Wednesday, November 12, 2014

Sovaldi: Shooting Star Instead of Blockbuster

Via RPM Report, an FDA/CMS Summit for Biopharma Executives event supporter. The RPM Report provides actionable insight on regulation, policy, FDA and CMS to apply directly to your decision-making.

Gilead’s Sovaldi HCV treatment has earned a special place in pharma lore with its rapid rise to about $10 billion in sales (bringing with it lots of controversy about the sustainability of specialty drug pricing). Now the product appears poised to make a new reputation: fastest to fall from blockbuster status.

The debate over what qualifies as a “blockbuster” drug is one of those inside-industry debates that has gone on—and will continue—for decades. There was a period when $100 million in annual sales earned a product “blockbuster” status, but that is long ago. The new thresholds are about ten times that level.   

No matter what sales trigger defines “blockbuster,” Gilead’s hepatitis C product Sovaldi is far above it. The brand should be remembered for decades as one of the fastest out-of-the-blocks blockbusters -- approaching $8 billion in sales in its first nine months of marketing.

However, Sovaldi may be gone just as fast – more like a flashing comet in the pharma firmament than a lasting blockbuster. The active ingredient, sofosbuvir, will not go away, but the single-ingredient brand is likely to become quickly irrelevant.

Gilead is preparing for FDA approval of the next-generation two-ingredient fixed dose oral combination product to supplant Sovaldi on October 10. That product will have treatment success rates, pricing, convenience and patient-experience qualities that should mean that Sovaldi will recede from the market with something approaching a mirror image of its meteoric rise.

After remaining relatively quiet in public during the months of shock and push back from the payer community about the pricing of Sovaldi at $84,000 for a typical course of therapy, Gilead has begun to speak out in advance of the upcoming launch of the ledipasvir/sofosbuvir combo (called Harvoni in Europe).

Gilead President John Milligan explained the pricing for the new product to the DC policy world at an Oct. 1 Brookings/Engelberg Center half-day session on the “Cost and Value of Biomedical Innovation.” That discussion complemented other conversations with the financial community and presumably with payers who should be more prepared for the follow-on product than for Sovaldi.   

Milligan said the new product will priced in line with the total drug current treatment costs for existing 12-week Sovaldi /PEGinterferon/ribavirin treatment, or roughly $94,500.

That means the new combo will cost about $10,000 more than Sovaldi as a single ingredient per treatment course but the added cost will reflect a shift of PEGinterferon/ribavirin costs to the combo drug and not added costs for the drug regimen part of the HCV treatment. With the new ingredient, Gilead will capture the part of drug costs going to other manufacturers for PEGinterferon and ribavirin.   

Milligan, in fact, argued that pricing to the total cost of current standard of care is the foundation of Gilead’s pricing decisions – and, he suggested, the industry‘s standard practice.

“At the end of the day,” Milligan said, “the pricing analysis [for the original launch of Sovaldi] was  relatively simple – current cost of other therapies.” Responding indirectly to the months of outside speculation on the factors considered in Sovaldi pricing, he said that Gilead “didn’t look at return on investment; we don’t look at sunk costs. None of that goes into our pricing.” Generalizing to the industry, Milligan said, “in fact, I don’t know a single firm that uses that as a metric for how to determine [price].”

So, with the combo removing the tough PEGinterferon and ribavirin pieces of treatments, the need for Sovaldi as a single ingredient should quickly diminish.

Milligan described Sovaldi numerous times (at least three times) in his short Brookings presentation as a “stop-gap” therapy that Gilead developed to get to the market first to meet demand for a higher efficacy HCV treatment -- beyond the big improvements previously offered by Vertex’s Incivek and Merck’s Victrelis.   

“We worked very hard,” Milligan said, “to bring in Sovaldi as a stop gap between where we were with very difficult interferon-containing regimens to the future which will be all-oral regimens.”

So, the blockbuster was really a “stop-gap” to the sponsor.

Maybe looked at in retrospect, it was also a stalking horse – to acclimate the market to the single-ingredient  price and then make the two-ingredient fixed combination look more attractive. That may explain Gilead’s reticence for fighting back on the response to Sovaldi pricing: not only was the product doubling the size of the company, it was creating a better milieu for the more important next product.

Starting the fixed dose combo at the same price as current 12-week Sovaldi plus injections therapy has three other important benefits to Gilead.

1. It sets up the potential of a reduced treatment price for the fixed dose combo when used in a shorter, 8-week treatment regimen for less severely ill patients – thus making it harder for payers to try to limit use to only the sickest patients. The less sick patients will be expensive to treat but enough less expensive than the 12-week therapies that the payers should feel pressure.

2. It creates less room for pricing decisions by the next-comers (like Abbvie’s four-ingredient ABT-450 product which appears on track for an end of 2014 approval decision form FDA).  There is obviously room for price strategies under $94,500 for twelve weeks and $63,000 for eight-week therapy. But by keeping the price close to current costs, Gilead is leaving next competitors less options.

3. Finally, and this is another reason that Sovaldi as a brand may be remembered as a comet rather than a blockbuster, sofosbuvir as a single agent quickly was gaining an important place in an unapproved two-product combination in clinical practice, paired for treatment of about 40% of people getting HCV treatment with the Janssen product Olysio (simeprevir). Together, the two products cost about $150,000 at wholesale acquisition cost, Milligan told Brookings. He described that as “a very expensive regimen,” implying that Gilead could have considered that as the benchmark for its combo, but didn’t.

By pricing a third lower than that existing oral combo, Gilead will look more responsible with its new product. And Sovaldi will be the bright comet that was.


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