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Highway bill gives $500 million to veterans’ hepatitis drugs

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(Bloomberg) — The U.S. Department of Veterans Affairs was authorized to spend as much as $500 million for hepatitis C treatments through Oct. 1 as part of the emergency highway funding bill signed into law on Friday.

The spending could provide a short-term sales boost for Gilead Sciences Inc. (Nasdaq:GILD), which makes the hepatitis C treatments Harvoni and Sovaldi, and for AbbVie Inc. (Nasdaq:ABBV), which makes a similar drug, Viekira Pak. Gilead sold $4.9 billion of its hepatitis C pills in the second quarter, while AbbVie sold $385 million of its treatment in the same period.

While the drugs provide a cure for the disease, which can cause liver damage to the point of needing a transplant, their prices have attracted a firestorm of criticism from politicians and insurers. List prices for the treatments are more than $83,000 for a 12-week course.

The drugmakers said funding shortages at the VA have affected sales. Overall patient volumes in the U.S. may have declined in part because of fewer patients treated by the VA, AbbVie’s Chief Executive Officer Rick Gonzalez said on a July 24 conference call with analysts.

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“We’ve already seen VA purchases drop off towards the end of quarter two,” said Paul Carter, Gilead’s executive vice president of commercial operations, on a Tuesday conference call with analysts. Both drugmakers said they assumed funding would resume on Oct. 1 and the agency would ramp up purchases of hepatitis C drugs again at that time.

The VA estimates it will spend $690 million in 2016 for 11,394 treatments, according to the department’s 2016 budget. Veterans are a significant population of potential patients. About 175,000 enrollees are diagnosed with hepatitis C, according to the VA. About 2.7 million Americans have the virus, according to the U.S. Centers for Disease Control and Prevention.

The emergency spending is part of $3.35 billion authorized for the Veterans Choice Fund to cover the cost of private medical services for veterans. The bill, passed by Congress on Thursday, was signed by President Barack Obama on Friday.

—With assistance from Derek Wallbank in Washington.

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