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

Senator Ron Wyden
Press Release
December 1, 2015

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

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

Senate Finance Committee Ranking Member Ron Wyden, D-Ore., and senior
committee member Chuck Grassley, R-Iowa, today released the results of
an 18-month investigation into the pricing and marketing of Gilead
Sciences' Hepatitis C drug Sovaldi and its second-wave successor,
Harvoni. Drawing from 20,000 pages of internal company documents, dozens
of interviews with health care experts, and a trove of data from
Medicaid programs in 50 states and the District of Columbia, the
investigation found that the company pursued a marketing strategy and
final wholesale price of Sovaldi – $1,000 per pill, or $84,000 for a
single course of treatment – that it believed would maximize revenue.
Building on that price, Harvoni was later introduced at $94,500.
Fostering broad, affordable access was not a key consideration in the
process of setting the wholesale prices.

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

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

Additional major findings from the investigation include:

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

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

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

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

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

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

***

Kaiser Family Foundation
December 2, 2015
It Pays to Shop: Variation in Out-of-Pocket Costs for Medicare Part D
Enrollees in 2016
By Jack Hoadley, Juliette Cubanski, and Tricia Neuman

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

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

From Figure 1:

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

Sovaldi $6,608

Harvoni $7,153

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

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

http://kff.org/medicare/issue-brief/it-pays-to-shop-variation-in-out-of-pocket-costs-for-medicare-part-d-enrollees-in-2016/

***


Comment by Don McCanne

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

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

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

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

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