Gilead's Strategy for New Hep C Drug Epclusa

July 6, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Foster City, California-based Gilead Sciences has an interesting problem. The company dominates the hepatitis C (HCV) market with about a 90 percent share. This is due to two blockbuster drugs, Harvoni, responsible for 43 percent of the company’s sales in 2015, and Sovaldi, which accounted for about 16 percent in the same period. The problem is that on June 28, the U.S. Food and Drug Administration (FDA) approved the company’s Epclusa for HCV.

The problem comes down to: how do you market and price this new drug in a way that you don’t eat into your own profits for the other two drugs?

This requires some background.

Hepatitis C virus has six distinct genotypes. Each of those genotypes has multiple subtypes. Some drugs only treat specific genotypes and/or subtypes.

Harvoni is used primarily to treat HCV patients that are infected with genotype 1 and 4 HCV patients. Sovaldi is mostly used to treat genotype 1, 2, 3 and 4, although is not usually used to treat genotype 1. Epclusa can treat patients with genotypes 1 through 6.

Also on the market is AbbVie ’s Viekira Pak, used to treat genotype 1. And Merck ’s Zepatir, also used to treat type 1.

Then on to pricing. Without getting into various rebates and discounts, Harvoni typically is priced at $94,500 per course of treatment in the U.S. Sovaldi is typically priced at about $85,000. Viekira Pak is generally priced at $85,000. Zepatir is usually priced at the relative bargain rate of $54,600.

Gilead apparently is pricing Epclusa at $74,500.

The Motley Fool has broken down some of the pluses and minuses of the various drugs, excluding pricing, particularly in relation to ribavirin, which is sometimes used in combination with the other drugs.

Viekira Pak is only approved for genotype 1, requires additional testing for variant genotype 1a or 1b strains, and if patients test positive for 1a, requires a combination with ribavirin. This is generally bad, because the side effects are, as The Motley Fool writes, a “long list of unpleasant and dangerous side effects, including abnormal breakdown of red blood cells that can lead to a heart attack.”

Zepatier is approved for genotypes 1 and 4, but also calls for ribavirin in certain antiviral-resistant strains.

Seeking Alpha notes, “Gilead will use Epclusa to grow share in the non-genotype 1 market where there is less competition, more leverage to raise prices, and potentially more lucrative rewards. According to the Motley Fool, genotypes 2 and 3 are more difficult to cure, and doctors ‘usually prescribe multi-drug combination therapies that are very expensive,’ often costing in excess of $100,000. Management is betting Epclusa is sufficiently differentiated that it will be able to establish a leading position in the non-type-1 market without having to undercut competitors on price.”

Gilead and everyone else is also probably finely-tuned to the U.S. presidential election cycle, which has had as one of its key components, rather heated discussions on drug pricing. On the surface, Epclusa’s versatility would seem to warrant a high price, but sensitivity to accusations of price gouging may result in somewhat moderate pricing.

Epclusa, Seeking Alpha indicates, has an advantage in that it can treat all six genotypes, which will probably help it justify its high price. Alexander Maxwell, a Seeking Alpha contributor, noted, “A treatment with the potential to cover all six gene types would make it easier for doctors to start treating without having to test patients for their genotype of Hepatitis C.”

But Gilead clearly doesn’t want Epclusa to eat into its Harvoni profits. The Motley Fool writes, “After undisclosed rebates and discounts, the true price of these treatments is extremely murky, but Epclusa’s advantages over its competition are clear.”

That said, it’s hard to see a long-term strategy where Epclusa doesn’t compete with Harvoni.

But the story gets a little more complicated. Bristol-Myers Squibb markets Daklinza, which last year was approved by the FDA for HCV genotype 3 in combination with Sovaldi without the need for ribavirin. A rather expensive combination, but in this year’s first quarter, Daklinza sales were $420 million. However, Daklinza will probably get hammered by Epclusa.

Epclusa appears to be the only drug to really treat genotype 2. That’s a pretty significant swath of the global population, with 567,000 in the U.S. and Canada, and 583,000 in Western Europe, and about 16.5 million worldwide. It hasn’t been approved outside the U.S. yet, but probably will be.

If this seems very complicated, it is. On a straight up-and-down decision, Epclusa would seem to be the drug physicians would want to prescribe because it covers the most genotypes without requiring extensive testing.

And to complicate an already complicated situation, Gilead and AbbVie, in particular, have made deals with various pharmacy benefit managers, such as CVS Health Corp and Express Scripts, to gain exclusivity for their HCV drugs.