(Bloomberg) — Drugmakers worried about a backlash over soaring drug prices are increasingly talking with insurers ahead of time about paying for new therapies that could cost six figures a year.
Companies such as Biogen Inc. (Nasdaq:BIIB), Amgen Inc. (Nasdaq:AMGN) and Sanofi (NYSE:SNY) are wary of the negative attention Gilead Sciences Inc. (Nasdaq:GILD) received over hepatitis C cure Sovaldi, which surprised the industry in late 2013 with its cost — $84,000 for 12 weeks of treatment. The price tag had House Democrats calling for an explanation from Gilead executives, and Gilead was spurned by the biggest manager of drug insurance benefits in the U.S., which backed a rival's discounted hepatitis C drug instead.
Insurers and hospitals felt blindsided by the introduction of Sovaldi, which was a "case study of how not to collaborate," said Betsy Nabel, president of Brigham and Women's Hospital. The medical center hadn't planned for the steep price, which also put pressure on the Massachusetts state Medicaid budget for medicine, she said at a conference last week in Boston.
Biogen and Amgen have been in talks with insurers even while their drugs are under development. And Sanofi is contemplating how to work with insurers to determine how pricey gene therapies get paid for.
Before Sovaldi, drugmakers often paid little attention to the impact their products would have on the health care system. Sovaldi was different because it promised a cure in a matter of weeks, creating a potential stampede on private and government insurers as doctors began doling out prescriptions to the 3.2 million Americans living with hepatitis C.
Starting treatment
Gilead said last week that 210,000 U.S. patients have started its treatments for the liver disease since December 2013, and that at least 250,000 will begin this year.
Drug spending in the U.S. rose 13 percent last year, the fastest rate in more than a decade, fueled by hepatitis C drugs like Sovaldi, according to benefit manager Express Scripts Holding Co. (Nasdaq:ESRX).
The public relations fallout over Sovaldi has been a blemish on one of the most successful drug introductions of all time. Foster City, Calif.-based Gilead reported that sales of its hepatitis C drugs doubled to $4.55 billion last quarter, soaring past the average estimate of analysts by almost $1 billion. Still, the stock's 33 percent climb in the past year has trailed its peers — Celgene Corp. has gained 49 percent and Amgen 42 percent — a sign of the toll that pricing pressure has taken on Gilead investors' psyche.
Vast improvement
"Gilead has worked — and continues to work — to make sure the medical and the payer communities have the information they need to evaluate the benefit of these new medications," Amy Flood, a Gilead spokeswoman, said in an e-mail.
Gilead argues that Sovaldi and a related drug, Harvoni, provide patients with a vast improvement over previous treatments, doing away with side effect-heavy injections and curing the virus with a single pill a day.
