September 24, 2018

A perspective from our CEO: Gilead Subsidiary to Launch Authorized Generics to Treat HCV

Today, Gilead announced a plan to introduce a generic version of our leading cures for hepatitis C (HCV) in the United States more than a decade before the expiration of the patents.

We made this unusual decision because we believe that it is the fastest way to lower list prices for our HCV cures without significant disruption to the healthcare system and our business, as a bridge to longer term solutions aimed at reducing patients’ out-of-pocket medication costs, improving access for Medicaid patients and providing greater pricing transparency.

When I began working in the biopharmaceutical industry more than 30 years ago, I understood the mandate, as a scientist, to use every tool we had to make a meaningful difference in improving people’s lives Ģ¶ to pursue breakthroughs, even cures, and eliminate serious diseases. HCV is one of those diseases.

HCV is a viral infection that can have serious and life-threatening consequences, including liver failure and cancer. Treatment was historically difficult and often ineffective until late 2013, when our first groundbreaking therapy was approved, offering the potential to cure many people living with HCV and generating long-term cost savings for the healthcare system. HCV cures not only save lives and relieve suffering, but also save billions of dollars by reducing spending on the complications of advanced liver disease. Since the launch of our first HCV cure almost five years ago, we have received FDA approval for three additional curative regimens and estimate that nearly 1 million people in the United States have been cured of HCV with our medications.

Unfortunately, the U.S. healthcare system is not structured to easily absorb the up-front cost of a one-time cure, even if it results in significant savings over a patient’s lifetime. Further, our country’s complex drug supply chain means that a drug’s list price does not always fully reflect the price paid by insurers – let alone a patient’s out-of-pocket cost.

In fact, in the past five years, the average price paid for our cures has decreased by more than 60 percent off of list prices after rebates paid to commercial and government health insurers. However, because these rebates are confidential and are not required to be passed through to patients, these discounts are effectively invisible and do not always translate into lower costs for patients. Moreover, access to these cures has been limited, particularly in Medicaid, based on the public list prices, despite the significant discounts that exist in the system.

Over the past several months, we have searched for a viable path to reduce the list price of our branded HCV medications so that their cost to payers is more easily understood. Unfortunately, existing contracts with insurers, together with laws associated with government pricing policies, make it unacceptably difficult to quickly lower the list price to reflect the discounted cost of our medications.

As a result, we made the decision to launch a generic version of our leading HCV medications in January 2019. These generics will be marketed by a subsidiary and will have a list price of $24,000 for the most common course of treatment – a price that is similar to what health insurers and governments will pay for our branded HCV medicines after rebates and discounts and a $50,760 reduction off the list price of Epclusa. Health insurers will have the choice of covering our branded medications or the authorized generics. This choice can make a meaningful difference, particularly for patient populations with the greatest need. For example, individual patients in Medicare plans that choose to cover the authorized generics could save up to $2,500 in out-of-pocket costs. We also expect these authorized generics to open up access to our medications for people insured by Medicaid, by offering substantial savings to state managed Medicaid plans that do not currently benefit from negotiated rebates.

We are committed to working with key participants in the healthcare system, including insurers, policymakers and government officials, to lower the list prices of Harvoni and Epclusa moving forward.

-John Milligan