Many large drug companies go to extraordinary lengths to fend off generic competition and extend the life of their patents, but Gilead today announced a highly unusual move in the opposite direction. In January 2019, the company will start selling “authorized” generic versions of two of its three hepatitis C (HCV) drugs, Epclusa and Harvoni, years before the patents on these drugs expire. The list price of the generics will be $24,000, which is about a quarter to a third of the price of the branded drugs.
These two drugs combine sofosbuvir (Sovaldi)—Gilead’s first approved HCV drug—with other drugs. The combinations have each surpassed Sovaldi for HCV treatment. When Sovaldi was FDA approved in 2013, it transformed the hepatitis C landscape, essentially curing the disease while bringing in billions of dollars in revenue for Gilead soon after Sovaldi’s launch.
But as more patients were cured, and competing HCV drugs from Merck, Abbvie and others arrived, Gilead saw its HCV business nose-dive the last few years. Gilead has also contended with criticism of the high price of its HCV drugs ($84,000 list price for Sovaldi, $95,000 for Harvoni, $75,000 for Epclusa), a patent dispute with Merck, and patent challenges around the world from patient groups—most notably The Initiative for Medicines, Access & Knowledge (I-MAK)—that are seeking to boost generic competition and lower prices. Last month, I-MAK scored a victory in China, where authorities rejected a key Sovaldi patent, potentially opening the door sooner for generics there. Gilead told STAT last month that it is “confident in the intellectual property covering (Sovaldi) and all its hepatitis C medicines.”
Gilead’s move into the generics business, through a newly created subsidiary called Asegua Therapeutics, appears to be an attempt to staunch the bleeding in its HCV business and get out ahead of the coming wave of generics. At least one market analyst is skeptical the move will slow Gilead’s projected 2019 sales decrease.
“I doubt Gilead can make a move like this and competitors won’t respond,” wrote Umer Raffat of Evercore ISI in a research note. “It’s possible that this starts another round of pricing flux in this market.”
In its press release, Gilead said that its preemptive move into generics will bring closer together the list price and the actual price that private and government insurers pay today for the branded versions. Gilead, like many other drug firms, blamed the healthcare system for high prices, saying it’s difficult to quickly lower the list price of a drug once it’s on the market, and that discounts it provides haven’t been passed down to patients because “of the complexity and structure of the U.S. healthcare system.” So the company says it’s making generics as another way of lowering prices.
Gilead’s move into the generics business “provides insight into frictions in [the healthcare] system,” Craig Garthwaite, a health policy researcher at Northwestern University, wrote via Twitter. “Firms often claim that various players in the chain make it hard to lower list prices — but that often feels like some proverbial cheap talk. This, however, is a costly signal of these difficulties — setting up an authorized generic involves real costs for the firm.”
Garthwaite added: “Patients with coinsurance will benefit because lower price will reduce their payments.” But, he asked, [the] “Question is will payers move to this drug?”