Two Takes On Sovaldi: Rep. Burgess Urges Rx And Insurers To Work It Out; Sen. Wyden Requests Details

Health Subcommittee Vice Chair has some advice for payers and drug companies: work out your problems or face the growing pressure for government to get involved.

“If you if you ask us to figure it out for you we will,” but “you may not like what we figure out.”

That was the message from House Energy & Commerce/Health Subcommittee Vice Chair Michael Burgess (R-Texas) for biopharma companies and health insurers during a July 11 American Enterprise Institute forum focusing on the outcry over the cost of treating hepatitis C. (Also see "The Cost Of A Cure: Gilead Exec Outlines Factors In Sovaldi’s Pricing" - Pink Sheet, 11 Jul, 2014.)

There there could be a role for government in developing novel payment structures for medical products that offer cures at very high costs, Burgess said. But, he urged the private sector instead to work out a solution without the government involvement.

Burgess was asked to provide his opinion on whether the government has a role to play in progressing incentives for insurance companies and other payers to pay for drugs, like Gilead Sciences Inc.’s Sovaldi, that come with a hefty upfront price tag, but would provide overall savings in the long run.

The Texas Republican doctor-legislator replied by urging the private sector – especially the insurers -- to tone down the rhetoric and to work out a solution without inviting the government in.

Burgess made his comments at the same time that Senate Finance Chairman Ron Wyden (D-Ore.) and Ranking Republican Charles Grassley (R-Iowa) were issuing a letter to Gilead asking for a full explanation of the calculations behind the pricing of the product.

In contrast to House Energy & Commerce Ranking member Henry Waxman’s (D-Calif.) approach (which includes two letters and an in-person briefing with Gilead), the Finance Committee is directing the investigation towards the costs of bringing Sovaldi to marketby trying to deconstruct the roughly $11 billion acquisition of Pharmasset when sofosbuvir was in the middle stages of development. (Also see "Sovaldi And The Case Against Incentives" - Pink Sheet, 18 Jun, 2014.)

There are 62 total requests in the letter—21 major questions with 41 subparts—with a large focus on specific communications between Gilead, Pharmasset and its financial advisor on the deal Morgan Stanley and Gilead’s advisor’s Barclays and Bank of America Merrill Lynch.

One of the questions asks Gilead to supply a complete accounting of all research and development costs after the Pharmasset acquisition, including “separate line items for personnel costs, clinical studies, materials and supplies, licenses and fees, milestone payments under collaboration agreements, overhead allocations, facilities costs, and the value contracts with contract research organizations (CROs) related directly to the development of sofosbuvir.”

That question represents just the tip of the iceberg of the kinds of requests the Finance Committee is making.

Like the Waxman inquiries, the letter cites the price of $84,000 for a 12-week course of treatment, but adds that for some patients with genotypes 1 and 3, the 24-week course will cost double—$168,000. The letter also mentions a 48-week course of therapy for patients who have liver cancer.

Moreover, the letter highlights a Pharmasset filing with the SEC that demonstrates the company was considering a $36,000 price: “a US price base rate of $36,000 per course of treatment” was listed as one of the “assumptions” in the December 6, 2011 filing.

The letter reiterates a Health Affairs analysis on how Sovaldi could impact spending in federal programs, including Medicare Part D: $6.5 billion if 75,000 Part D beneficiaries were put on Sovaldi. The letter adds there are 1.8 million prison inmates who have hep C and treatment with Sovaldi could cost taxpayers “billions” despite a 44% discount.

While the Finance letter still does not raise a direct legislative threat to pricing flexibility, the approach of deconstructing the components that went into the Sovaldi price – including the financial acquisition costs – is a warning of more pointed attacks in the future.  Unlike the Democrats in the House who have been leading the inquiries to this point, Wyden holds the chairman’s gavel and has the authority to call a hearing if so inclined. 

That specter is something that Burgess believes all parties should work to avoid. He said that it would be better for the industries to collaborate to find creative solutions to the pricing problem, applying “a greater knowledge” of all the dynamics than Congress would be able to do.

Burgess did urge greater communication within the federal government to prepare for breakthroughs to hit the market. He pointed out that government agencies like the National Institutes of Health, the Food and Drug Administration, and the Centers for Medicare and Medicaid Services could do a better job of communicating, and perhaps serve as an example. He likened NIH to a developer, stating that when it knows of a new molecule that could eventually become a medical product, it should discuss with CMS, the eventual payer, a way to reasonably pay for the product.

Here are Burgess’ Comments at the AEI Forum,:

Michael Burgess: July 11 AEI Forum

Jim Glassman, AEI: “As I understand it, we now have drugs coming on that actually cure diseases, and we have a private health insurance system that seems more interested in paying for, or knows how to pay for, chronic diseases like paying for anti-retrovirals – $20,000-$30,000 a year, forever – rather than for a cure which may cost a lot more, and then it’s done. Do you think there’s a role for government in figuring out how to kind of square that circle, and get private insurers to maybe develop a different kind of system to handle cures?

Burgess: The short answer to your questions is yes, there is a role.

Would it be better if the payers and the developers worked that out outside of the government? It might be, but if you ask us to figure it out for you we will. You may not like what we figure out. You may be able to apply a greater knowledge set to that than the people who work on the committees.

I’m not saying that to be glib. The discussion comes up about the new Hepatitis C drug. We should be standing on our chairs cheering, “We’ve cured Hepatitis C! That’s incredible!”

Here is a disease that, when I was in residency at Parkland Hospital, we didn’t even know what it was… And now, 40 years later, we’ve got a cure. Now, the cost, yeah, it’s a problem, and from the payers’ side, it’s going to have to be figured out, but really the headline ought to be, “We cured hepatitis C!” …

I’ve always concerned that there doesn’t seem to be the type of communication … I would like to see between the NIH, the FDA and CMS. Here you’ve got the developer, you’ve got the regulator, and here you’ve got in CMS’ case for Medicare, you’ve got the payer. What is the conversation? What is the two-way street here? Is NIH talking to FDA about, we’ve really got this new class of stuff that’s coming, you’d better be ready for the approval or the regulatory side of this that we’re about to give you? And similarly, to CMS, there is something coming and you may need to adjust some of how you pay for things?

Are we talking to each other within the Federal agencies? Is there give and take?

There may need to be a novel payment system as you articulated. There may be a different way to do that. If you leave it to us, we’ll figure something out, but it could be something as devastating as we’ll just tell you what you can charge,”in which case the possibility of recouping the development side of the equation is going to be much harder, or we’ll simply make it so that the price point can be such that it’s above the reach of the population that desperately needs the medication and then we’ll let the marketplace figure it out. The government will do it; I encourage you to do it first.