Gilread Sciences’ new $1,000-a-day hepatitis C drug, Sovaldi, poses a huge risk to the bottom lines of insurance companies, according to an analysis conducted by Leerink, the investment bank.
Sovaldi is having perhaps one of the most successful drug launches ever with their new hepatitis C drug, and could generate $1.5 billion in its first quarter on the market. Just a week ago, a group of Democrats in the U.S. House of Representatives including longtime drug industry gadfly Henry Waxman wrote a stern letter to Gilead asking them to explain why the drug was so expensive. This led Ana Gupte, who covers managed care for Leerink, to review the effect to the expensive new drug on companies she covers. She found that some companies treating patients with Sovaldi could hinder earnings per share by as much as 10%.
“If all the currently 9% eligible for Sovaldi were to receive the drug,” Gupte writes, “the price tag could be as much as $27B with over $8B in fully insured Managed Care. The major brunt is being experienced by Medicaid, Commercial and the Dual Eligibles with significant potential consumption by the newly insured with ObamaCare.”
The managed care companies Gupte looked at include when evaulating costs for the hepatitis C drug include: CalifornaMolina Healthcare (MOH) , a California-based provider of Medicare services and, more recently Affordable Care Act plans; Healthnet (HNC), another California managed care player; Centene (CNT), a big managed care firm based in St. Louis; WellCare Health Plans (WCG); Wellcare Health Plans (WCG) in Tampa, FL; Universal America Corp. of White Plains, N.Y.; and insurance giants Wellpoint, Aetna AET +0.17%, UnitedHealth Group UNH -0.05%, and Cigna CI -0.43%.
There on the opposing side, is a strong argument from the larger health care system, that the new hepatitis C drug price is fair. According to Mark Schoenebaum at ISI Group, it costs more per pill than Vertex’s Incivek, but is also used for less time and is nearly twice as likely to result in patients being cured over time.