(Bloomberg) — Gilead Sciences Inc. may finally be forced to offer a lower price for its $94,500 hepatitis C drug.
The biotechnology company could have no choice but to negotiate its own discounts with CVS Health Corp. and other drug benefit managers, say analysts, after rival drugmaker AbbVie Inc. announced a deal today to block Gilead’s pill Harvoni from a list of medicines covered by Express Scripts Holding Co.
Express Scripts manages pharmacy benefits for about 85 million people in the U.S., while CVS had about 26 percent of the pharmacy benefits market in the U.S. last year, behind Express Scripts, according to the U.S. Department of Labor.
“Does Gilead really want to be blocked from half of the U.S. population?” John Kreger, an analyst at William Blair & Co., said in a telephone interview today. “They would be the most motivated to cut a deal with CVS.”
AbbVie’s deal with Express Scripts flips the power balance to favor insurers and pharmacy managers, who now can pit drugmaker against drugmaker to force price cuts in one of the most expensive classes of medicines in history. AbbVie’s treatment, without the multiyear discount it has given to Express Scripts, costs $83,319 for a 12-week course, or about $1,000 a day.
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The result will be “a domino effect,” said David Bernstein, chief of hepatology for the North Shore-LIJ Health System, as each drugmaker strikes its own deal to be a pharmacy manager’s medicine of choice in return for discounts. Bernstein has worked as a consultant for Gilead and AbbVie.
Gilead shares fell 14 percent to $93.70, the biggest intraday drop since February 2012. The stock had gained 45 percent in the last 12 months as of yesterday’s close.
CVS is in a particularly strong position to extract price cuts on hepatitis C drugs, and the AbbVie deal “puts a lot more pressure on CVS and Gilead to have some sort of agreement,” said Ross Muken, an analyst at Evercore-ISI. By playing Gilead and AbbVie off each other, “CVS could end up with a pretty sweetheart deal here.”