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The Wyden-Grassley US Senate Investigation Into The Pricing Of Sovaldi: A Report Part II

Sovaldi, the main component of Harvoni, was developed by Pharmasset, a small workbench pharmaceutical company. From its outset, the company had focused on developing drugs for HIV, HBV and hepatitis C. The developers were seeing promise in an experimental HCV therapy known as PSI-7977. After publishing clinical results, Gilead Sciences became interested in the drug. Instead of acquiring the drug, they acquired the company for $11.2B. A Gilead executive called it “a bargain.” Gilead needed PSI-7977 because of its failure to develop a safe HCV drug of its own. Recent experiments with its experimental GS-9190 had resulted in adverse effects in two patients – adverse enough to put Gilead into a holding pattern in HCV drug development.

Everyone with a drug in the HCV pipeline knew everyone else’s business. The people at Gilead knew that Pharmasset’s drug was, according to the FDA, well-positioned to become the “market leader,” capable of the surest and fastest move away from interferon. Pharmasset knew that Gilead’s failures would likely send it calling for PSI-7977; the big bang was all but inevitable. By this time, Gilead had already named its intent to acquire Pharmasset: Project Harry. Shortly after the project became the acquisition, with Sovaldi ready for approval and Harvoni in the pipeline, Gilead changed it’s marketing strategy from price-per-treatment to price-per-cure, without regard for patient access. This new model allowed Gilead to justify the high price of Sovaldi, which made it easy to charge even more for Harvoni. From the very beginning, this was Gilead’s plan.

During the run-up to the FDA approval of Sovaldi, some of the most famous hep C doctors in the country began a practice that became known as warehousing. Patients with early-stage disease were discouraged from treatment with interferon and the available non-structural protein inhibitors which required augmentation with interferon. New drugs were on the way; there was no longer any point in subjecting people to the rigors of IFN/RVN if the promise of a cure with a low side-effect profile was true. Part of the thinking behind this strategy of waiting was that those who had never done treatment before always did better on whatever treatment was around, and patients only got one shot at being treatment-naive. During this time there was wonderful news: a dear friend had just been declared SVR in AbbVie’s clinical trial. Here was a person with cirrhosis, who had tried interferon many times without success. Now she was SVR-12, just like that. Patients all over the country were hearing similar news, and the HCV community was full of anticipation – the idea of taking a drug, without appreciable side effects, that practically guaranteed a cure, had been unthinkable even just a few years prior. Now, Gilead Sciences was on the verge of making history with Sovaldi-based drugs. Nobody yet knew about the price – that most people with HCV wouldn’t be able to afford to buy a single pill.

But Gilead made a major miscalculation. Their goal was to set Harvoni’s price as high as possible without incurring insurance restrictions on patient access, but that’s exactly what happened. Even after the government and several advocacy groups begged Gilead for substantial discounts, the company offered only a 10% price reduction in the form of rebates to Medicare, Medicaid and the Bureau Of Prisons. (The VA eventually negotiated a discount of 50%, but only after the agency threatened to override Gilead’s patents.) The $500 per-pill agreement was still too high for the VA to treat the majority of over 150,000 veterans infected with HCV.). Gilead had figured on anger and resistance from HCV patient advocates, but the severe insurance restrictions that came after Gilead set its price point took the company completely by surprise.

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