How to Save $200 Billion and Cure Hepatitis C

7/22/13

Wall Street is buzzing with anticipation about the first new all-oral drugs for hepatitis C approaching the market. The high rate of HCV infection and dissatisfaction with current treatments have created a potential multi-billion dollar bonanza for drug companies. It’s estimated that Gilead, the frontrunner in this race, will charge as much as $90,000 per patient. With roughly 3 million infected patients currently in the U.S., that’s about $270 billion to cure everyone.

Is this necessary? Or even advisable? Particularly in the case of hepatitis C, payers, physicians, and patients can collaborate to extract huge price concessions from pharmaceutical companies, netting more than $200 billion in savings. All they have to do is acknowledge that sometimes “good enough” is better than “best.” I’m wagering they will, and that’s why my firm, RA Capital, has invested in Achillion Pharmaceuticals, which we believe will compete quite aggressively and effectively on price once they launch their HCV therapy in 2016.

Price competition is going to play a bigger and bigger role in containing healthcare cost, and HCV treatment is one area where such competition won’t have to come at the expense of patient welfare.

An estimated 150 million people are infected with hepatitis C worldwide. All current treatment regimens require long-term, weekly interferon injections with significant side effects. Many patients can’t tolerate those or just don’t want to bother with them. Because the disease progresses slowly, patients can and do wait for years for better treatment choices. Hence the mounting anticipation for the all-oral treatments.

Clearly, being first to market will be a plus. Both Gilead and AbbVie are likely to get approvals around the same time towards the fall of 2014. Gilead’s treatment also appears to deliver the highest cure rate (about 95 percent) and will comprise just a single pill daily for eight to twelve weeks. Abbvie’s regimen has a similar cure rate but requires taking a number of pills twice a day. By 2016, several other all-oral treatments are expected to be approved, including one from Bristol-Myers Squibb and another from Achillion, a small biotech.

Analysts are buzzing about the various characteristics of the new drugs and trying to determine which company has the advantage. All of these combo drug regimens are expected to provide cure rates of 85 percent or better, but there are slight differences in their side-effect profiles, pills per day, treatment duration and cure rates. By most accounts, Gilead offers the “best” treatment and is therefore expected to both charge top dollar and win a majority market share. Its stock has more than doubled in the last year to a $90 billion valuation on high expectations for hepatitis C drug sales.

In business-as-usual mode, U.S. payers would just throw open their wallets and pay whatever it costs to provide the “best” therapy to all the patients who could benefit. But once they start receiving the bills, payers and providers may begin singing a different tune.

Certainly, some patients with advanced disease will immediately require treatment with the “best” drug available. But many patients are still in the early stages of Hepatitis C and will feel no sense of urgency. With at least four competitive “good-enough” all-oral regimens on the market by 2016, payers could negotiate dramatically reduced prices, awarding the lowest bidder the privilege of selling the first line treatment. The small percent of patients who fail that regimen could then cycle onto the best and presumably most expensive one.

This approach is extremely simple and convenient for patients, compared to today’s regimens that can take up to a year and require injections with many side effects. Indeed, this is similar to the way doctors usually prescribe antibiotics, moving to the more expensive options only after the cheaper ones have been exhausted.

After all, every one of these drugs represents a huge improvement over current therapy. They are all “good enough” to cure most patients. And, assuming that the first-line drug could be negotiated down to as low as $10,000, each patient who responds to the cheapest drug (most will) would save the system as much as $80,000 compared to using the best drug first. By our calculations, the cumulative savings nationwide would be as much as $200 billion in the U.S. alone over the next decade. Similar savings await other nations.

Certainly companies deserve to be rewarded for tremendous breakthroughs like the new hepatitis C drugs. And many on Wall Street are incredulous that drug companies will lower their prices. Indeed, large pharmaceuticals companies don’t have a strong track record of offering deep discounts even in the face of significant competition. For example, there are many drugs approved for multiple sclerosis yet the prices for these only go up each year.

But hepatitis C is a big market and a certain type of company could still do quite well charging even $10,000 per patient. The 3 million patients in the U.S. alone could net $30 billion of sales, which might be modest for Gilead shareholders but would be a windfall for a company as small as Achillion, whose market capitalization is less than 1 percent of Gilead’s valuation. So even if having Gilead, AbbVie, and Bristol-Myers on the market is not enough to spark a price war by 2015, payers will likely get a discounted offer they can’t refuse from Achillion in early 2016.

To some, the idea of using merely “good enough” drugs will seem offensive. It’s a point of pride for Americans that patients come first and doctors have the freedom to prescribe the best regardless of cost. Even if this American healthcare fantasy were true, when the most expensive route to a cure is merely more convenient than the least expensive drug regimen, are those extra billions of dollars worth it? My bet is that private and public insurers will both be taking a much closer look at scenarios like this one, cutting wherever they can reap huge savings without harming patients.

Besides, if $90,000 were offered directly to patients, what would they chose? My guess is that most would buy the cheaper drugs, get cured for less, and put the massive savings towards countless other necessities.

If only reimbursement worked that way.

Hepatitis C has proven to be surprisingly easy to cure and we will soon see multiple “good enough” drugs on the market, which makes it easy for payers and providers to negotiate down prices on behalf of patients, employers, and taxpayers. Just as oncologists have started to push back against high drug prices, others will begin taking a stance against exorbitant spending, especially for mere convenience.

After all, our definition of “best” has left us with the priciest healthcare system in the world, but not always the best outcomes. HCV treatment is one textbook example of how mindlessly sticking to our old ways will have spectacularly expensive consequences.

Peter Kolchinsky is Managing Partner of RA Capital Management, a Boston-based healthcare crossover fund, which, of the companies mentioned in this article, owns shares of Achillion. Follow @

By posting a comment, you agree to our terms and conditions.

  • kayla

    Hepatitis C is not surprisingly easy to cure by any remote standard. Many patients have been waiting 30 plus years for a cure, and certain genotypes including 3a are very resistant to long term SVR. Gilead has been fast tracked for approval by fall 2013 and Abbvie will not be far behind. Whilst I agree with the writers overall point, he should get some of his facts right.

    • John

      Future looks good for those who can wait , but no one will try to cure with the cheapest available as you may develop a resistance and other similar type therapies may not work as well or not at all , its like failing telaprevir then trying simeprevir , that comment makes no sense from writer . Also Hepatitis C is very hard to cure and remember clinical trial results and real life populations will probably not be as attractive .

      I think the price of gilead and abbvie will be closer to $60 000 USD , almost $ 100 000 is ridiculous , sheesh that’s like $ 2000 per tablet .

      • Peter Kolchinsky

        John, you raise the excellent question of resistance: would failing the first regimen allow the virus to develop resistance that would undermine the chances of the second regimen to work, suggesting that the best should have been used first? The short answer is that resistance won’t be a notable problem if the first and second regimens do not use identical classes of drugs. For example, Abbvie, BMS, and Achilion have all-oral combinations that use various drug classes such as protease inhibitors, ns5A inhibitors, and non-nuke polymerase inhibitors, but they do not incorporate a nucleotide polymerase inhibitor. However, Gilead’s regimen is considered “best” precisely because its backbone is a nucleotide polymerase inhibitor to which essentially zero resistance had been observed. Therefore, Gilead’s regimen is ideal to play clean up.

        • John

          I agree the Gilead regimen looks to be the best and one I would love to try . I am aware that gilead is currently in the final phase 3 , ION 3 trial , this trial is about half way complete . What is considered cure is it SVR12 ? or SVR24 ? , hard to find a accurate answer . I am hoping it is SVR12 as that would mean Gilead will go to fda approval 3 months earlier which would be great for all .
          Also there are rumours going around from my hospital and also clinical trial sites that Gilead is very close to go to fda for the single combo pill sofosbuvir / ledispasvir . Some say late this year or some say early next year February , March any truth In that would you say or is it just wishful thinking ?

        • John M.

          Hi Peter,

          I saw that you were heavily invested in CNDO, and then dumped after the conference call. My question is: you do not actually think that giving people pig worm eggs works for crohn’s do you? No doctor in their right mind thinks that garbage works…so why were you invested there….Or were you just front running Fidelity like a lot of your other trades…just wondering what your investment thesis is. If it is front running, aren’t you just ripping off retail mom and pop investors.

          BTW, do you know a PM at fidelity or something?

  • Peter Kolchinsky

    Kayla, you are right that HepC has been historically difficult to cure (cure rates used to be 85% of patients after only 12 weeks of dosing in patients infected with Genotype 1, 2, 3, and 4 HCV (these are the strains of virus that infect that vast majority of patients in the US, EU, and Asia). That’s why I say that the virus has proven surprisingly easy to cure; 2 years ago, very few people would have thought so many companies would have cracked the code for how to get cure rates so high. But the main point of the article is simply that patients ought to be treated with the least expensive of the “good enough” drugs and then whoever is left over after that first pass can be treated with the best (regardless of cost, as is our tradition). Each regimen would only take 12 weeks (maybe 8) and therefore even with this two-step regimen, patients would spend less time (3-6 months) on drug than the average patient getting today’s standard of care (which takes 6-12 months). If some people fail to be cured by that two-step regimen, then they likely weren’t going to be cured by using the best (most expensive) drug first. These patients will probably need to wait for a stronger drug combination down the road; at the rate at which new combinations are being developed, I don’t think these patients would need to wait more than another couple of years. Thankfully, this tends to be a very slowly progressing disease and most patients will be able to benefit even from those drugs that are currently in the earliest stages of clinical development.

  • Penny

    Nice article , I was wondering if anyone had any advice , say for example the treatment does indeed cost $ 90 000 USD and as I am in New Zealand we are 1 or 2 years behind USA . I cannot wait that long , if I was get a prescription from my doctor and come to the USA would I be able to buy treatment for Hepatitis c from Gilead or Abbvie ? I am prepared to pay but I cannot afford $ 90 000 USD , would it possible to Abbvie or Gilead to sell to me at a reduced price or is that impossible as I am not a American . Any thoughts would be greatly appreciated .

    • Peter Kolchinsky

      Penny, companies often have patient-assistance programs for low-income patients who are prescribed their drug by a US-licensed physician, but these programs typically do not apply to healthcare tourism patients visiting from abroad. Patients who urgently need care and do not yet have access to a drug, either because it’s not approved in their country or cannot afford it, sometimes are offered by their physicians to consider enrolling into a clinical study. The Hepatitis C Foundation of New Zealand can give you more information about local options. Look up Dr. Ed Gane, a well-regarded HepC expert and based in NZ.

  • JD Kapp

    How about a ONE SHOT CURE? … sounds far fetched when compared to these multiple month treatments which have yet to reliably knock out the toughest genotype that represents the greatest challenge to USAmericans.
    Penny … your neighbor Australia may be your best shot … specifically Benitec Biopharma in Sydney. Benitec will be moving their candidate for a One Shot Cure to the Clinic in 2 months at Duke and University of California, San Diego. I believe that they plan to expand clinical testing to Australia after completing the first clinicals here in the USA.

    Benitec’s treatment is a single injection that simultaneously attacks HCV at 3 critical locations that assures viral destruction without chance of any mutation or resistance. The treatment continues working for months.

    Sounds a bit too good to be true? Benitec is the undisputed leader of a new type of therapy called ddRNAi. With more than 40 global patents and 8 years of patent litigation behind them, Benitec’s technology is finally ready for prime time. This breakthrough treatment is behind many additional products in Benitec’s pipeline:

    Hepatitis C …

    Chronic Hepatitis B …

    Wet Macular Degeneration … leading cause of blindness for elderly

    Intractable Cancer Pain …

    Non small cell Lung Cancer … knocks out resistance to chemotherapy

    HIV – AIDS … clinical testing has commenced in California

    You might want to consider reading a PubMed abstract by BM Berkson, Integrative Medical Center of New Mexico, New Mexico State University, titled:
    “A conservative triple antioxidant approach to the treatment of hepatitis C. Combination of alpha lipoic acid (thioctic acid), silymarin, and selenium: three case histories” … here’s the link: http://www.ncbi.nlm.nih.gov/pubmed/10554539

    Following Dr Berkson’s protocol might reduce the urgency of your need for treatment. If you also consider investing in Benitec Biopharma, you might just experience a windfall of profit from stock appreciation as the World takes notice of Benitec’s pipeline of unique treatments for serious conditions currently without satisfactory medical treatment. Buying yourself a bit of time and generating a bit of wealth could afford you the opportunity to select a more effective yet less burdensome treatment.

    Benitec link … http://www.benitec.com

    • penny

      JD Kapp , sounds great , but to good to be true . I have family and also Australian citizenship but I would prefer to use a medicine from gilead or abbvie as they ae phase 3 trials and more likely to cure me .
      Australia has the same problem as New Zealand , very slow compared to usa and eu to release these new medicines when they come out next year , Australia is about 1 to 2 years behind usa

      • JD Kapp

        One can lead a horse to water ….
        So you made this decision based upon what?
        I have known many to die from HCV treatment over the past 20 years. Benitec’s therapeutic platform is the first that I would consider recommending to my clients.
        If you think that Benitec is behind then you are sadly mistaken. Benitec’s IP is unique and undisputed, proven so by 8 years of patent litigation. Gilead’s application to the EMA does not even include the most challenging genotype afflicting the USAmerican population.

        • penny

          JD Kapp , what trial phase is it in ?
          I am very interested but I need to very careful to make sure I don’t make my condition any worse .
          How many people have tried this and what is the svr cure rate ?

  • Carlos Danger

    I think this article would have been better if the author had name-dropped Achillion a few more times.

    • John

      Carlos what do you mean by your statement ?

      • Carlos Danger

        The author’s firm appears to be heavily invested in Achillion and to me the article appeared to be pumping up their visibility a bit unnecessarily. Despite the full disclosure of their investment, I think the article would have been better if Achillion hadn’t been mentioned quite so many times.

        • concerned

          I completely agree. It was a disgusting attempt to get more people to lose money. Sad.

  • John

    Carlos I agree , mind you achillion stocks have dropped as one of there hcv medicines did not go as planned set back . As for JD Kapp , one injection will cure hcv seems far fetched especially in phase 1, . Penny I would recommend you wait for the gilead or abbvie as they are well into phase 3 studies and because these companies are desperate to be the first , we will see these new treatments a lot quicker as the first will get a big slice of the pie . I have a feeling gilead or abbvie will go to fda early next year for gen 1 interferon free . A lot of money to be made for them , sheesh if you are right and the price $ 90 000 , better be careful not to drop $ 1000 tablet under the fridge , crazy prices but then again when your sick you will do whatever it takes to get better and they know it . I think the price will be lower than what they are speculating .
    Who knows if most of the world was not in recession the price would be closer to double . Good times ahead especially if you live in usa .

    • Josie

      The one shot cure is not far fetched at all. Benitec’s trial is an adaptive PI/II, testing safety & efficacy. The 4th and 5th cohorts will be dosed at rates that saw transfection to 100% of hepatocytes that aims to knock down 3 separate, but highly conserved regions of the HCV virus, in 520 mice and primates with safety out to 18 months. Patients should be dosed with a therapeutic dose in Jan/March 2014 with preliminary results March/June 2014. The trial, due to begin next month at 2 US sites, has received full support of the RAC, who seemed very excited by the prospect. Before you diss it, it might also be worth noting that US company Calimmune, headed up by Nobel Laureate David Baltimore has licenced Benitec’s IP, and believes that the current PI/II trial for HIV may just bring about a cure. Don’t get me wrong, Gilead have a great product, but mutation is always a concern, as is a lengthy treatment time, due to patient compliance. A one injection cure will replace all current and upcoming programs, no question.

  • Concerned

    ACHN has a protease inhibitor and those are soon to be dinosaurs when the nuc’s and nS5A inhibitors hit the market. People don’t get heartburn and take a glass of milk for it – they take antacids, ppi’s or H2′s. Silly article. ACHN has been dead in the water for a long time and it’s dinosaur in clinical trials will not save it. They are better off moving into a different arena all together. INHX and VRUS were gobbled up and ACHN and IDIX were left on the sideline for a reason. The author is trying to drum up a lot of cash he has lost over they years as ACHN went from a darling to a chump. It’s just sad he’s trying to lead other people to this mirage.

    • Peter Kolchinsky

      Regardless whether ACHN exists or doesn’t, the point of the article is that payors and providers can leverage the availability of multiple “good-enough” HCV regimens to cure millions of patients for much less than it would cost than if they paid top dollar for the “best” regimen. Achillion is merely the smallest of the companies currently with a viable regimen and therefore would stand to make a relatively large profit even if it charged a price that would be low by pharma’s standards. As for the relevance of the PI class, there is no question that this class can be useful. Abbvie and BMS both have very effective regimens that includes a PI, NS5A, and non-nuke (neither include a nuke). Nukes aren’t the be-all-end-all drugs most people (including me) thought they were just a couple of years ago. Achillion’s PI and NS5A are both among the best in their respective classes; we’ll see more data later this year, but odds are high that their results should be comparable to those from Abbvie and BMS, but without needing a non-nuke (and with once-daily dosing). IDIX, Merck, J&J, Vertex may join the commercial fray with “good-enough” all-oral regimens in the 2016-2018 timeframe, which would make it all the more feasible for payors/providers to knock down the cost of curing HCV… BUT ONLY if they break with the tradition of paying asking price for the best drug. HCV has been reduced to a slowly progressing yet curable infection and is nothing like HIV or MS or Cancer. So HCV drugs are more like antibiotics… use the cheaper ones first and save the best for last. That’s the message – that’s the heresy.

      • ConcernedCitizen31

        “Good enough” regimes lead to resistance, as someone else pointed out. Saving a buck over “good enough” drugs is an unwise decision, for anyone affected by this deadly virus. The best drugs will win out.

  • John

    People with hcv should only use the best which will most probably be gilead or abbvie in the near future only because they will be almost 100 % be the first to release interferon free treatments for the gen 1 . No one will take less expensive , cheaper alternatives because you may enquire a resistance to future therapies , no one knows for sure as they are new . Future side effects and other effects will change as the years go . When gilead or abbvie release there regimens next year its time to treat simple as that .
    Bristol Myers , achillion , vertex and so on will only get a small piece of the pie , gilead and abbvie will get a big slice .

  • JSchaible

    While the promise of all oral HCV Rx … and more specifically of nucs …is attractive, I think the “end of INF” is FAR over hyped. $90K/pt? With new drugs
    that manage the occasional (though admittedly serious) side effects of generic
    INF (such as GSK’s Promacta (epog) that treats the INF associated ITP).
    As such, the pharmacoeconomics are quite weak at a $90K price point.
    Certainly much worse now than it was prior to Promacta’s launch for this
    indication.

    I also still harbor concerns on the liver tox issues seen broadly in the class,
    so don’t agree that $GILD etc are out of the woods quite yet.

  • John

    Have you been reading all the news from gilead and from real people who have finished trials using sofosbuvir/ledipasvir ? well I have and almost all that I have read many many people and spoken to through forums have been cured even people who failed the latest telaprevir based treatments , so it looks very likely that gilead has the answer , only hope it does not take to long to be available to the public . The only negative I have to say regard gilead is that they are usually very over priced , I mean really how can you justify charging $ 800 to $ 1000 per tablet as estimated reported . I am mystified why gilead share price continues to drop slowly .

    • ConcernedCitizen31

      My mom was cured by Gilead’s drug. It is all that.

  • john

    I was cured after going undec at 3 rd week (gilead ion 3). Their are huge expenses associated with not curing hepc. It is now the largest cause of liver transplants. A very expensive operation follow by need of lifetime use of immunosuppresants. I believe the cure is worth a lot to society. It’s not an ongoing expense like HIV but a one time cure. I think the pharmaceutical companies will and should be paid well for developing this. Gilead had to pay over 11 billion just to but company with patent for soforbuvir. And Gilead has done a superb job getting these drugs thru phase 3 trials in into priority review at FDA. There are 150 million people with hepc worldwide. We need to stop this disease and put it into the past like smallpox

  • John

    Very easy for you to say john as you are cured . What about people is less fortunate countries , or people with no insurance , or countries which are so slow to release drugs after fda approval like Australia , new Zealand , etc , those people will need to buy these medicine as soon as they are available . Surely a 12 ( single pill a day ) week cycle can still be made very profitable and still be made reasonable so that most will have access . They could easily charge the same about such as telaprevir $ 50 000 and still make huge profits . This is just greed and nothing more , lets see the price when they are released , good thing abbvie is on its tail as this will at least make them think a bit more before they price the new meds . The rest of the companies in the race are at least a year behind . a price of $ 90 000 to
    $ 300 000 is not justified .

  • beto

    I contracted hep c at 20 years of age. I am now 57 (so 37 years). Though I am much luckier than my dead and dying
    peers, I am here to tell you it has not been a picnic. While day traders speculate and forecast the “hep
    c cure” market and Big Pharma plays the open field, me and 80 million other “happy
    heppers” continue to wait. One year
    turns to two, two to three and 60 million livers suffer another day. I personally do not trust Big Pharma and the
    FDA as far as I can spit bile. We all know that the issue at hand is not what
    combination is the best or, how dated the protease inhibitors are; the great omnipresent and troubling issue is
    that we stand in line dependent on an industry that could give a damn about our
    health and whether any of us die or not. The folks that can cure us (and could have
    cured us years ago) are as crooked as they come and are backed by an army of
    greedy stock holders. The
    interferon/ribaviron machine certainly does not want to see this cure happen
    anytime soon and the profoundly corrupt and incompetent regulatory mess we know
    as the FDA, only has the ear of the folks they are supposed to regulate. Your damn right I am cynical and I am mad as
    hell. There is a cure, so just freaking let
    us have it. Stop making us grovel on our
    knees before these greedy bastards. Stop
    talking 2000 dollars a pill to high ball us, and weaken our resistance. Find a reasonable price where you make money
    but still make it possible for those not working because they are too sick. Give us some dignity and remember for many of
    us it has been a lifetime with this scourge as a bedfellow. Vaccines sure get a fast track without any
    trials so we know it can be done. Just
    get it done! Thank you for listening to my rant…I bet tens of millions would agree…

  • Kevin Worldsavior

    Hepatitis C Virus (HCV) is just as easy to kill as any other viruses, known or unknown on the planet. Nature has provided us the unlimited power of being as healthy as Gods, we just gotta activate it. No killer viruses, bacteria, germs and cancers on Earth got any chance against the tremendous power of the Cancer Killer – they just die the moment they touch you.
    Any infectious diseases on Earth can be erased from the face of the planet along with any forms of cancer, once everybody (kids and adults) start doing my discovery – the PCK – The Personal Cancer Killer – the complete prev ention and cure (for those now sick) for kids and adults of any diseases – from the common cold to cancer – just an exercise for a minute a day for prevention and for 2 – 3 minutes a day for the cure (any infectious diseases can be cured for max. 3 days, and any cancers for max. 30 days – no recurrences of any cancers guaranteed). Cancer Killer is by far more powerful than the the immune system itself, keeps it intact all the time.
    The price of the Cancers and Viruses Killer for the whole world is $90 Billion. I accept checks of $50 Million to disclose it personally and how one can stay absolutely healthy all the time, all life long – never getting sick of any diseases, regardless of age, lifestyle, etc., even for a second.