' The CMS Blog (Nov. 5,
2015), available at http://blog.cms.gov/2015/11/05/prescription-drugs-
advancing-ideas-to-improve-access-affordability-and-innovation.
A recent example of a much discussed, highly-effective
drug is a therapy used by Hepatitis C patients.
Hepatitis C, a debilitating and life threatening
infection that leads to chronic conditions of the
liver, has undergone a revolutionary improvement in
cure rates with innovative new medicines. These
medicines are changing the lives of many individuals,
but they are also expensive, costing tens of thousands
of dollars, sometimes even more than one hundred
thousand dollars, per patient. These costs have
strained personal as well as public budgets,
particularly state health care budgets. Because state
budgets generally need to be balanced every year, new
drug treatments can surprise states with tens or
hundreds of millions of dollars in new spending. As
these costs often necessarily compete with other state
programs like K-12 education, transportation, law
enforcement, and public health programs, some states
have made tough choices, including limiting access to
these therapies.\614\
---------------------------------------------------------------------------
\614\ Id.
However, as Slavitt also noted, states have an obligation
to provide treatment. CMS simultaneously issued a notice to all
state Medicaid directors specifically related to HCV drug
access to reinforce the point.\615\ As Slavitt explained in his
post:
---------------------------------------------------------------------------
\615\ Department of Health and Human Services, CMS, Release No.
172, Medicaid Drug Rebate Program Notice, Assuring Medicaid
Beneficiaries Access to Hepatitis C (HCV) Drugs (Nov. 5, 2015),
available at http://www.medicaid.gov/Medicaid-CHIP-Program-Information/
By-Topics/Benefits/Prescription-Drugs/Downloads/Rx-Releases/State-
Releases/state-rel-172.pdf.
Our notice to state Medicaid directors reminds states
of their obligation to provide access to these
promising therapies (consistent with section 1927 of
the Social Security Act) based on the medical evidence,
and that they have tools available to manage their
costs.\616\
---------------------------------------------------------------------------
\616\ Andrew M. Slavitt, ``Prescription Drugs: Advancing Ideas to
Improve Access, Affordability, and Innovation,'' The CMS Blog (Nov. 5,
2015), available at http://blog.cms.gov/2015/11/05/prescription-drugs-
advancing-ideas-to-improve-access-affordability-and-innovation.
The Agency also sent letters to HCV drug companies, Gilead,
Johnson & Johnson, Merck & Company, Inc., and AbbVie, in which
---------------------------------------------------------------------------
Slavitt wrote:
Manufacturers also have a role to play in ensuring
access and affordability. The agency believes it is
important that state Medicaid agencies have access to
the lowest available manufacturer prices in the market.
Additionally, they should be given the opportunity to
participate in discount or value-based purchasing
arrangements offered by manufacturers.\617\
---------------------------------------------------------------------------
\617\ Department of Health and Human Services, CMS, HCV
Communication, Assuring Medicaid Beneficiaries Access to Hepatitis C
(HCV) Drugs (Nov. 5, 2015), available at http://medicaid.gov/medicaid-
chip-program-information/by-topics/benefits/prescription-drugs/hcv-
communication.html.
Additional factors may affect the U.S. market for HCV
therapies. For example, as demonstrated this year by FDA safety
warnings that were issued for Sovaldi and Viekira Pak. On March
24, 2015, the FDA warned ``that serious slowing of the heart
rate can occur when the antiarrhythmic drug amiodarone is taken
together'' with Harvoni or Sovaldi in combination with other
direct-acting antiviral HCV drugs such as Olysio or
daclatasvir.\618\ The warning advised to avoid such co-
prescriptions.\619\ On October 22, 2015, the FDA issued a
warning that Viekira Pak and Technivie (approved for treatment
of genotype 4 patients) ``can cause serious liver injury mostly
in patients with underlying advanced liver disease.'' \620\ The
FDA required new safety warnings reflecting the risk to the
drugs' labels.\621\ While these warnings have not resulted in
any of the drugs being pulled from the market at the time of
this report, it is not known what impact they could have on
practices and attitudes of patients, health care providers, and
payers, which could affect competition in the market.
---------------------------------------------------------------------------
\618\ FDA, FDA Drug Safety Communication: FDA warns of serious
slowing of the heart rate when antiarrhythmic drug amiodarone is used
with hepatitis C treatments containing sofosbuvir (Harvoni) or Sovaldi
in combination with another Direct Acting Antiviral drug (Mar. 24,
2015), available at http://www.fda.gov/Drugs/DrugSafety/ucm439484.htm.
\619\ Id.
\620\ FDA, FDA Drug Safety Communication: FDA warns of serious
liver injury risk with hepatitis C treatments Viekira Pak and Technivie
(Oct. 22, 2015), available at http://www.fda.gov/Drugs/DrugSafety/
ucm468634.htm.
\621\ Id.
---------------------------------------------------------------------------
As such, the market for HCV therapies continues to evolve.
Even as competition appears to have mitigated some of the
pricing concerns discussed throughout this report, concerns
about cost burden and access remain. In addition, future
warnings or regulatory actions could further affect the HCV
market.
Section 7: Conclusions and Questions
This report is a case study of one company's experience in
bringing a breakthrough therapy to market. Although it may have
implications for other companies and other products, this
report focuses only on the facts and circumstances of Gilead
Sciences' introduction of sofosbuvir-based HCV drugs. Given
that, despite the company's assurances of cooperation, Gilead
failed to produce all relevant documents and supporting
materials related to pricing, the staff's analysis of pricing
decisions and strategies is necessarily based only on the
documents and interviews that were provided by the company and
from outside sources.
Gilead acquired access to its sofosbuvir-based drugs
through a multi-billion dollar acquisition and spent hundreds
of millions of dollars more completing clinical trials and FDA
approvals. While there were extensive discussions regarding
return on those investments while Gilead was considering the
acquisition of Pharmasset, there is scant evidence that return
on these investments played a significant role in determining
the pricing of these drugs. Similarly, the cost of
manufacturing Sovaldi, which was nominal, played no part in
establishing the price. In an interview, Gilead executive Jim
Meyers, who played a lead part in making the pricing
recommendation did not know the cost of manufacturing the drug.
During the investigation, Gilead asserted that its primary
concern in developing and marketing Sovaldi was to treat the
largest number of HCV patients possible. For example, Gilead
claimed that it shifted the emphasis of Sovaldi's Phase 3
trials to focus more heavily on treating genotype 1 patients,
which Meyers told investigative staff was done to help as many
patients as possible--as many as 5 million people are infected
with HCV in the U.S., of which roughly 70% are carrying
genotype 1. In reality, Gilead's marketing, pricing, and
contracting strategies were focused on maximizing revenue--even
as the company's analysis showed a lower price would allow more
people to be treated--not only for Sovaldi, but more
importantly for its follow-on sofosbuvir-based product
pipeline. Significantly, when confronted with the widespread
initiation of access restrictions, Gilead refused to offer
substantial discounts and did not significantly modify its
contracting strategy to improve patient access.
A key consideration in Gilead's decision-making process to
determine the ultimate price of Sovaldi was setting the price
such that it would not only maximize revenue, but also prepare
the market for Harvoni and its even higher price. To that end,
Gilead's goal throughout its pricing decision process appears
to have been to identify the price just below the level where
payers would place significant restrictions on patient access.
Although it knew there would be some patient loss in the
$80,000 to $85,000 per standard dosage range, Gilead's internal
analysis indicated that it was a viable level for the majority
of payers, and would also help secure what the company later
referred to as ``market share leadership'' \622\ for Harvoni as
a preferred future therapy and baseline price for the next wave
of HCV drugs. The response to the launch price by payers
appears to have been more severe than Gilead's expectations.
---------------------------------------------------------------------------
\622\ Appendix E, Ex. 45, Gilead Sciences, Inc., 2015-2016 HCV
Commercial Plan (Apr. 22, 2014), GS-0014083, at GS-0014085.
---------------------------------------------------------------------------
While Gilead claimed in interviews with investigative staff
that payers readily accepted the proposed $80,000 to $85,000
price range during its pre-marketing surveys and focus groups,
not a single one of the states, payers, or pharmacy benefits
managers interviewed by staff investigators told us that it
communicated assent in such surveys, nor did its organization.
To the contrary, several experts and entities privately and
publicly warned Gilead about the consequences of excessive
pricing before introduction.
Even though Gilead assumed that the final price
recommendation of $84,000 would not result in significant
patient access restrictions, it quickly became apparent that
this assumption was incorrect as many public and private payers
quickly reacted and adopted restrictions. Ultimately, these
restrictions reduced the number of patients who could have
received treatment.
When presented with these access restrictions and pleas by
both public and private payers for supplemental rebates or
discounts to reduce the cost of HCV treatment for their
respective patient populations, Gilead offered supplemental
rebates and discounts of minimal value (on the order of 10% if
all restrictions were lifted for Medicaid, for example). Only a
handful of payers accepted these additional reductions. When
payers proposed additional discounts, Gilead rejected them.
When launching Harvoni, Gilead essentially executed the
same revenue maximizing methodology that it used for Sovaldi,
even though it was aware that such an approach could cause
similar access challenges. Gilead always intended to extract a
premium for this follow-on, all oral drug. Its acquisition
advisor, during the run-up to Gilead's purchase of Pharmasset,
called it a ``convenience bump.'' By elevating the price for
the new standard of care set by Sovaldi, Gilead intended to
raise the price floor for all future HCV treatments, including
its follow-on drugs and those of its competitors. Its
expectations were confirmed when AbbVie entered the market with
its multi-drug, all oral Viekira Pak for genotype 1 at a base
treatment price of $83,319, marginally below Gilead's prices.
Gilead was able to maintain pricing power until Express
Scripts, a major pharmacy benefits manager, entered into an
agreement with AbbVie to make Viekira Pak its preferred
genotype 1 HCV drug. Gilead quickly entered into its own
agreements with other major benefits managers and payers
including CVS Caremark and Anthem with what appear to have been
substantial discounts. Industry sources have estimated these
discounts to be on the order of 40% from the list price,
although due to their confidential nature, those discounts have
not been confirmed.
Potential Areas for Committee Consideration
The evidence collected for this report presents the Senate
Finance Committee with a warning for critical policy areas
under its jurisdiction. The federal government has
responsibility for billions of dollars in payments for
pharmaceuticals through the Medicare and Medicaid programs.
However the federal government is not the direct payer for
either. In Medicare, payments for pharmaceuticals are made
through prescription drug plans sponsors. In Medicaid, each
state program is responsible for payments, with the federal
government reimbursing a state-specific percentage, or
``match.'' The Finance Committee is responsible for policies
that govern these programs and the intermediaries making
payments on behalf of the federal government.
The narrative in the case of Sovaldi is fairly
straightforward: Pharmasset developed the drug that ultimately
became known as Sovaldi. Gilead purchased Pharmasset and
shepherded Sovaldi through the completion of the FDA approval
process. Gilead engaged in a complex process in determining the
price of Sovaldi, ultimately settling on a price that
underestimated the reaction from both private and public
payers. When the payer community reacted negatively to the
price of Sovaldi during its initial period of monopoly pricing
power, Gilead provided only limited price flexibility, which
led to implementation of widespread treatment restrictions that
limited access to the sickest patients. Roughly a year later,
AbbVie received approval for its drug, Viekira Pak, and
competition through third parties--Express Scripts and CVS
Caremark--immediately extracted rebates and discounts from the
previously set list prices of both products.
One could argue that the system ``worked,'' in that a new
entrant into the market impacted the negotiated cost of the
``first to market,'' or breakthrough, drug. In other words,
competition worked to lower the cost of pharmaceuticals.
Gilead's ability to set and hold the price for Sovaldi at a
point that clearly caused stress to the payer community
lessened with the entrance of a competitor. However, even as
competition lowered prices for therapies, this report documents
that concerns remain, particularly in the public payer
community, about high costs for treating millions of people in
the U.S. infected with HCV.
There is no question that Viekira Pak's entrance into the
market changed the status quo. It is true that aspects of the
system worked, in this case, because AbbVie came to the market
with a competitor drug roughly a year after Sovaldi's release.
However, only looking at that one event in a vacuum ignores the
impact of the efforts that Gilead had undertaken to change the
HCV market as a whole.
Sovaldi was a significant breakthrough for those diagnosed
with HCV. However, comparing the drug with the previous
standard of care is like comparing apples to oranges. At the
most basic level, patients' ability to tolerate it meant that
more patients could take it. This dramatic increase in market
size and resulting revenue to Gilead was anticipated by the
company. However, when payers attempted to extract rebates or
discounts to ease cost concerns given the higher numbers of
patients being treated, Gilead rebuffed those efforts. The
result was that patients who could benefit from these drugs did
not receive them due to the high cost. Those patient
populations remain at risk and will, for the most part, still
require treatment in the future.
Accordingly, the public and private payer community
continue to face a higher cost for the prevailing (new)
standard of care, and higher overall costs because the new
generation of HCV drugs is better tolerated and will most
likely be far more widely prescribed.
Understanding the significance of AbbVie's entrance into
the market is critical. If no other company had developed a
breakthrough competitor with similar clinical results, Gilead's
de facto control of the market could have lasted much longer.
The average time between a single source innovator entering the
market and a generic manufacturer producing its equivalent
product and bringing it to market is 12.6 years.\623\ Without
successful competition, the costs to the public and private
payers could have caused much more significant disruptions and
access restrictions for years.
---------------------------------------------------------------------------
\623\ Henry Grabowski et al., Recent Trends in Brand-Name and
Generic Drug Competition, 17 J. Med. Econ. 207, 207-14 (Dec. 10, 2013),
available at http://informahealthcare.com/doi/abs/10.3111/
13696998.2013.873723.
---------------------------------------------------------------------------
While it is premature to make specific legislative
recommendations, several specific questions warrant public
discussion:
1) What are the effects of a breakthrough, single source
innovator drug on the marketplace?
Among other things, this report reflects the reality that
federal health care programs--notably Medicare and Medicaid--
have little to no policy levers at their disposal to
significantly impact the price of a single source innovator
drug. This report found that not until reasonable competition
entered the marketplace did Gilead's pricing incentives and
behavior change. Not all expensive innovator drugs face
competition so soon after launch, and thus the next expensive
innovator drug could potentially create significant budgetary
pressures for federal payers and lead to access restrictions
for an extended timeframe. In light of Gilead's abrupt change
in behavior when faced with competition, what policy levers are
available to increase competition with a single source
innovator or otherwise ensure single source breakthrough drugs
are available to those who would benefit clinically?
2) Do the payers in the programs have adequate information
to know the cost, patient volume, and increases in
efficacy of a new treatment regimen?
With respect to Sovaldi, cost drove much of the negative
reaction to the introduction of the drug. Gilead argued that
the price point for Sovaldi was less than that of the total
cost associated with the previous treatment regime. The payers
argued that the cost of Sovaldi was greater than any single
treatment previously considered for HCV. What is clear is that
payers were caught off guard by the price of the treatment
regimen, especially when Sovaldi was used in combination with
Olysio, driving the cost of treatment to approximately
$150,000.
With respect to volume, HCV impacts millions of Americans,
the full count of which is unknown. In the case of Sovaldi,
payers were overwhelmed by the cost of the drug in conjunction
with the volume of patients now eligible for treatment. The
volume was further driven by patients being warehoused in
anticipation of new drugs, as well as aggressive marketing by
Gilead and other manufacturers. Again, payers clearly did not
anticipate the demand for Sovaldi, and it is possible Gilead
itself was caught off-guard. However, if the latter is true,
the company decidedly did not take action to self-correct, and
instead remained committed to securing its original price from
public and private payers alike, regardless of volume.
While the Committee does not have jurisdiction over the
approval process of drugs, the Committee's role as a
significant payer cannot be ignored. If the payers do not have
the opportunity to know what is coming and react accordingly
with their plans and pricing, that is a problem. The Committee
should explore ways to provide greater transparency in this
area.
3) What role does the concept of ``value'' play in this
debate, and how should an innovative therapy's value be
represented in its price?
The Committee should consider that cost, patient volume,
and increases in efficacy ultimately speak to the concept of
value. The Committee has worked exhaustively to inject the
concept of value into the reimbursement regimes in Medicare.
While the Committee has worked with value-based purchasing
largely in Medicare Parts A and B, the Committee should turn
its attention to ensuring that the program is getting value for
the spending in Part D. The Congressional Budget Office has
already shown that spending increases for Part D can lead to
decreases in Parts A and B spending. But in the future, the
Committee will also have to consider whether the payers in
Medicare and Medicaid are doing enough to ensure that
innovative drugs produce additional value that supports their
additional expense.
4) What measures might improve price transparency for new
higher-cost therapies while maintaining incentives for
manufacturers to invest in new drug development?
The Committee should explore the degree to which
transparency could put downward pressure on pricing without
exposing confidential, proprietary information about a new
drug's scientific development. When confronted by dramatically
higher costs, many payers restricted access. The Committee
should examine ways to support manufacturers that direct their
efforts toward expanding access to their cures.
The process which a payer of health care services, whether
it be an employer or the federal government, must go through to
determine the exact price it will pay for pharmaceuticals is
long, complicated, and often opaque. While most drug
manufacturers publicly announce the ``price'' of their drugs,
the actual amount paid by individual payers is kept secret for
a variety of potentially legitimate reasons. However, there are
reasons to believe that increased transparency in actual prices
paid would better inform the public as well as help policy
makers make more informed decisions. On the latter point, the
public may be surprised to learn that members of Congress are
forbidden by law \624\ to have access to information regarding
price discounts and rebates agreed to by drug manufacturers as
part of the Medicare and Medicaid programs. Congress and payers
alike need more complete information on the ultimate prices
paid.
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\624\ 42 U.S.C. Sec. 1396r-8(b)(3)(D).
5) What tools exist, or should exist, to address the impact
of high cost drugs and corresponding access
restrictions, particularly on low-income populations
---------------------------------------------------------------------------
and state Medicaid programs?
The data contained in this report provides estimates of the
number of Medicaid enrollees infected with HCV, the number of
enrollees who received treatment, and the cost of that
treatment to taxpayers. More often than not, states responded
to the high need for--and high cost of--HCV treatments by
imposing access restrictions leading to a fraction of the
infected population actually receiving treatment. In addition,
as shown in the report, this high cost, high need situation is
expected to continue to strain state Medicaid budgets and
affect decision-making around access. The Committee should
explore the tools that states and the federal government can
employ, or should be able to employ, to appropriately manage
their patient populations, ensure timely access to medically
necessary treatments, and address the financial constraints of
new cures that enter the market.
Timeline of Key Events
1987 Gilead Sciences, Inc. (Gilead) is
founded in Foster City, California.
1992 Gilead becomes a publicly traded
company.
1998 Pharmasset, Inc. (Pharmasset) is
founded in Tucker, Georgia.
2006 Pharmasset becomes a publicly traded
company.
2008 Pharmasset spends $770,000 researching
PSI-7977, a molecule being developed
for the treatment of the Hepatitis C
virus (HCV). PSI-7977 would become
Sovaldi.
2009 Pharmasset spends $6.9 million
researching PSI-7977.
2010 Pharmasset announces initiation of
Phase 2a and 2b studies for PSI-7977.
This announcement is the first public
acknowledgement that the compound is
being developed. The company spends
$16.4 million researching the
compound.
May 13, 2011 The Food & Drug Administration (FDA)
approves Vertex Pharmaceutical's
Incivek (telaprevir) through priority
review, for the treatment of Chronic
Hepatitis C (CHC) genotype 1 in adult
patients with compensated liver
disease (including cirrhosis), in
combination with pegylated interferon
alfa and ribavirin.
FDA approves Merck & Company's (Merck)
Victrelis (boceprevir) through
priority review, for the treatment of
CHC genotype 1, in combination with
pegylated interferon-alfa and
ribavirin, in adult patients with
compensated liver disease (including
cirrhosis).
These drugs are the first direct-
acting antivirals (DAA) to receive
FDA approval. DAAs work by targeting
enzymes within the RNA of HCV.
September 2, 2011 Gilead begins negotiations to acquire
Pharmasset. Gilead's initial offer is
$100 per share.
November 1, 2011 Pharmasset initiates Phase 3 trials
for PSI-7977.
November 6, 2011 Pharmasset announces results of a
Phase 2 trial in which all Hepatitis
C (HCV) patients who used PSI-7977
were cured of the disease.
November 21, 2011 Gilead announces agreement to purchase
Pharmasset for $137 per share.
December 16, 2011 Pharmasset halts clinical trials for a
second HCV drug, PSI-938. In response
to the news, a Gilead spokesman tells
the Wall Street Journal, ``[s]ince
the announcement from Pharmasset
regarding PSI-938 does not impact the
development of PSI-7977, we do not
believe the fundamental value of the
deal has been impacted.''
January 17, 2012 Gilead completes its purchase of
Pharmasset, Inc. for $11.2 billion.
PSI-7977 becomes GS-7977.
March 25, 2013 Gilead begins its evaluation of
pricing and access for GS-7977, which
would be marketed as Sovaldi.
May 6, 2013 FDA grants Viekira Pak breakthrough
therapy designation.
October 10, 2013 FDA grants Sovaldi breakthrough
therapy designation. The designation
would allow the company to include
two additional Phase 3 studies,
VALENCE and PHOTON-1, which provided
data supporting treatment of genotype
3 patients, and genotype 1 patients
co-infected with HIV, respectively.
November 22, 2013 FDA approves Olysio (simeprevir)
through priority review, for the
treatment of CHC genotype 1 as a
component of a combination antiviral
treatment regimen.
November 18-23, 2013 Gilead executives set the price of
Sovaldi at $84,000.
December 6, 2013 FDA approves Gilead's Sovaldi
(sofosbuvir) through priority review
and with breakthrough therapy
designation, for the treatment of CHC
infection as a component of a
combination antiviral treatment
regimen.
January 29, 2014 The American Association for the Study
of Liver Diseases (AASLD) and
Infectious Disease Society of America
(IDSA) issue recommendations that
health care providers prescribe
Sovaldi and Olysio in combination for
genotype 1 patients who are not
eligible to receive interferon.
July 11, 2014 Senators Wyden and Grassley send a
letter to Gilead CEO John Martin
seeking information about how the
company priced Sovaldi.
August 11, 2014 Vertex Pharmaceuticals notifies
providers it will discontinue sales
of Incivek in October.
October 10, 2014 FDA approves Gilead's Harvoni
(ledispasvir and sofosbuvir) through
priority review and with breakthrough
therapy designation, for the
treatment of CHC genotype 1.
October 28, 2014 The National Association of Medicaid
Directors sends letter to Congress
raising concerns about the price of
Sovaldi and Harvoni.
November 5, 2014 FDA approves Olysio-Sovaldi
combination for treatment of patients
with CHC genotype 1. The application
for the combination was submitted by
Johnson & Johnson.
December 19, 2014 FDA approves AbbVie Inc.'s Viekira
Pack (ombitasvir, paritaprevir, and
ritonavir, dasabuvir) through
priority review and with breakthrough
therapy designation, for use with or
without ribavirin to treat patients
with CHC genotype 1.
December 22, 2014 Express Scripts Holding Co., the
nation's largest pharmaceutical
benefits manager, announces that it
has reached a deal to include Viekira
Pak on its preferred drug list at a
significant, but undisclosed
discount. The deal sparks competition
between AbbVie and Gilead.
January 20, 2015 Johnson & Johnson announces financial
results for full year 2014. Sales of
Olysio total $2.3 billion, largely
attributable to co-prescriptions with
Sovaldi. The company reports a sharp
drop in Olysio sales during the
fourth quarter of 2014, compared to
the third quarter, which analysts
attribute to competition from
Harvoni.
Merck notifies providers that it will
discontinue sales of Victrelis by
December 2015.
February 3, 2015 Gilead announces financial results for
full year 2014. Net product sales for
Sovaldi total $10.3 billion; net
product sales for Harvoni total $2.1
billion. The company announces that
it expects the ``gross-to-net''
discount for HCV drugs to average 46%
in 2015, compared to 22% in 2014. The
increase is attributed to recent
agreements it has reached with
payers. The company also announces a
$15 billion stock buyback program,
and initiates a 43-cent-per-share
quarterly dividend.
March 24, 2015 FDA issues safety warning that Sovaldi
and Harvoni, when used with other
direct-acting antiviral drugs such as
Olysio, can cause ``serious slowing
of the heart rate'' when used with
the arrhythmia drug amiodarone.
July 24, 2015 FDA approves Bristol-Meyer Squibb's
Daklinza (daclatasvir) through
priority review for the treatment of
CHC genotype 3 in combination with
Sovaldi.
FDA approves AbbVie's Technivie
(ombitasvir, paritaprevir, and
ritonavir) through priority review
and with breakthrough therapy
designation, for use in combination
with ribavirin for the treatment of
CHC genotype 4 patients without
cirrhosis.
October 22, 2015 FDA issues safety warning that Viekira
Pak and Technivie can cause serious
liver injury, ``mostly in patients
with underlying advanced liver
disease.''
October 27, 2015 Gilead announces third quarter
financial results. For the first nine
months of 2015, net product sales for
Harvoni total $10.5 billion; net
product sales for Sovaldi total $3.7
billion.
October 30, 2015 AbbVie announces third quarter
financial results. For the first nine
months of 2015, net revenue for
Viekira Pak totals $1.1 billion.
November 5, 2015 The Centers for Medicare & Medicaid
Services (CMS) sends a letter to
state Medicaid programs expressing
concerns about continuing access
restrictions for HCV drugs, and
encouraging states to negotiate with
pharmaceutical companies. On the same
day, CMS sends letters to Gilead,
Johnson & Johnson, AbbVie, and Merck,
seeking information about the
companies' negotiating practices.
Glossary of Key Terms
AbbVie, Inc. Markets and sells Viekira PakTM and
TechnivieTM.
American Association for the Medical societies that have issued
Study of Liver Diseases/ clinical practice guidelines and
Infectious Diseases Society of best practices for treatment of
America (AASLD/IDSA) hepatitis C.
Bristol Myers-Squibb Co. Markets and sells DaklinzaTM.
Cirrhosis Cirrhosis is a condition in which the
liver slowly deteriorates and is
unable to function normally due to
chronic, or long lasting, injury.
Scar tissue replaces healthy liver
tissue and partially blocks the flow
of blood through the liver. The
buildup of scar tissue that causes
cirrhosis is usually a slow and
gradual process. In the early stages
of cirrhosis, the liver continues to
function. However, as cirrhosis gets
worse and scar tissue replaces more
healthy tissue, the liver will begin
to fail. Chronic liver failure,
which is also called end-stage liver
disease, progresses over months,
years, or even decades. With end-
stage liver disease, the liver can
no longer perform important
functions or effectively replace
damaged cells.
DaklinzaTM (daclatasvir) Developed by Bristol-Meyers Squibb.
Approved in July 2015 for treatment
of genotype 3 in combination with
Sovaldi.
Direct-acting antiviral drugs DAAs act against HCV by directly
(DAA) inhibiting viral activities
including specific enzymes such as
polymerase and protease. Among the
DAAs are agents which specifically
target the NS5A (replication
complex), NS5B (polymerase) and NS3/
4A (protease).
Early virologic response (EVR) A significant or complete decline in
hepatitis C RNA levels by week 12 of
treatment. Failing to achieve an EVR
typically means that treatment has
failed and a patient will not clear
the disease.
Fibrosis The liver can regenerate most of its
own cells when they become damaged.
However, if injury to the liver is
too severe or long lasting,
regeneration is incomplete, and the
liver creates scar tissue. Scarring
of the liver, also called fibrosis,
may lead to cirrhosis.
Genotype Hepatitis C is divided into distinct
strains known as genotypes, which
vary in geographic distribution and
respond differently to treatment.
Also referred to as ``GT.''
Genotype 1 The most common strain of hepatitis C
in the United States, accounting for
roughly 70%-75% of infections.
Genotype 2 The second most common strain of
hepatitis C in the United States,
accounting for roughly 15%-16% of
infections.
Genotype 3 The third most common strain of
hepatitis C in the United States,
accounting for roughly 10%-12% of
infections.
Gilead Sciences, Inc. Markets and sells Sovaldi and
Harvoni.
Gross-to-net price The difference between the gross--
wholesale--price of a drug and the
net price after deducting mandatory
and supplemental discounts to
government payers, in addition to
discounts to private payers, and
other related costs.
Harvoni (ledispasvir/sofosbuvir) Developed by Gilead as a fixed-dose,
once daily, single tablet regimen of
two agents. Approved in October 2014
for treatment of genotype 1 without
interferon or ribavirin. First
interferon-free therapy. Also
referred to as Wave 2 and ``SOF/
LDV''
Incivek (telaprevir) Developed by Vertex. Approved in May
2011 for treatment of genotype 1 in
combination with pegylated
interferon-alfa and ribavirin. Was
among the first two direct-acting
antivirals approved to treat
hepatitis C, along with Victrelis.
Interferon-alfa The first approved therapy for
hepatitis C, this injectable drug
works by boosting the immune system
to effectively block new cell sites
to which a virus can attach. It had
major drawbacks for patients because
it required frequent visits to a
health care provider and was often
accompanied by difficult side
effects. Also referred to as IFN.
Johnson & Johnson Markets and sells OlysioTM.
Merck & Co. Marketed and sells Victrelis.
NS5A Inhibitors Class of drugs including ledipasvir
(part of Harvoni), ombitasvir (part
of Viekira PakTM), and daclatasvir
(DaklinzaTM), that inhibit the NS5A
part of the virus that is required
to create the replication complex. A
unique class of antivirals that
first allowed for all-oral regimens
for hepatitis C.
OlysioTM (simeprevir) Developed by Johnson & Johnson.
Approved in November 2013 to treat
genotype 1. The AASLD/IDSA
recommended in January 2014 that it
be used in combination with Sovaldi
for treatment of patients not
eligible for treatment with
interferon. The FDA approved its use
in combination with Sovaldi in
November 2014.
Pegylated interferon-alfa Interferon-alfa linked with
polyethylene glycol, which prolongs
its effect allowing once weekly
injections. Pegylated interferon in
combination with ribavirin was the
standard of care for the treatment
of hepatitis C for over a decade
until 2014. Also referred to as PEG
IFN or PEG.
Pharmasset, Inc. Bought by Gilead in 2011, this
company was the original developer
of PSI-7977, the molecule that would
become Sovaldi and be component of
Harvoni.
Polymerase inhibitors Class of drugs, including Sovaldi,
Harvoni and Viekira PakTM that work
by disrupting the polymerase enzyme
that mediates hepatitis C RNA
replication.
Protease inhibitors Class of drugs including OlysioTM,
Victrelis, and Incivek, that work
by blocking the protease, which
cleaves and processes viral
polyproteins, an important part of
hepatitis C's life cycle.
Rapid virologic response (RVR) When hepatitis C virus is
undetectable at week 4 of treatment.
Reaching RVR typically signifies
high likelihood that a patient has
been successfully cured of the
disease.
Ribavirin An antiviral drug discovered in 1972
used for treatment of RNA viruses
including hepatitis C. It was part
of the standard of care until 2014
and may be a component of current
DAA-based regimens. Also referred to
as RBV.
Sovaldi (sofosbuvir) Developed clinically by Gilead.
Approved in December 2013 to treat
genotypes 1, 2, 3 and 4. Also
referred to as PSI-7977, GS-7977,
SOF, and Wave 1.
Standard of care Treatment accepted by medical experts
as a proper treatment for a certain
type of disease and that is widely
used by healthcare professionals.
Also called best practice, standard
medical care, and standard therapy.
Sustained virologic response Hepatitis C virus RNA is undetectable
(SVR) a set time after treatment--
typically 12 or 24 weeks. Signifies
that a patient has likely been cured
of the disease.
TechnivieTM (obmitasvir/ Developed by AbbVie. Approved in July
paritaprevir/ritonavir) 2015 for treatment of genotype 4.
Treatment experienced (TE) Patient who has received treatment
for a disease.
Treatment naive (TN) Patient who has not yet received
treatment for a disease.
Vertex Pharmaceuticals, Inc. Marketed and sold Incivek.
VictrelisTM (boceprevir) Developed by Merck. Approved in May
2011 for treatment of genotype 1 in
combination with pegylated
interferon-alfa and ribavirin. Was
among the first two direct-acting
antivirals approved to treat
hepatitis C, along with Incivek.
Viekira PakTM (obmitasvir/ Developed by AbbVie as a fixed-dose
paritaprevir/ritonavir/ regimen of three agents active
dasabuvir) against HCV. Ritonavir is included
as a dose-boosting agent. Approved
in December 2014 for treatment of
genotype 1 without interferon or
ribavirin.
Warehousing The common, though informal, practice
of doctors encouraging their
patients to delay treatment close to
the release date of a new therapy
that is expected to be more
effective or less burdensome (in
terms of side effects). Typically
results in a surge of patients using
the new therapy.
Wholesale Acquisition Cost (WAC) The price of a drug before any
discounts, deductions, or other
costs.
Letter from Senators Wyden and Grassley to John Martin, CEO, Gilead
Sciences (July 11, 2014)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
July 11, 2014
Dr. John C. Martin,
Chairman and Chief Executive Officer
Gilead Sciences, Inc.
333 Lakeside Drive
Foster City, CA 94404
Dear Dr. Martin:
The Committee on Finance has jurisdiction of matters related to
``health programs under the Social Security Act and health programs
financed by a specific tax or trust fund,'' as provided by Rule XXV of
the Standing Rules of the Senate. These federal health care programs
include Medicare and Medicaid, which together provide health care to
over 100 million Americans and represent nearly $900 billion in annual
federal spending.
The Federal government is the health care industry's largest
customer, and Congress has a responsibility to conduct oversight and
ensure that taxpayer dollars are used wisely in a transparent market.
Gilead received federal regulatory approval last year for Sovaldi, a
drug developed to treat and cure the Hepatitis C virus (HCV). The drug
has been hailed as a breakthrough treatment, and its commercial release
is a welcome advance in medical research for the 3.2 million Americans
infected with HCV and their families.\1\
---------------------------------------------------------------------------
\1\ Centers for Disease Control and Prevention, Hepatatis C FAQs
for the Public, http://www.cdc.gov/Hepatitis/C/cFAQ.htm#statistics,
accessed July 10, 2014.
Although Sovaldi has the potential to help people with HCV, at $
1,000 per pill, its pricing has raised serious questions about the
extent to which the market for this drug is operating efficiently and
rationally. While a standard course of treatment for Sovaldi has been
widely reported to cost $84,000 in the United States, Gilead will offer
the drug in other countries for a fraction of the price. In Egypt, for
example, Sovaldi could be offered for as low as $900 per course of
treatment--a 99 percent discount of the price in the U.S.\2\
---------------------------------------------------------------------------
\2\ Maggie Fick and Ben Hirschler, Gilead offers Egypt new
hepatitis C drug at 99 percent discount, Reuters, March 21 ,2014,
http://www.reuters.com/article/2014/03/21/us-hepatitis-egypt-gilead-
sciences-idUSBREA2K1VF20140321, accessed July 10, 2014.
The total cost of a course of this therapy also remains in
question. The U.S. Food and Drug Administration dosage approval shows
the price could be higher than the $84,000 for a standard treatment.
Some patients with HCV genotypes 1 and 3 will require 24 weeks of
treatment.\3\ The longer treatment regimen roughly doubles the cost-
per-patient-per-treatment to $168,000 for Sovaldi, not including the
additional cost of peg-interferon alfa and ribavirin used in
combination treatments.\4\ HCV patients with liver cancer could require
48 weeks of treatment.\5\
---------------------------------------------------------------------------
\3\ U.S. Food & Drug Administration, Label for Sovaldi (NDA no.
204671), December 6, 2013, http://www.accessdata.fda.gov/
drugsatfda_docs/label/2013/204671s000lbl.pdf, accessed July 10, 2014.
\4\ Leof, A., et al., (2014). Sofosbuvir for the treatment of
hepatitis C and evaluation of the 2014 American Association for the
Study of Liver Diseases treatment guidelines. Portland, OR: Center for
Evidence-Based Policy, Oregon Health & Science University, p. 7-8,
http://www.ohsu.edu/xd/research/centers-institutes/evidence-based-
policy-center/med/upload/Sofosbuvir_for_HepatitisC_
Final_5_19_2014.pdf, accessed July 10, 2014.
\5\ Supra at note 3.
The large patient population combined with the high price of each
individual treatment creates a question as to whether payors of health
care, including Medicare and Medicaid, can carry such a load. Health
care experts recently estimated that Sovaldi alone could increase
Medicare's spending on prescription drugs by $2 billion between 2014
and 2015 if just 25,000 patients enrolled in the program's prescription
drug benefit, known as Part D, receive prescriptions.\6\ That
represents ``roughly 10 percent of Part D enrollees with the hepatitis
C virus and about one-fourth of enrollees who have been diagnosed.'' If
75,000 Part D enrollees took the drug during the same period, program
costs would increase by $6.5 billion and premiums for all Part D
enrollees could jump 8 percent, ``a bigger increase than in any year
since 2008.'' \7\
---------------------------------------------------------------------------
\6\ Tricia Neuman, et al., The Cost Of A Cure: Medicare's Role In
Treating Hepatitis C, Health Affairs, June 5, 2014, http://
healthaffairs.org/blog/2014/06/05/the-cost-of-a-cure-medicares-role-in-
treating-hepatitis-c/, accessed July 10, 2014.
\7\ Ibid.
Sovaldi's cost also could dramatically increase the government's
spending in other programs, including health care for prisoners with
HCV. According to a recent survey, over 1.8 million people with
hepatitis C are currently incarcerated.\8\ This represents up to 32.8
percent of the total cases of HCV in the U.S.\9\ The Federal Bureau of
Prisons within the Department of Justice has already approved Sovaldi
for use in treating prison populations, and it is reported that it
receives a 44 percent discount.\10\ Even with this discount, American
taxpayers could end up paying billions of dollars buying Sovaldi to
treat inmates infected with HCV.
---------------------------------------------------------------------------
\8\ Varan, A.K., et al. ``Hepatitis C Seroprevalence among Prison
Inmates Since 2001: Still High But Declining.'' Public Health Reports,
129, no. 2 (March/April, 2014): 187-195. (http://www.
ncbi.nlm.nih.gov/pubmed/24587554), accessed July 10, 2014.
\9\ Ibid.
\10\ Peter Loftus, New Hepatitis Drugs Vex Prisons, Wall Street
Journal, April 24, 2014, http://online.wsj.com/news/articles/
SB10001424052702304311204579510054146055222, accessed July 10, 2014.
Given the impact Sovaldi's cost will have on Medicare, Medicaid and
other federal spending, we need a better understanding of how your
company arrived at the price for this drug. In order for a marketplace
to function properly, it must be competitive, fair, and transparent. It
is unclear how Gilead set the price for Sovaldi. That price appears to
be higher than expected given the costs of development, and production
and the steep discounts offered in other countries. An efficient market
needs informed consumers to keep costs down. Consequently, we have
directed our staff to investigate issues related to Sovaldi and
Gilead's pricing of the drug. As part of this investigation, we are
seeking information and documents related to the merger of Gilead
Sciences, Inc. and Pharmasset, Inc., the original developer of Sovaldi,
that was announced November 21, 2011, and the subsequent pricing of
---------------------------------------------------------------------------
Sovaldi.
The following document requests, questions and statements use
``Gilead'' to refer to Gilead Sciences, Inc., its board of directors,
any subsidiaries and contracted third parties; ``Pharmasset'' is used
to refer to Pharmasset, Inc., its board of directors, any subsidiaries
and contracted third parties; ``Morgan Stanley'' refers to Morgan
Stanley & Co., LLC, and all its subsidiaries. ``Barclays'' refers to
Barclays Bank PLC, and all its subsidiaries, including but not limited
to Barclays Capital. ``Bank of America Merrill Lynch'' refers to Bank
of America Corporation, and all its subsidiaries, including, but not
limited to Merrill Lynch. Any reference to ``Sovaldi'', ``PSI-7977'' or
``GS-7977'' refers to sofosbuvir, a drug used in the treatment of
hepatitis C virus, and any other names or codenames used to refer to
said drug, its predecessor, and related formulas, compounds, research
or development projects. ``Supporting documents'' refers to, but is not
limited to, emails, faxes, notes, minutes, memoranda, reports,
forecasts, transcripts, charts, spreadsheets and government forms.
Please answer the following questions and provide the following
documents:
1. Please provide copies of all presentations, financial analyses,
and supporting documents given to Pharmasset and/or to Gilead
from 2010 to present from Morgan Stanley in its role as
Pharmasset's financial advisor.\11\
---------------------------------------------------------------------------
\11\ Pharmasset Schedule 14D-9, December 6, 2011, p. 8.
2. Please provide a copy of the fairness opinion prepared by Morgan
Stanley in conjunction with Gilead's final offering price,\12\
and all supporting documents related to or referencing the
fairness opinion, including but not limited to assumptions
about the pricing and market for PSI-7977.
---------------------------------------------------------------------------
\12\ Ibid., p. 12-13.
3. Please provide copies of the three prospective commercialization
forecasts prepared by Pharmasset's management ``in and prior to
September 2011'' \13\ and all supporting documents.
---------------------------------------------------------------------------
\13\ Ibid., p. 29-30.
4. Please provide copies of Pharmasset' s revised forecasts
(prepared before the American Association for the Study of
Liver Diseases conference in November 2011) \14\ and all
supporting documents, including but not limited to assumptions
about the pricing and market for PSI-7977.
---------------------------------------------------------------------------
\14\ Ibid., p. 31-32. Referred to as the ``Updated Forecast'',
management assumed PSI-7977 would be launched in the United States no
earlier than the third quarter of 2014; that a course of treatment
using PSI-7977 would be priced at $36,000 in the United States, and
that European Union pricing would be 60% to 70% of the U.S. price.
5. Please provide copies of all communications between Pharmasset's
board and its senior management regarding PSI-7977 and all
supporting documents, including assumptions about the pricing
---------------------------------------------------------------------------
and market for the drug.
6. In its final annual financial filing with the Securities and
Exchange Commission (SEC), Pharmasset reported that its
research and development costs totaled $176.7 million for the
fiscal years ending 2009, 2010 and 2011, the period during
which PSI-7977 was being developed.\15\ Of that total,
Pharmasset attributed $62.4 million directly to the development
of PSI-7977.
---------------------------------------------------------------------------
\15\ Pharmasset, Inc., 10-K for the fiscal year ended September 30,
2011, November, 14, 2011, p. 60.
---------------------------------------------------------------------------
a. Please provide an itemized accounting of Pharmasset's total
research and development costs prior to the completion of the
merger with Gilead on January 17, 2012.
b. Please provide an itemized accounting of Pharmasset's
research and development costs directly attributable to the
development of PSI-7977 prior to the completion of the merger
with Gilead on January 17, 2012.
7. Gilead retained Barclays and Bank of America Merrill Lynch as
its financial advisors for the acquisition of Pharmasset.\16\
---------------------------------------------------------------------------
\16\ Gilead Sciences, Inc., and Pharmaset, Inc., Gilead Sciences to
Acquire Pharmasset, Inc., for $11 Billion, November 21, 2011, http://
gilead.com/news/press-releases/2011/11/gilead-sciences-to-acquire-
pharmasset-inc-for-11-billion, accessed July 10, 2014.
---------------------------------------------------------------------------
a. Please provide copies of all communication between Barclays
and Gilead relating to the valuation and acquisition of
Pharmasset, including assumptions, projections, analyses,
recommendations, and any related supporting documents about the
pricing and market for PSI-7977.
b. Please provide copies of all communication between Bank of
America Merrill Lynch and Gilead, relating to the valuation and
acquisition of Pharmassett, including assumptions, projections,
analyses, recommendations, and any related supporting documents
about the pricing and market for PSI-7977.
8. Please provide all analyses, recommendations, and supporting
documents related to the proposed valuation and acquisition of
Pharmasset, including assumptions and projections about the
price and market for PSI-7977. Please include all documents
related to the following:
a. The September 2, 2011 meeting between Pharmasset and Gilead
to discuss acquisition;
b. The October 7, 2011 proposal from Gilead to purchase
Pharmasset for $125 per share;
c. The November 17, 2011 proposal from Gilead to purchase
Pharmasset for $135 per share;
d. The November 20, 2011 proposal from Gilead to purchase
Pharmasset for $137 per share.
9. Please provide copies of all communications between Gilead and
Pharmasset concerning the proposed valuation and acquisition of
Pharmasset, including assumptions and projections about the
price and market for PSI-7977. Please include all supporting
documents related to the following:
a. The September 2, 2011 meeting between Pharmasset and Gilead
to discuss acquisition;
b. The October 7, 2011 proposal from Gilead to purchase
Pharmasset for $125 per share;
c. The November 17, 2011 proposal from Gilead to purchase
Pharmasset for $135 per share;
d. The November 20, 2011 proposal from Gilead to purchase
Pharmasset for $137 per share.
10. Please provide copies of the analysis of the fair value of the
In-Process Research and Development (IPR&D) related to GS-7977
cited in Gilead's 10-Q filed with the U.S. Securities and
Exchange Commission (SEC) for the quarter ending March 31,
2012, \17\ and all supporting documents related to the
preparation of this valuation. Identify and describe the key
assumptions in the IPR&D valuation.
---------------------------------------------------------------------------
\17\ Gilead Sciences, Inc. Form 10-Q for the quarterly period ended
March 31, 2012, May 4, 2012, p. 16.
11. Please provide copies of the analysis of the fair value of IPR&D
related to sofosbuvir cited in Gilead's 10-K filed with the SEC
for the fiscal year ending December 31, 2012, \18\ and all
supporting documents related to the preparation of this
valuation. Identify and describe the key assumptions in the
IPR&D valuation.
---------------------------------------------------------------------------
\18\ Gilead Sciences, Inc., Form 10-K for the fiscal year ended
December 31, 2012, February, 27, 2013, p. 105.
12. Please provide an itemized accounting of research and
development costs \19\ related directly to the development of
sofosbuvir that was incurred by Gilead after the completion of
the Pharmasset merger on January 17, 2012. This accounting
should include separate line items for personnel costs,
clinical studies, materials and supplies, licenses and fees,
milestone payments under collaboration arrangements, overhead
allocations, facilities costs and the value contracts with
contract research organizations (CROs) related directly to the
development of sofosbuvir.
---------------------------------------------------------------------------
\19\ Gilead Sciences, Inc., Form 10-K for the fiscal year ended
December 31, 2013, February 25, 2014, p. 60.
13. Before Gilead could complete its acquisition of Pharmasset, both
companies were required to file pre-merger notifications with
the U.S. Federal Trade Commission (FTC).
a. Please provide copies of Gilead's filing with the FTC, all
documents provided to the FTC pursuant to 16 C.F.R. Sec. 803.1
and 16 C.F.R. Sec. 803.2, all communications with the FTC
related to the filing, and all supporting documents related to
the filing.
b. Please provide copies of Pharmasset's filing with the FTC,
all documents provided to the FTC pursuant to 16 C.F.R.
Sec. 803.1 and 16 C.F.R. Sec. 803.2, all communications with
the FTC related to the filing, and all supporting documents
related to the filing.
14. Please provide copies of the marketing and pricing plans
prepared for, and being used in, the launch of Sovaldi in the
U.S. and internationally,\20\ including all communications and
supporting documents related to the preparation of these plans,
materials, and prices.
---------------------------------------------------------------------------
\20\ Gilead Sciences., Inc., Form 10-Q for the quarterly period
ended March 31, 2014, May 5, 2014, p. 29. Gilead's Selling, General,
and Administrative expenses (SG&A) for the quarter ending March 31,
2014, ``increased by $173.8 million or 46%, compared to the same period
in 2013, due primarily to a $113.6 million increase in headcount and
other expenses to support the ongoing growth and expansion of our
business, which includes ongoing launches of Sovaldi in the United
States and internationally as well as the anticipated launch of
idelalisib.''
---------------------------------------------------------------------------
a. Looking forward, please describe how the commercial success
of Sovaldi, as evidenced by first quarter sales, will affect
marketing and pricing plans, including the cost of production,
and future prices in the U.S. and internationally. If there
will not be any effect, explain why.
15. Sovaldi is currently prescribed in combination with other
medications, which increases the total cost per patient per
course of treatment.\21\ Gilead has applied for approval to
sell single-dose combinations of Sovaldi with other drugs.
---------------------------------------------------------------------------
\21\ Supra at note 3.
---------------------------------------------------------------------------
a. If approval is granted for a single-dose combination drug,
how will it affect the future price of Sovaldi?
b. Please provide copies of any pricing plans, marketing plans,
or price estimates related to these pending combination drugs,
and all supporting documents related to the plans and related
forecasts.
16. Please provide copies of Gilead's estimates of the U.S.
treatment cost-per-
patient and U.S. cost-per-cure for each of the FDA's approved
genotype-based treatment regimens for Sovaldi, including
itemization of the cost of Sovaldi, the cost of combination
drugs, and all supporting documents used in developing such
estimates.
17. Looking forward, what are Gilead's expected changes in the
treatment cost-per-patient and the cost-per-cure of Sovaldi-
based treatment over the next five years for each of the FDA
approval regimens for the U.S. HCV populations?
18. Oregon Health & Science University researchers reviewed
treatment guidelines for Sovaldi jointly issued by several
professional societies, concluding there is a ``substantial
risk of conflict of interest influencing the recommendations
from both individual panel members and funding sources.'' \22\
The organizations' website shows 18 of the 27 panel members
involved in developing the guidance for the American
Association for the Study of Liver Disease (AASLD) and the
Infectious Diseases Society of America (IDSA) disclosed either
a direct financial relationship with Gilead or received
institutional funding from the company.\23\ Both groups, and a
third collaborating partner, the International Antiviral
Society-USA (IAS-USA), have all received funding from
Gilead.\24\
---------------------------------------------------------------------------
\22\ Supra at note 4, p. 21.
\23\ AASLD/IDSA, Recommendations for Testing, Managing, and
Treating Hepatitis C, Disclosure Information, http://hcvguidelines.org/
disclosure_information, accessed July 10, 2014.
\24\ See AASLD 2012 Annual Report p. 29, http://www.aasld.org/
aboutus/Documents/2012AnnualReport.pdf, accessed July 10, 2014; IDSA
Industry relations, Grants and Contributions 2010-2014, http://
www.idsociety.org/IDSA_Industry_Relations, accessed on July 10, 2014;
IAS-USA Cases on the Web Grant Support, https://www.iasusa.org/cow-
grant-support, accessed on July 10, 2014.
---------------------------------------------------------------------------
a. Please provide an itemized accounting of all payments from
2009 to present between Gilead and/or Pharmasset and the
following organizations:
i. AASLD
ii. IDSA
iii. IAS-USA
b. Please provide an itemized accounting of all payments from
2009 to present between Gilead and/or Pharrnasset and the
expert panel members that developed the AASLD/IDSA treatment
guidelines for HCV.\25\
---------------------------------------------------------------------------
\25\ AASLD/IDSA, Recommendations for Testing, Managing, and
Treating Hepatitis C, Disclosure Information, http://hcvguidelines.org/
disclosure_information, accessed on July 10, 2014.
---------------------------------------------------------------------------
c. For each organization or individual identified in (a) or (b),
provide:
i. Date of payment
ii. Payment description
iii. Amount of payment
iv. Year-end or year-to-date payment total and cumulative
total payments for each organization or individual
d. Describe any communications between employees of Gilead and
the organizations and individuals identified in (a) and (b)
regarding the AASLD/IDSA treatment guidelines for HCV. Please
provide all supporting documents related to those
communications.
19. Gilead's advertising and promotional expenses have increased
from $116.6 million in 2011 to $216.2 million in 2013.\26\
---------------------------------------------------------------------------
\26\ Supra at note 19, p. 96.
---------------------------------------------------------------------------
a. How much money does Gilead plan to spend on advertising and
promotional expenses in 2014?
b. How much money does the company plan to spend on advertising
and promotion of SovaIdi in 2014?
c. How much money did the company spend on advertising and
promotion of Sovaldi prior to January 1, 2014?
20. Gilead has included Sovaldi in its patient assistance program ,
which includes coupons for reducing the cost of patient co-
pays.\27\ Gilead estimated that 30,000 patients were treated
with Sovaldi during the first quarter of 2014: \28\
---------------------------------------------------------------------------
\27\ Gilead, Support Path for Sovaldi, http://www.gilead.com/
responsibility/us-patient-access/support%20path%20for%20sovaldi,
accessed on July 10, 2014.
\28\ Supra note at note 20. p. 27.
---------------------------------------------------------------------------
a. How many patients have been treated in the United States with
Sovaldi to date?
b. How many patients in the United States have been assisted by
Gilead's patient assistance program to date?
c. What percentage of patients does Gilead expect to be covered
under this program?
d. What is the average outlay-per-patient in the patient
assistance program?
e. What percentage of the patient's cost for Sovaldi will the
payment assistance program cover for each of the FDA-approved
treatment regimens?
f. What patients are eligible for this assistance? What
patients are ineligible for this assistance?
g. There are a number of HCV-infected populations, such as those
exposed through intravenous drug use, contaminated blood and
those born to someone infected with the virus. Describe the
patient populations expected to be covered by the Sovaldi
patient assistance program.
h. How are the costs of this assistance accounted for within
Gilead's financials, e.g. are they deducted as part of the
company's Selling, General, and Administrative (SG&A) expenses?
21. Sovaldi is and will be sold in multiple countries, many of which
are expected to receive significant discounts compared to the
price in the U.S.
a. Please provide a list of all countries where Sovaldi is or
will be sold, and the corresponding price or planned price for
each country. Describe how the company reached the price for
each country.
b. How are the revenue, costs and any discounts associated with
international sales, such as Egypt, accounted for within
Gilead's financials, e.g. are they deducted as part of the
company's Selling, General, and Administrative (SG&A) expenses?
Thank you in advance for your assistance in this matter. Please
begin producing documents and information on a rolling basis no later
than 14 days--and complete production no later than 60 days--after the
receipt of this letter. Please contact our staff as soon as possible to
discuss prioritizing the order in which responsive documents and
information should be produced.
Please direct any questions about this letter to David Berick,
Chief Investigator, or Elizabeth Jurinka, Chief Health Policy Advisor
for Chairman Wyden, and to Jason Foster, Chief Investigative Counsel,
or Rodney Whitlock, Health Policy Director for Senator Grassley.
Sincerely,
Ron Wyden,
Chairman Charles E. Grassley,
Member
=======================================================================
Appendix A
=======================================================================
State Data and Methodology
To better quantify and qualify the financial impacts of Sovaldi and
Harvoni on individual state Medicaid programs, investigative staff
requested quantitative and qualitative data from all 50 states and the
District of Columbia regarding a series of issues related to Hepatitis
C virus (HCV) infections, pharmaceutical spending, interactions with
Gilead Sciences, Inc., and the financial impact of Sovaldi and Harvoni
on state Medicaid spending. State Medicaid programs were asked to
provide:
- Total spending (pre-rebate) on Sovaldi and Harvoni in calendar
year 2014 (CY 2014)
- The number of prescriptions filled for Sovaldi and Harvoni during
CY 2014
- The number of unique recipients who were dispensed Sovaldi and
Harvoni during CY 2014
- The top 25 drugs, in terms of aggregate spending, in CY 2014
- The rank of Sovaldi and Harvoni in the state's pharmaceutical
spending
- The estimated number of enrollees infected with HCV
- The estimated number of enrollees in each state's Medicaid
program
- Whether the state signed a supplemental rebate agreement with
Gilead in CY 2014
What follows are descriptions of the data compiled by investigative
staff.
Supplemental Rebate
State Medicaid programs were asked if the program agreed to a
supplemental rebate with Gilead for Sovaldi during CY 2014.
Federal law requires pharmaceutical manufacturers to return a
rebate equal to either the difference between a drug's
quarterly average manufacturer price (AMP) and the best price,
or 23.1%, whichever is larger.\1\ In addition to these
statutory requirements, companies can provide supplemental
rebates to Medicaid programs. The supplemental rebates are
typically used by companies as leverage to secure placement on
states' preferred drug lists and increase market share.
---------------------------------------------------------------------------
\1\ 42 U.S.C. Sec. 1396r-8(c)(1) (setting the basic rebate for
single source drugs and innovator multiple source drugs).
Forty-eight programs responded to this request, or were able to
provide this information. The responses are noted in the column
titled ``Supplemental Rebate for Sovaldi in CY 2014'' in Table
---------------------------------------------------------------------------
1.
HCV Enrollees in Medicaid
State Medicaid programs were asked to provide information about the
number of enrollees infected with HCV. Investigative staff
believe these data are the most accurate available
representation of the HCV prevalence within each program. The
methods of data collection were not uniform; reports to
investigative staff used varying levels of detail to describe
how the data were collected. Investigative staff outlined these
methods (where applicable) in notes detailing state-by-state
data variations (see ``Data Variations by State'' after Table
4). The data can be divided into three broad categories:
diagnosed patients, population estimates, or hybrid figures
based on a combination of diagnoses and estimates. In most
cases, the figures were provided as a single number; in cases
where there was a range, investigative staff used the lower
bound, noting both the upper and lower estimates in the data
variations.
Forty-four programs responded to this request. The data can be
found in the column titled ``HCV Enrollees in Medicaid'' in
Table 1.
Total Medicaid Population
State Medicaid programs were asked to provide the program's
enrollment. The data reflect enrollment estimates, average
monthly enrollment, or total enrollment figures for CY 2014, a
specific month or date, or other specified time periods. In
some cases, programs reported separate fee-for-service (FFS)
and managed care organization (MCO) population figures;
investigative staff listed a single number for consistency and
noted full descriptions in the data variations (see ``Data
Variations by State'') when multiple numbers were submitted.
Fifty programs responded to this request. The data can be found in
the column titled ``Total Medicaid Enrollees'' in Table 1.
Total Drug Spending Data
State Medicaid programs were asked to provide a list of the top 25
medications as ranked by total amount paid during CY 2014. The
data do not reflect any required or supplemental rebates. For
each medication, state programs were asked to provide (1) claim
count, (2) wholesale acquisition cost (WAC), (3) drug quantity,
(4) days of supply, and (5) the number of unique recipients. If
Sovaldi did not fall within the top 25 medications by amount
paid, state programs were asked to provide a separate line item
with Sovaldi's rank and the above-
requested information. Many state programs provided the same
data for Harvoni and Olysio when they fell out of the list of
top 25 medications.
All programs responded to this request. Data highlighting total
spending, rank by total spending, and the number of unique
Medicaid recipients for Sovaldi, Harvoni and Olysio can be
found in Tables 2, 3 and 4, respectively. The first three data
columns for each table show figures specific to FFS programs;
the next three columns show stand-alone data for MCO programs;
the final three columns show combined FFS and MCO data in cases
where states did not report separate data for each program.
Individual state programs deliver Medicaid prescription drug
benefits differently, which is reflected in the data. Twenty-
eight states reported their total drug spending as all FFS; 13
states reported separate spending data for FFS and MCO
programs; other states provided a single top 25 list with
combined FFS and MCO data. These differences are specified in
each column, as well as in the data variations detailed in
``Data Variations by State.''
Table 1--Supplemental Rebates and HCV/Total Medicaid Enrollees
----------------------------------------------------------------------------------------------------------------
Supplemental
Rebate for HCV Enrollees in Total Medicaid
State Sovaldi in CY Medicaid Enrollees
2014
----------------------------------------------------------------------------------------------------------------
Alabama................................................ No 6,200 1,031,000
Alaska................................................. No 1,200 130,000
Arizona................................................ No 18,000 1,746,175
Arkansas............................................... No 1,381 902,378
California............................................. No 237,000 12,342,888
Colorado............................................... No 6,229 1,192,000
Connecticut............................................ No 10,800 725,500
Delaware............................................... No 1,444 202,064
District of Columbia................................... No 5,461 247,201
Florida................................................ No 17,230 3,429,343
Georgia................................................ Yes 6,000 1,913,957
Hawaii................................................. No * 328,000
Idaho.................................................. No * 274,541
Illinois............................................... No 15,520 3,000,000
Indiana................................................ No 9,522 1,117,418
Iowa................................................... No 5,406 560,000
Kansas................................................. No * 422,576
Kentucky............................................... No 15,542 1,437,235
Louisiana.............................................. * * 1,292,942
Maine.................................................. Yes 1,749 336,000
Maryland............................................... No 15,019 1,300,000
Massachusetts.......................................... No 21,047 1,852,801
Michigan............................................... No 17,605 2,000,000
Minnesota.............................................. Yes 5,600 939,902
Mississippi............................................ No 1,711 703,015
Missouri............................................... No 13,000 947,250
Montana................................................ No 2,930 167,621
Nebraska............................................... No 862 234,056
Nevada................................................. No 3,513 556,015
New Hampshire.......................................... No 1,600 146,682
New Jersey............................................. No 19,919 1,675,640
New Mexico............................................. No 4,864 790,000
New York............................................... No 57,897 6,221,396
North Carolina......................................... No 19,246 1,840,215
North Dakota........................................... No * 81,000
Ohio................................................... No 6,500 2,936,891
Oklahoma............................................... No 6,416 1,025,312
Oregon................................................. No 10,898 999,496
Pennsylvania........................................... No 31,636 2,161,630
Rhode Island........................................... No 2,200 265,000
South Carolina......................................... No 4,000 1,200,000
South Dakota........................................... * * 117,346
Tennessee.............................................. No 9,772 1,360,000
Texas.................................................. No 17,325 3,884,958
Utah................................................... No * *
Vermont................................................ Yes 1,280 176,128
Virginia............................................... No 10,312 1,136,180
Washington............................................. No 23,310 1,535,509
West Virginia.......................................... No 16,342 494,460
Wisconsin.............................................. * 14,800 1,200,000
Wyoming................................................ Yes 700 85,000
----------------------------------------------------------------------------------------------------------------
* Not available.
State reported data vary by time period. For a full explanation, please see ``Data Variations by State''
following Table 4 in Appendix A.
Table 2--State Reported Medicaid Spending and Data for CY 2014--Sovaldi
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sovaldi Rank-- Sovaldi Total Sovaldi HCV
State Sovaldi Rank--FFS Sovaldi Total Sovaldi HCV Sovaldi Rank-- Sovaldi Total Sovaldi HCV Combined FFS/MCO Spending-- Recipients--
Spending--FFS Recipients--FFS MCO Spending--MCO Recipients--MCO Combined FFS/MCO Combined FFS/MCO
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama A 6 $11,903,250 151 * * * * * *
Alaska A 50 $223,338 4 * * * * * *
Arizona B 7 $313,031 4 2 $23,891,674 259 * * *
Arkansas A 15 $3,236,633 38 * * * * * *
California B 31 $21,866,410 280 * * 1,359 * * *
Colorado A 3 $8,537,340 93 * * * * * *
Connecticut A 1 $66,127,237 744 * * * * * *
Delaware A 20 $1,464,752 16 * * * * * *
District of Columbia A 32 $605,735 9 * * * * * *
Florida D 2 $26,826,502 336 2 $35,429,282 471 2 $62,255,785 712
Georgia A 1 $30,475,725 329 * * * * * *
Hawaii E * * * 1 $18,678,769 184 * * *
Idaho A 10 $1,739,667 18 * * * * * *
Illinois A 4 $18,819,196 208 * * * * * *
Indiana C * * * * * * 2 $40,304,301 462
Iowa A 53 $1,264,706 17 * * * * * *
Kansas C * * * * * * 3 $11,316,299 137
Kentucky D 27 $515,424 6 1 $47,322,123 506 1 $47,837,547 511
Louisiana B 6 $5,645,304 67 2 $5,419,841 60 * * *
Maine A 2 $6,943,323 133 * * * * * *
Maryland B 148 $472,145 9 1 $29,321,884 348 * * *
Massachusetts B 1 $41,471,082 492 1 $52,038,369 549 * * *
Michigan A 167 $800,482 16 * * * * * *
Minnesota A 1 $9,181,119 114 * * 393 * * *
Mississippi D 28 $1,951,548 23 3 $5,715,467 66 11 $7,667,015 87
Missouri A 2 $32,988,645 359 * * * * * *
Montana A 2 $3,721,163 39 * * * * * *
Nebraska A 6 $3,050,208 31 * * * * * *
Nevada A 2 $11,882,983 126 * * * * * *
New Hampshire A 36 $84,677 1 * * * * * *
New Jersey C * * * * * * 1 $55,575,074 695
New Mexico B 6 $296,825 3 1 $8,433,631 105 * * *
New York B 1 $31,137,860 399 1 $332,459,598 3,509 * * *
North Carolina A 2 $38,952,473 473 * * * * * *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Table 2--State Reported Medicaid Spending and Data for CY 2014--Sovaldi--Continued
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Sovaldi Rank-- Sovaldi Total Sovaldi HCV
State Sovaldi Rank--FFS Sovaldi Total Sovaldi HCV Sovaldi Rank-- Sovaldi Total Sovaldi HCV Combined FFS/MCO Spending-- Recipients--
Spending--FFS Recipients--FFS MCO Spending--MCO Recipients--MCO Combined FFS/MCO Combined FFS/MCO
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
North Dakota B 5 $562,542 9 1 $2,081,450 * * * *
Ohio B 2 $6,442,541 101 5 $30,294,252 387 * * *
Oklahoma A 1 $17,824,761 220 * * * * * *
Oregon B 47 $558,280 9 2 $10,003,701 135 * * *
Pennsylvania C * * * * * * 2 $98,136,797 1,059
Rhode Island B 42 $84,010 2 2 $5,383,450 60 * * *
South Carolina B 250 $99,933 2 13 $4,267,112 48 * * *
South Dakota A F 5 $1,607,185 20 * * * * * *
Tennessee A 1 $29,015,258 321 * * * * * *
Texas D * * * 317 $1,145,688 13 410 $1,145,688 13
Utah C * * * * * * 1 $5,583,957 66
Vermont A 2 $3,338,307 45 * * * * * *
Virginia B 18 $1,254,445 21 7 $10,567,386 119 * * *
Washington A 9 $2,143,021 31 * * * * * *
West Virginia A 32 $1,413,795 19 * * * * * *
Wisconsin A 54 $3,073,300 38 * * * * * *
Wyoming A 2 $1,147,913 13 * * * * * *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
A State reported total drug spending data through its FFS program.
B State reported separate total drug spending data for the FFS and MCO programs.
C State reported combined total drug spending data for the FFS and MCO programs.
D State reported combined total drug spending data for the FFS and MCO programs, as well as separate FFS and MCO total drug spending.
E Hawaii reported combined total drug spending data for the FFS and MCO programs, but given Hawaii's Medicaid program is less than 1% FFS, the data is noted as MCO for our purposes (there was
one unique recipient for Sovaldi in the FFS program).
F South Dakota reported a duplicated patient count for Sovaldi recipients.
* Not available or not applicable.
Table 3--State Reported Medicaid Spending and Data for CY 2014--Harvoni
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Harvoni Rank-- Harvoni Total Harvoni HCV
State Harvoni Rank--FFS Harvoni Total Harvoni HCV Harvoni Rank-- Harvoni Total Harvoni HCV Combined FFS/MCO Spending-- Recipients--
Spending--FFS Recipients--FFS MCO Spending--MCO Recipients--MCO Combined FFS/MCO Combined FFS/MCO
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama A * $756,162 24 * * * * * *
Alaska A 385 $31,812 1 * * * * * *
Arizona B * $46,566 1 * $63,507 2 * * *
Arkansas A * * * * * * * * *
California B 164 $2,882,089 57 * * 101 * * *
Colorado A * * * * * * * * *
Connecticut A 4 $16,724,290 319 * * * * * *
Delaware A 494 $61,250 2 * * * * * *
District of Columbia A * * * * * * * * *
Florida D 888 $127,905 3 142 $1,439,135 36 236 $1,567,040 39
Georgia A 15 $7,575,827 125 * * * * * *
Hawaii E * * * 30 $1,118,087 22 * * *
Idaho A 239 $118,169 3 * * * * * *
Illinois A 549 $188,987 8 * * * * * *
Indiana C * * * * * * 23 $4,412,692 74
Iowa A 440 $162,876 3 * * * * * *
Kansas C * * * * * * 26 $2,128,971 49
Kentucky D * * * 27 $5,871,678 92 29 $5,871,678 92
Louisiana B 38 $2,047,978 44 1,070 $32,128 1 * * *
Maine A * $158,796 15 * * * * * *
Maryland B 155 $445,055 10 8 $7,209,942 144 * * *
Massachusetts B 4 $12,252,727 243 * * * * * *
Michigan A * * * * * * * * *
Minnesota A * * * * * * * * *
Mississippi D 250 $99,795 2 131 $299,384 6 185 $399,179 8
Missouri A * * * * * * * * *
Montana A 59 $321,285 280 * * * * * *
Nebraska A 144 $403,704 7 * * * * * *
Nevada A 11 $2,763,618 55 * * * * * *
New Hampshire A * * * * * * * * *
New Jersey C * * * * * * 24 $6,983,022 159
New Mexico B 111 $33,393 1 40 $974,977 22 * * *
New York B * * * 22 $32,362,005 581 * * *
North Carolina A * * * * * * * * *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Table 3--State Reported Medicaid Spending and Data for CY 2014--Harvoni--Continued
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Harvoni Rank-- Harvoni Total Harvoni HCV
State Harvoni Rank--FFS Harvoni Total Harvoni HCV Harvoni Rank-- Harvoni Total Harvoni HCV Combined FFS/MCO Spending-- Recipients--
Spending--FFS Recipients--FFS MCO Spending--MCO Recipients--MCO Combined FFS/MCO Combined FFS/MCO
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
North Dakota B * * * 2 $901,124 * * * *
Ohio B * * * 627 $457,585 11 * * *
Oklahoma A * * * * * * * * *
Oregon B 131 $126,039 1 55 $1,103,510 23 * * *
Pennsylvania C * * * * * * 112 $2,962,739 66
Rhode Island B * * * * * * * * *
South Carolina B 220 $124,509 4 352 $159,131 4 * * *
South Dakota A F * $65,774 1 * * * * * *
Tennessee A 172 $1,046,544 21 * * * * * *
Texas D * * * * * * * * *
Utah C * * * * * * * $1,073,705 20
Vermont A 204 $126,240 2 * * * * * *
Virginia B 180 $133,606 3 268 $458,679 8 * * *
Washington A * * * * * * * * *
West Virginia A 270 $224,919 5 * * * * * *
Wisconsin A * * * * * * * * *
Wyoming A * * * * * * * * *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
A State reported total drug spending data through its FFS program.
B State reported separate total drug spending data for the FFS and MCO programs.
C State reported combined total drug spending data for the FFS and MCO programs.
D State reported combined total drug spending data for the FFS and MCO programs, as well as separate FFS and MCO total drug spending.
E Hawaii reported combined total drug spending data for the FFS and MCO programs, but given Hawaii's Medicaid program is less than 1% FFS, the data is noted as MCO for our purposes (there was
one unique recipient for Sovaldi in the FFS program).
F South Dakota reported a duplicated patient count for Sovaldi recipients.
* Not available or not applicable.
Table 4--State Reported Medicaid Spending and Data for CY 2014--Olysio
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Olysio Total Olysio HCV
State Olysio Rank--FFS Olysio Total Olysio HCV Olysio Rank--MCO Olysio Total Olysio HCV Olysio Rank-- Spending-- Recipients--
Spending--FFS Recipients--FFS Spending--MCO Recipients--MCO Combined FFS/MCO Combined FFS/MCO Combined FFS/MCO
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama A * * * * * * * * *
Alaska A * * * * * * * * *
Arizona B * * * * * * * * *
Arkansas A 225 $342,455 5 * * * * * *
California B * * * * * * * * *
Colorado A * * * * * * * * *
Connecticut A 6 $14,407,876 221 * * * * * *
Delaware A * * * * * * * * *
District of Columbia A * * * * * * * * *
Florida D 35 $5,166,141 91 32 $5,988,711 109 32 $11,154,852 185
Georgia A 18 $6,175,803 97 * * * * * *
Hawaii E * * * 4 $4,615,489 69 * * *
Idaho A * * * * * * * * *
Illinois A * * * * * * * * *
Indiana C * * * * * * 16 $9,299,691 155
Iowa A * * * * * * * * *
Kansas C * * * * * * * * *
Kentucky D * * * 34 $4,990,572 79 41 $4,990,572 79
Louisiana B * * * * * * * * *
Maine A * * * * * * * * *
Maryland B * * * 17 $3,911,975 61 * * *
Massachusetts B 8 $7,079,983 122 9 $7,491,262 117 * * *
Michigan A * * * * * * * * *
Minnesota A * * * * * * * * *
Mississippi D * * * * * * * * *
Missouri A * * * * * * * * *
Montana A 641 $22,561 28 * * * * * *
Nebraska A * * * * * * * * *
Nevada A * * * * * * * * *
New Hampshire A * * * * * * * * *
New Jersey C * * * * * * 22 $7,304,069 138
New Mexico B * * * * * * * * *
New York B * * * 15 $42,514,707 669 * * *
North Carolina A * * * * * * * * *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Table 4--State Reported Medicaid Spending and Data for CY 2014--Olysio--Continued
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Olysio Total Olysio HCV
State Olysio Rank--FFS Olysio Total Olysio HCV Olysio Rank--MCO Olysio Total Olysio HCV Olysio Rank-- Spending-- Recipients--
Spending--FFS Recipients--FFS Spending--MCO Recipients--MCO Combined FFS/MCO Combined FFS/MCO Combined FFS/MCO
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
North Dakota B * * * 13 $138,173 * * * *
Ohio B * * * * * * * * *
Oklahoma A * * * * * * * * *
Oregon B 2,349 $30 1 48 $1,302,597 23 * * *
Pennsylvania C * * * * * * 24 $15,555,728 248
Rhode Island B * * * * * * * * *
South Carolina B * * * 146 $520,477 8 * * *
South Dakota A F * * * * * * * * *
Tennessee A * * * * * * * * *
Texas D * * * 1,548 $136,186 2 1,853 $136,186 2
Utah C * * * * * * 25 $1,121,245 18
Vermont A 32 $819,966 12 * * * * * *
Virginia B 156 $155,985 4 118 $1,204,435 19 * * *
Washington A * * * * * * * * *
West Virginia A * * * * * * * * *
Wisconsin A * * * * * * * * *
Wyoming A * * * * * * * * *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
A State reported total drug spending data through its FFS program.
B State reported separate total drug spending data for the FFS and MCO programs.
C State reported combined total drug spending data for the FFS and MCO programs.
D State reported combined total drug spending data for the FFS and MCO programs, as well as separate FFS and MCO total drug spending.
E Hawaii reported combined total drug spending data for the FFS and MCO programs, but given Hawaii's Medicaid program is less than 1% FFS, the data is noted as MCO for our purposes (there was
one unique recipient for Sovaldi in the FFS program).
F South Dakota reported a duplicated patient count for Sovaldi recipients.
* Not available or not applicable.
Data Variations by State
Acronyms
FFS: fee-for-service
MCO: managed care organization
CY: calendar year (Calendar Year 2014 = January 1, 2014-December 31,
2014)
FFY: federal fiscal year (Fiscal Year 2014 = October 1, 2013-September
30, 2014)
SFY: state fiscal year (State Fiscal Year 2014 = July 1, 2013-June 30,
2014, unless otherwise noted)
HCV: Hepatitis C virus
ICD-9: International Classification of Diseases (ICD), maintained by
the World Health Organization. ICD-9 refers to the ninth revision of
these codes.
Alabama
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Average monthly enrollment during CY 2014;
HCV Enrollees in Medicaid: Enrollees with a claim indicating HCV
diagnosis codes during the period July 2013-December 2014.
Alaska
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Total enrollees during CY 2014 (none enrolled in
managed care);
HCV Enrollees in Medicaid: Estimate of enrollees infected with
Hepatitis C based on available claims data.
Arizona
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014 (Harvoni rank not available because Harvoni was not
released until the fourth quarter of 2014);
Medicaid Population: Enrollment during July 2015 (excluding the
Medicare Savings Program and emergency services populations, 92.7% of
the Arizona Health Care Cost Containment System (AHCCCS) population is
enrolled in MCO's and 7.3% is in FFS);
HCV Enrollees in Medicaid: Enrollees identified in the AHCCCS who have
a claim or encounter with an HCV diagnosis attached to that claim or
encounter.
Arkansas
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Number of Medicaid beneficiaries during SFY 2014
(July 1, 2013-June 30, 2014);
HCV Enrollees in Medicaid: Estimated enrollees with a diagnosis code
(Acute HCV, Chronic HCV, and Unspecified HCV) in medical claims history
during January 1, 2013-January 23, 2015.
California
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014 (unable to provide total spending and rank data for
MCO population);
Medicaid Population: Enrollment during March 2015;
HCV Enrollees in Medicaid: Estimate of enrollees based on a 3% HCV
prevalence of Medi-Cal adults.
Colorado
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Estimates for both FFS and MCO populations
combined;
HCV Enrollees in Medicaid: Enrollees identified from claims and
diagnosis codes during April 2014.
Connecticut
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Total enrollment for June 2014;
HCV Enrollees in Medicaid: Enrollees with HCV as primary diagnosis
during July 2015.
Delaware
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Total enrollment for June 2014;
HCV Enrollees in Medicaid: Enrollees with an HCV diagnosis in their
active profile between May 1, 2014 and April 30, 2015.
District of Columbia
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Enrollment estimates for both FFS and MCO
populations combined (Time period: January 1, 2014-April 30, 2015);
HCV Enrollees in Medicaid: Estimate of enrollees with an HCV diagnosis
during July 2015 (Additional estimate: 11,000 enrollees may be amenable
to treatment).
Florida
Spending: Reported total drug spending data are combined FFS and MCO
data, as well as separate FFS and MCO data, for CY 2014;
Medicaid Population: Total enrollment on January 31, 2014;
HCV Enrollees in Medicaid: Enrollees with at least one HCV diagnosis
record between January 1, 2014 and December 31, 2014.
Georgia
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Enrollment for December 2014 reflects total
enrollee count eligible for Medicaid and PeachCare;
HCV Enrollees in Medicaid: Estimated enrollees in the FFS population
with HCV.
Hawaii
Spending: Hawaii reported combined FFS and MCO data, but given Hawaii's
Medicaid program is less than 1% FFS, the data are noted as MCO for our
purposes (in CY 2014, there was one unique recipient for Sovaldi in the
FFS program);
Medicaid Population: Estimate based on December 2014 enrollment
statistics;
HCV Enrollees in Medicaid: No data provided.
Idaho
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Enrollees during CY 2014;
HCV Enrollees in Medicaid: Estimate not provided.
Illinois
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Projected Medicaid enrollment for SFY 2015 (July
1, 2014-June 30, 2015), with approximately 1.2 million enrolled in an
MCO and 1.8 million in FFS;
HCV Enrollees in Medicaid: Estimated number of enrollees with HCV based
on diagnoses submitted on medical claims during SFY 2014 (July 1, 2013-
June 30, 2014).
Indiana
Spending: Reported total drug spending data are combined FFS and MCO
data for CY 2014 (All Indiana Medicaid enrollees received pharmacy
benefits through FFS program);
Medicaid Population: Total enrollment for December 2014 (68.9% Managed
Care/31.1% FFS);
HCV Enrollees in Medicaid: Enrollees with an HCV diagnosis in 2014.
Iowa
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Estimate for February 2015;
HCV Enrollees in Medicaid: Estimate of enrollees.
Kansas
Spending: Reported total drug spending data are combined FFS and MCO
data for CY 2014;
Medicaid Population: Total enrollment during December 2014 (399,968
enrolled in an MCO);
HCV Enrollees in Medicaid: No data provided.
Kentucky
Spending: Reported total drug spending data are combined FFS and MCO
data, as well as separate FFS and MCO data, for CY 2014;
Medicaid Population: Total combined enrollment for CY 2014 (FFS:
179,031, MCO: 1,301,166);
HCV Enrollees in Medicaid: Enrollees identified with HCV from medical
claims with an adjudication date of August 17, 2015 (Dates of service:
January 1, 2014-December 31, 2014).
Louisiana
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014;
Medicaid Population: Total enrollment on January 6, 2015;
HCV Enrollees in Medicaid: No data provided.
Maine
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Enrollees during CY 2014 based on a January 29,
2015 analysis;
HCV Enrollees in Medicaid: Enrollees identified in Medicaid following
an analysis of medical claims with an HCV diagnosis during CY 2014.
Maryland
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014;
Medicaid Population: Estimate for SFY 2015 (July 1, 2014-June 30,
2015);
HCV Enrollees in Medicaid: Estimated enrollees with an HCV diagnosis.
Massachusetts
Spending: Reported total drug spending data are separate FFS/Primary
Care Clinician (PCC) Plan and MCO data for CY 2014 (Not all MCO's
reported complete data for December 2014);
Medicaid Population: Total enrollment for CY 2014 (1,037,108
unduplicated FFS/PCC members; 815,693 unduplicated MCO members);
HCV Enrollees in Medicaid: Estimated enrollees (MCO and FFS) with
relevant diagnosis codes in their claims data; the 21,047 figure is
based on the low end range estimates for the MCO (9,161-9,319) and FFS
(11,886-12,471) populations.
Michigan:
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Estimate of enrollees during CY 2014 (75% are
typically enrolled in an MCO and approximately 600,000 are in the FFS
program during CY 2014);
HCV Enrollees in Medicaid: Enrollees having at least one Medicaid claim
or encounter in Michigan's data warehouse with one of the following
ICD-9 codes in
FY 2014 (070.44 Chronic hepatitis C with hepatic coma, 070.54 Chronic
hepatitis C without mention of hepatic coma, 070.70 Unspecified viral
hepatitis C without coma, 070.71 Unspecified viral hepatitis C with
coma).
Minnesota
Spending: Reported total drug spending data are FFS for CY 2014 (MCO
reported data include MinnesotaCare enrollees);
Medicaid Population: Combined average monthly enrollment during CY 2014
for Medicaid enrollees (838,256) and MinnesotaCare (101,646);
HCV Enrollees in Medicaid: Estimate of enrollees with HCV during
September 2014 (approximately 1,300 in FFS).
Mississippi
Spending: Reported total drug spending data are combined FFS and MCO
data, as well as separate FFS and MCO data, for CY 2014;
Medicaid Population: Average monthly total enrollment for CY 2014;
HCV Enrollees in Medicaid: Total enrollees having HCV during December
2014 based on paid medical claims containing any ICD-9 code for HCV
(Time period: January 1, 2013-December 31, 2014).
Missouri
Spending: Reported total drug spending data are FFS for CY 2014
(Pharmacy benefit carved out, meaning all MCO and FFS enrollees are
covered through the FFS program);
Medicaid Population: Average monthly enrollment for October 2015;
HCV Enrollees in Medicaid: Estimated enrollees with a diagnosis of HCV
in their claims history on October 2, 2014.
Montana
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Total enrollees during CY 2014;
HCV Enrollees in Medicaid: Total enrollees with claims containing HCV
diagnosis codes (070.41-070.49) with eligibility in June and July 2015.
Nebraska
Spending: Reported total drug spending data are FFS for CY 2014 (all
outpatient prescription medications covered by FFS);
Medicaid Population: Total average monthly enrollment during 2014;
HCV Enrollees in Medicaid: Enrollees as of July 6, 2014, based on
diagnoses submitted on medical claims for the following ICD-9 diagnosis
codes (070.41, 070.44, 070.51, 070.54, 070.70, 070.71) during FFY 2013
among FFS clients.
Nevada
Spending: Reported total drug spending data are FFS for CY 2014 (70% of
Medicaid recipients are in MCOs);
Medicaid Population: Total enrollment for December 2014;
HCV Enrollees in Medicaid: Enrollees diagnosed with HCV during CY 2014.
New Hampshire
Spending: Reported total drug spending data are FFS for CY 2014
(Sovaldi carved out of MCO and paid on FFS basis for CY 2014);
Medicaid Population: Average enrollment for those with full Medicaid
benefits in CY 2014;
HCV Enrollees in Medicaid: Estimate of enrollees with an ICD-9
diagnosis in CY 2013.
New Jersey
Spending: Reported total drug spending data are combined FFS and MCO
data for CY 2014;
Medicaid Population: Total enrollment on December 31, 2014;
HCV Enrollees in Medicaid: Enrollees diagnosed between July 1, 2012-
December 31, 2014.
New Mexico
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014;
Medicaid Population: Estimate of total enrollees during CY 2014;
HCV Enrollees in Medicaid: Estimate of enrollees with HCV.
New York
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014;
Medicaid Population: Total enrollment for March 2015;
HCV Enrollees in Medicaid: Estimated enrollees with a diagnosis of
chronic HCV as identified by ICD-9 codes (data extracted by SUNY
Buffalo on June 3, 2014 with service dates December 13, 2013-April 30,
2014).
North Carolina
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Enrollment during March 2015;
HCV Enrollees in Medicaid: Enrollees diagnosed with HCV according to
medical claims from July 1, 2013-July 28, 2015 (7,350 or 38.2% are
dually eligible for both Medicaid and Medicare; 11,896 patients are
eligible for Medicaid only).
North Dakota
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014;
Medicaid Population: CY 2014 enrollment estimate including the FFS
(65,000) and MCO (16,000) populations;
HCV Enrollees in Medicaid: No data provided.
Ohio
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014;
Medicaid Population: Total enrollment for December 2014;
HCV Enrollees in Medicaid: Estimate of Medicaid patients infected with
HCV.
Oklahoma
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Total enrollment during CY 2014;
HCV Enrollees in Medicaid: Estimated enrollees with a diagnosis of HCV
during SFY 2014 (July 1, 2013-June 30, 2014).
Oregon
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014;
Medicaid Population: Total enrollment on December 15, 2014;
HCV Enrollees in Medicaid: Current enrollees (as of September 2014)
with a chronic HCV-related diagnosis code (January 2010-September
2014).
Pennsylvania
Spending: Reported total drug spending data are combined FFS and MCO
data for CY 2014 (FFS: 29%, MCO: 72% during CY 2014);
Medicaid Population: Current enrollees on July 2015, including those
dually eligible for Medicare and Medicaid;
HCV Enrollees in Medicaid: Estimate based on a 2014 University of
Pittsburgh study estimating 46,397 non-dual eligible enrollees in
Pennsylvania infected with HCV. Based on this model, 31,636, or 68%,
have not been successfully treated.
Rhode Island
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014 (approximately 6% of enrollees in FFS);
Medicaid Population: Average monthly enrollment during CY 2014;
HCV Enrollees in Medicaid: Estimate based on an average of total
enrollees served in CY 2014, multiplied by a mid-range of incidence/
prevalence information for HCV, and adjusted for adult population range
(adjusted further if based on policy of treating Stage 3 and 4 disease
only).
South Carolina
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014;
Medicaid Population: Total enrollment on July 1, 2015 (63% in one of
six MCO plans);
HCV Enrollees in Medicaid: Number of enrollees with an ICD-9 diagnosis
of HCV in their medical claims history.
South Dakota
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Average monthly enrollment during SFY 2015 (July
1, 2014-June 30, 2015);
HCV Enrollees in Medicaid: No data provided.
Tennessee
Spending: Reported total drug spending data are FFS for CY 2014
(Tennessee is a 100% managed care state, though pharmacy services are
delivered through an administrative services only contract with a
Pharmacy Benefit Manager, generally considered FFS);
Medicaid Population: Estimate of total CY 2014 enrollment (including
dual-eligibles);
HCV Enrollees in Medicaid: Estimate for CY 2014.
Texas
Spending: Reported total drug spending data are combined FFS and MCO
data, as well as separate FFS and MCO data, for CY 2014 (rank by total
spending is the only difference between MCO and combined FFS and MCO
data; Sovaldi, Harvoni and Olysio not in FFS);
Medicaid Population: Average monthly enrollees during CY 2014 (includes
all full-benefit Medicaid clients);
HCV Enrollees in Medicaid: Enrollees with an HCV diagnosis code in the
first 10 diagnosis code fields during SFY 2013 (September 1, 2012-
August 31, 2013) claims/encounters data.
Utah
Spending: Reported total drug spending data are combined FFS and MCO
data for CY 2014;
Medicaid Population: No data provided;
HCV Enrollees in Medicaid: No data provided.
Vermont
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Enrollment during December 2014;
HCV Enrollees in Medicaid: Estimate of treatable enrollees with Chronic
Hepatitis C (CHC), according to a model based on a 1.6% prevalence
among the adult Medicaid population.
Virginia
Spending: Reported total drug spending data are separate FFS and MCO
data for CY 2014;
Medicaid Population: Total enrollment on December 31, 2014;
HCV Enrollees in Medicaid: Enrollees during December 2014 with any
diagnosis for HCV based on all available claims (January 2005-December
2014).
Washington
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: Enrollment during December 2014, of which 234,518
enrolled in FFS and 1,300,992 enrolled in an MCO (approximately 15% FFS
and 85% MCO);
HCV Enrollees in Medicaid: CY 2014 estimate based on enrollee
demographics and CDC published estimates of HCV prevalence data.
West Virginia
Spending: Reported total drug spending data are FFS for CY 2014;
Medicaid Population: January 31, 2015 total enrollment figures for both
FFS (291,846) and MCO (202,614) populations;
HCV Enrollees in Medicaid: Enrollees diagnosed with HCV in the FFS
program based on a January 31, 2015 analysis.
Wisconsin
Spending: Reported total drug spending data are FFS in CY 2014
(Wisconsin carves out the pharmacy benefit from managed care; 69%
enrolled in a managed care plan);
Medicaid Population: Estimated enrollment during December 2014;
HCV Enrollees in Medicaid: Estimate for Wisconsin enrollees with HCV.
Wyoming
Spending: Reported total drug spending data are FFS for CY 2014
(Wyoming is 100% FFS);
Medicaid Population: Estimate of annual enrollment during SFY 2014
(July 1, 2013-June 30, 2014);
HCV Enrollees in Medicaid: Enrollees with a diagnosis of HCV from a
January 2014 query.
=======================================================================
Appendix B
=======================================================================
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
=======================================================================
Appendix C
=======================================================================
Monthly Part D Spending on Hepatitis C Drugs Since 2014
----------------------------------------------------------------------------------------------------------------
Non-Gilead HCV
Month Drugs SOVALDI HARVONI Grand Total
----------------------------------------------------------------------------------------------------------------
Jan-14.............................. $28,442,376 $87,971,156 .............. $116,413,532
----------------------------------------------------------------------------------------------------------------
Feb-14.............................. $43,853,177 $172,286,950 .............. $216,140,127
----------------------------------------------------------------------------------------------------------------
Mar-14.............................. $76,366,244 $279,584,516 .............. $355,950,760
----------------------------------------------------------------------------------------------------------------
Apr-14.............................. $100,038,835 $335,657,011 .............. $435,695,845
----------------------------------------------------------------------------------------------------------------
May-14.............................. $117,118,858 $374,015,256 .............. $491,134,114
----------------------------------------------------------------------------------------------------------------
Jun-14.............................. $119,223,080 $362,401,672 .............. $481,624,753
----------------------------------------------------------------------------------------------------------------
Jul-14.............................. $123,297,596 $357,824,949 .............. $481,122,544
----------------------------------------------------------------------------------------------------------------
Aug-14.............................. $109,346,905 $307,513,498 .............. $416,860,404
----------------------------------------------------------------------------------------------------------------
Sep-14.............................. $98,500,726 $274,536,702 .............. $373,037,428
----------------------------------------------------------------------------------------------------------------
Oct-14.............................. $84,139,502 $243,317,636 $52,627,766 $380,084,904
----------------------------------------------------------------------------------------------------------------
Nov-14.............................. $50,040,416 $160,278,599 $211,035,968 $421,354,984
----------------------------------------------------------------------------------------------------------------
Dec-14.............................. $41,520,872 $151,573,035 $436,228,838 $629,322,745
----------------------------------------------------------------------------------------------------------------
Jan-15.............................. $31,306,240 $111,180,236 $484,972,311 $627,458,787
----------------------------------------------------------------------------------------------------------------
Feb-15.............................. $33,999,630 $108,632,947 $552,282,193 $694,914,770
----------------------------------------------------------------------------------------------------------------
Mar-15.............................. $39,714,722 $121,356,036 $702,916,231 $863,986,988
----------------------------------------------------------------------------------------------------------------
Apr-15.............................. $36,506,518 $114,514,855 $686,400,733 $837,422,106
----------------------------------------------------------------------------------------------------------------
May-15.............................. $31,753,078 $104,467,097 $636,896,854 $773,117,030
----------------------------------------------------------------------------------------------------------------
Jun-15.............................. $30,554,998 $109,482,553 $653,142,640 $793,180,191
----------------------------------------------------------------------------------------------------------------
Grand Total......................... $1,195,723,772 $3,776,594,704 $4,416,503,535 $9,388,822,010
----------------------------------------------------------------------------------------------------------------
Source: CMS Chronic Conditions Warehouse, http://ccwdata.org.
Note: Spending data are prior to rebates.
CY2013 Part D Spending on HCV Drugs
------------------------------------------------------------------------
Drug Name Spending
------------------------------------------------------------------------
INCIVEK...................... $177,000,000
------------------------------------------------------------------------
INTERFERON................... $138,000,000
------------------------------------------------------------------------
VICTRELIS.................... $45,000,000
------------------------------------------------------------------------
RIBAVIRIN.................... $18,000,000
------------------------------------------------------------------------
SOVALDI...................... $14,000,000
------------------------------------------------------------------------
OLYSIO....................... $2,000,000
------------------------------------------------------------------------
Grand Total.................. $394,000,000
------------------------------------------------------------------------
Source: Centers for Medicare & Medicaid Services, Office of Enterprise
Data and Analytics.
Notes: Spending data are prior to rebates; Olysio was approved by the
FDA on November 22, 2013; Sovaldi was approved by the FDA on December
6, 2013.
CY2014 Part D Spending on HCV Drugs
------------------------------------------------------------------------
Drug Name Spending
------------------------------------------------------------------------
SOVALDI...................... $3,106,960,981
------------------------------------------------------------------------
OLYSIO....................... $833,253,319
------------------------------------------------------------------------
HARVONI...................... $699,892,572
------------------------------------------------------------------------
Other........................ $158,635,267
------------------------------------------------------------------------
Grand Total.................. $4,798,742,139
------------------------------------------------------------------------
Source: CMS Chronic Conditions Warehouse, http://ccwdata.org.
Notes: Spending data are prior to rebates; Harvoni was approved by the
FDA on October 10, 2014; ``Other'' includes Copegus, Pegasys, Pegasys
Proclick, Moderiba, Intron-A w Diluent, Victrelis, Intron-A, Rebetol,
Rebetron, Peg-Intron, Sylatron, Peg-Intron Redipen, Ribavirin,
Virazole, Infergen, Ribatab, Ribapak, Ribasphere, Incivek, Ribasphere,
and Ribapak.
CY2015 Part D HCV Spending (Through June 30)
------------------------------------------------------------------------
Drug Name Spending
------------------------------------------------------------------------
HARVONI...................... $3,716,610,962
------------------------------------------------------------------------
SOVALDI...................... $669,633,723
------------------------------------------------------------------------
VIEKIRA PAK.................. $93,767,208
------------------------------------------------------------------------
OLYSIO....................... $88,907,976
------------------------------------------------------------------------
Other........................ $21,160,002
------------------------------------------------------------------------
Grand Total.................. $4,590,079,872
------------------------------------------------------------------------
Source: CMS Chronic Conditions Warehouse, http://ccwdata.org.
Notes: Spending data are prior to rebates; ``Other'' includes Copegus,
Pegasys, Pegasys Proclick, Moderiba, Intron-A w Diluent, Victrelis,
Intron-A, Rebetol, Rebetron, Peg-Intron, Sylatron, Peg-Intron Redipen,
Ribavirin, Virazole, Infergen, Ribatab, Ribapak, Ribasphere, Incivek,
Ribasphere, and Ribapak.
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Appendix D
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Appendix E
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