(Bloomberg) – Anthem Inc. (NYSE:ANTM), the biggest provider of U.S. group health coverage, said it chose Gilead Sciences Inc.'s hepatitis C drug Harvoni as the primary option for group health plan patients with the most common form of the disease.
The deal is the latest in a series of agreements with the U.S.'s biggest insurers and drug benefit managers, in which the payers have pitted Gilead against AbbVie Inc. and its competing medicine in order to exact price discounts for the treatments, which can cost $1,000 a day.
"Recently, an agreement was forged with Gilead Sciences, effectively lowering Anthem's hepatitis C treatment costs," Anthem said in an e-mail. Under the deal, patients with the most common genotype of the liver virus will generally have to try Harvoni first.
Anthem said that "favorable pricing" from Gilead along with "clinical differentiators" such as simpler dosing were the reasons it chose Harvoni over AbbVie's Viekira Pak. Harvoni is one pill a day, while AbbVie's drug requires most patients to take four to six pills a day.
Market forces
Both Gilead and AbbVie introduced $1,000-a-day hepatitis C treatments last year. The companies said there wouldn't be a price war over their breakthrough drugs. Instead, that's exactly what's starting to happen.
Anthem has become the third major benefits administrator to announce an exclusive deal with Gilead or AbbVie in exchange for better drug pricing.
Express Scripts Holding Co., the biggest U.S. managers of pharmacy benefits, said it wrung a price discount from AbbVie by agreeing last month to make its drug, Viekira Pak, the preferred choice for most patients for at least two years. Soon after, CVS Health Corp. and Anthem made deals with Gilead to use its drug, Harvoni, blocking AbbVie.
Gilead declined to comment, and AbbVie didn't comment beyond a statement that it believed in broad access to its drug.
AbbVie's medicine requires most patients to take four to six pills a day for 12 weeks, compared with one pill a day for Harvoni. Anthem cited Harvoni's simpler dosing regimen in its decision to go with that drug.
AbbVie's drug had 78 U.S. retail prescriptions in the week that ended Jan. 2, according to Symphony Health Solutions data. Harvoni, which was approved two months earlier, had 5,325 prescriptions.
Hefty price tags for new drugs have drawn criticism from insurers, lawmakers, and doctors. Before discounts, Gilead's hepatitis medicine Sovaldi costs $84,000 for a 12-week course of treatment, and Harvoni, which combines Sovaldi with another medication, taken as a single pill, costs $94,500 for 12 weeks. Viekira Pak's listed 12-week price is $83,31
Anthem's decision likely affects about 17 million people covered by its business plans, according to Brian Abrahams, an analyst with Wells Fargo. Express Scripts' drug lists covered by the deal with AbbVie account for about 25 million people.
Discounts
The question for Gilead, AbbVie and other biotechnology and pharmaceutical companies is whether the exclusive deals have emboldened insurers to demand bigger discounts in other top-selling categories, such as medicines for rheumatoid arthritis, heart disease, multiple sclerosis and cancer.
How far benefits managers can go to extract discounts is likely to be a major topic of conversation at the health industry's biggest annual gathering next week, the JPMorgan Healthcare Conference in San Francisco, especially after a year of claims by Gilead and AbbVie that they wouldn't engage in such a competition.
"It's rare that pricing becomes a competitive differentiating feature," Gilead President John Milligan said in September 2013. "The likelihood of people taking a substandard regimen, pricing it low in order to gain market share probably won't work in this area."
