Gregg Alton has what seems like a disorienting job at Gilead Sciences Inc. He’s paid to figure out how to sell the drug Sovaldi, which infamously retails in the U.S. at $1,000 a pill, for relatively next to nothing.
The instructions for pricing the cure, which wipes out hepatitis C in just 12 weeks, basically go like this: “Get to as many patients as possible in low-income nations --and not lose money,” Alton says. “It’s very simple.”
Actually, it’s not so simple, but it is controversial. Decisions about what to charge around the world for life-saving remedies have spurred debate ever since Big Pharma began offering some discounts after a backlash in the ’90s, when groundbreaking HIV treatments reduced deaths in wealthy countries and not poor ones. Criticism has been harsh with Sovaldi, one of the most expensive and best-selling drugs in history.
“We make a good target,” says Alton, Gilead’s executive vice president of corporate and medical affairs.
He offers a rare look at how a pharmaceutical giant walks the line between shareholder expectations on the one hand and global public health needs on the other. It starts with his team looking at the map through the lens of per-capita income. Countries that are well-off go into one bucket. The rest are sorted by wealth and rate of hepatitis C infection.
Then come negotiations with governments. Whatever the price settled on in lower-income nations, Alton says, it usually brings complaints about why the therapy isn’t cheaper -- or why it’s so much cheaper than in the U.S.
by Caroline Chen, Bloomberg | Read more:
Image: Forbes
The instructions for pricing the cure, which wipes out hepatitis C in just 12 weeks, basically go like this: “Get to as many patients as possible in low-income nations --and not lose money,” Alton says. “It’s very simple.”
Actually, it’s not so simple, but it is controversial. Decisions about what to charge around the world for life-saving remedies have spurred debate ever since Big Pharma began offering some discounts after a backlash in the ’90s, when groundbreaking HIV treatments reduced deaths in wealthy countries and not poor ones. Criticism has been harsh with Sovaldi, one of the most expensive and best-selling drugs in history.“We make a good target,” says Alton, Gilead’s executive vice president of corporate and medical affairs.
He offers a rare look at how a pharmaceutical giant walks the line between shareholder expectations on the one hand and global public health needs on the other. It starts with his team looking at the map through the lens of per-capita income. Countries that are well-off go into one bucket. The rest are sorted by wealth and rate of hepatitis C infection.
Then come negotiations with governments. Whatever the price settled on in lower-income nations, Alton says, it usually brings complaints about why the therapy isn’t cheaper -- or why it’s so much cheaper than in the U.S.
Sovaldi Versus IPhone
“People say, ‘Why does Egypt pay 2 percent of the price?’ But it’s something we should do,” he says. He contrasts Sovaldi with the iPhone: “It costs the same everywhere, but it’s not a human need.”
At the moment there are 101 countries in Gilead’s most-needy category, including Egypt, Cuba, Pakistan and the Philippines, and they’re all on the company’s generic-approved list. Gilead has given 11 manufacturers in India licenses to make knockoffs, with sales strictly limited to the list; Gilead gets a 7 percent cut of sales. A generic pill is going for as little as $4.29 in India.
But it could take years for generics to reach all 101, and in the meantime Gilead is cutting deals with some for branded Sovaldi, and also for Harvoni, a formulation that combines Sovaldi with another drug and can reduce treatment times. Typically it’s $900 for a 12-week regimen, or $10 a pill, Alton says, with governments footing all or part of the bill. Gilead has received or applied for the OK to sell Sovaldi in 29 countries, including 16 on the most-needy list. (...)
“People say, ‘Why does Egypt pay 2 percent of the price?’ But it’s something we should do,” he says. He contrasts Sovaldi with the iPhone: “It costs the same everywhere, but it’s not a human need.”
At the moment there are 101 countries in Gilead’s most-needy category, including Egypt, Cuba, Pakistan and the Philippines, and they’re all on the company’s generic-approved list. Gilead has given 11 manufacturers in India licenses to make knockoffs, with sales strictly limited to the list; Gilead gets a 7 percent cut of sales. A generic pill is going for as little as $4.29 in India.
But it could take years for generics to reach all 101, and in the meantime Gilead is cutting deals with some for branded Sovaldi, and also for Harvoni, a formulation that combines Sovaldi with another drug and can reduce treatment times. Typically it’s $900 for a 12-week regimen, or $10 a pill, Alton says, with governments footing all or part of the bill. Gilead has received or applied for the OK to sell Sovaldi in 29 countries, including 16 on the most-needy list. (...)
‘Sophisticated Strategy’
“We can’t price to the poorest person,” Alton says. For one thing, there’s the don’t-lose-money mandate. What’s more, he says, Gilead doesn’t want “to create an artificially low price for the generic companies coming in after us.”
There’s another set of calculations for middle-income nations. In Brazil, for instance, Gilead charges $6,875 for 12 weeks -- 8.2 percent of the U.S. retail price but, according to critics, too much for a nation where per-capita income is about $15,838.
Gilead has a “very sophisticated strategy,” says Tahir Amin, co-founder of the nonprofit group Initiative for Medicines, Access and Knowledge. The company has excluded Chinese generic-makers that could have hastened delivery but would have cost Gilead profits, Amin says. And Gilead “could certainly do more” for middle-income countries not among the 101, he says, singling out China, Brazil and Ukraine, where the disease-burden is high.
Hepatitis C related liver diseases kill about 500,000 annually, most of them in middle- and low-income countries. Until Sovaldi, treatments were marginally effective and often had brutal side effects. When the drug hit the U.S. market in 2013 it was a stunner, for its efficacy and list price: $84,000 for 12 weeks.
That kicked off a new round in the argument over how to reward the innovation that produces cures while not throwing up hurdles for those who need them.
Some public and private U.S. insurers have limited prescriptions to only the sickest. A bipartisan U.S. Senate Finance Committee report chastised Gilead, saying it was focused more on profits than patients. Gilead responded that it priced Sovaldi thoughtfully, based on existing treatments on the market.
Most in Big Pharma make the lion’s share of their money in the U.S., where prices aren’t regulated and insurers negotiate discounts, so hardly anyone pays full freight. Still, Sovaldi’s U.S. sales have made the company and some shareholders rich, but Alton says that’s fair. Gilead is “incentivizing investors -- otherwise they would invest in social media or something else.”
“We can’t price to the poorest person,” Alton says. For one thing, there’s the don’t-lose-money mandate. What’s more, he says, Gilead doesn’t want “to create an artificially low price for the generic companies coming in after us.”
There’s another set of calculations for middle-income nations. In Brazil, for instance, Gilead charges $6,875 for 12 weeks -- 8.2 percent of the U.S. retail price but, according to critics, too much for a nation where per-capita income is about $15,838.
Gilead has a “very sophisticated strategy,” says Tahir Amin, co-founder of the nonprofit group Initiative for Medicines, Access and Knowledge. The company has excluded Chinese generic-makers that could have hastened delivery but would have cost Gilead profits, Amin says. And Gilead “could certainly do more” for middle-income countries not among the 101, he says, singling out China, Brazil and Ukraine, where the disease-burden is high.
Hepatitis C related liver diseases kill about 500,000 annually, most of them in middle- and low-income countries. Until Sovaldi, treatments were marginally effective and often had brutal side effects. When the drug hit the U.S. market in 2013 it was a stunner, for its efficacy and list price: $84,000 for 12 weeks.
That kicked off a new round in the argument over how to reward the innovation that produces cures while not throwing up hurdles for those who need them.
Some public and private U.S. insurers have limited prescriptions to only the sickest. A bipartisan U.S. Senate Finance Committee report chastised Gilead, saying it was focused more on profits than patients. Gilead responded that it priced Sovaldi thoughtfully, based on existing treatments on the market.
Most in Big Pharma make the lion’s share of their money in the U.S., where prices aren’t regulated and insurers negotiate discounts, so hardly anyone pays full freight. Still, Sovaldi’s U.S. sales have made the company and some shareholders rich, but Alton says that’s fair. Gilead is “incentivizing investors -- otherwise they would invest in social media or something else.”
by Caroline Chen, Bloomberg | Read more:
Image: Forbes
