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Hepatitis price war draws Blue Cross coverage for both drugs

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(Bloomberg) — Gilead Sciences Inc. and AbbVie Inc., engaged in a price war over hepatitis C drugs, are offering such substantial discounts that one benefit manager has decided to cover both medicines rather than get a lower price for one through an exclusive deal.

A “substantial reduction” in the price for Gilead’s Harvoni and AbbVie’s competing Viekira Pak made it possible to give both drugs preferred status and still save more money than through an exclusive deal, said Prime Therapeutics L.L.C. Prime covers 25 million patients in non-profit Blue Cross and Blue Shield plans for people in 23 states.

“We are receiving market-leading rates from both companies,” said Peter Wickersham, a senior vice president in charge of specialty drugs for Prime, in a telephone interview. “Neither company wanted to be left off the formulary.”

Wickersham said in his 20 years in the industry he had never seen prices for a brand-name drug category plummet so quickly after a competing drug was introduced.

The deal breaks a pattern of major benefits managers signing exclusive deals with either Gilead or AbbVie in exchange for better pricing. Express Scripts Holding Co., the biggest U.S. manager of pharmacy benefits, said it wrung a price discount from AbbVie by agreeing last month to make Viekira Pak the preferred choice for most patients for at least two years.

Soon after, CVS Health Corp. and Anthem Inc. made deals with Gilead to use Harvoni, blocking AbbVie. Anthem said last week said it got price discounts in return.

Saving money

Wickersham said that Prime’s initial inclination was also to do an exclusive deal to give preferred status to only one of the two competing drugs. Yet after it asked Gilead and AbbVie what discounts they would give if both drugs were equally covered, then projected its likely costs, it realized it could save more money by covering both drugs.

Gilead said it had no comment other than to say it was pleased to have reached the agreement with Prime. AbbVie said it’s working to provide access to Viekira Pak as many patients as possible.

AbbVie’s Viekira Pak is less convenient than the Gilead medication, since it requires most patients to take four to six pills a day for 12 weeks, compared with one pill a day for Harvoni. Nonetheless, Wickersham said that AbbVie’s drug is likely to capture some market share because sometimes patients respond better to one medication than another.

Gilead slid 1 percent to $101.21 at the close in New York. AbbVie was little changed at $65.76.

Hefty price tags for new drugs have drawn criticism from insurers, lawmakers and doctors. Before discounts, Gilead’s hepatitis medicine Sovaldi costs $84,000 for a 12-week course of treatment, and Harvoni, which combines Sovaldi with another medication, taken as a single pill, costs $94,500 for 12 weeks. Viekira Pak’s listed 12-week price is $83,319.

Wickersham predicted that hepatitis C drug prices would drop further in the next few years as other competitors hit the market.

“You could probably call this round one,” Wickersham said.

See also: VIP drug-approval pass costs $125 million and climbing.