His Job Is to Sell a $1,000 Pill for $10 Without Losing Moneyby
`We make a good target,' says Gilead Sciences' access chief
Debate about rationing access to a life-saving medicine
Gregg Alton has what seems like a disorienting job at Gilead Sciences Inc. He’s paid to figure out how to sell the drug Sovaldi, which infamously retails in the U.S. at $1,000 a pill, for relatively next to nothing.
The instructions for pricing the cure, which wipes out hepatitis C in just 12 weeks, basically go like this: “Get to as many patients as possible in low-income nations --and not lose money,” Alton says. “It’s very simple.”
Actually, it’s not so simple, but it is controversial. Decisions about what to charge around the world for life-saving remedies have spurred debate ever since Big Pharma began offering some discounts after a backlash in the ’90s, when groundbreaking HIV treatments reduced deaths in wealthy countries and not poor ones. Criticism has been harsh with Sovaldi, one of the most expensive and best-selling drugs in history.
“We make a good target,” says Alton, Gilead’s executive vice president of corporate and medical affairs.
He offers a rare look at how a pharmaceutical giant walks the line between shareholder expectations on the one hand and global public health needs on the other. It starts with his team looking at the map through the lens of per-capita income. Countries that are well-off go into one bucket. The rest are sorted by wealth and rate of hepatitis C infection.
Then come negotiations with governments. Whatever the price settled on in lower-income nations, Alton says, it usually brings complaints about why the therapy isn’t cheaper -- or why it’s so much cheaper than in the U.S.
Sovaldi Versus IPhone
“People say, ‘Why does Egypt pay 2 percent of the price?’ But it’s something we should do,” he says. He contrasts Sovaldi with the iPhone: “It costs the same everywhere, but it’s not a human need.”
At the moment there are 101 countries in Gilead’s most-needy category, including Egypt, Cuba, Pakistan and the Philippines, and they’re all on the company’s generic-approved list. Gilead has given 11 manufacturers in India licenses to make knockoffs, with sales strictly limited to the list; Gilead gets a 7 percent cut of sales. A generic pill is going for as little as $4.29 in India.
But it could take years for generics to reach all 101, and in the meantime Gilead is cutting deals with some for branded Sovaldi, and also for Harvoni, a formulation that combines Sovaldi with another drug and can reduce treatment times. Typically it’s $900 for a 12-week regimen, or $10 a pill, Alton says, with governments footing all or part of the bill. Gilead has received or applied for the OK to sell Sovaldi in 29 countries, including 16 on the most-needy list.
One is Egypt, which has the world’s highest hepatitis C infection rate: more than 10 percent of the population, or about 8.3 million people, according to Gilead. The Health Ministry buys Sovaldi at the $900 rate. The Egyptians “were relentless” in pursuing a deal, Alton says, with government physicians tracking down his team at a conference in Amsterdam after seeing data on the drug before it was approved by the U.S. Food and Drug Administration.
According to Doctors Without Borders, which is critical of drug-pricing policies, it costs Gilead $100 to manufacture the 90 pills in the 12-week course. The company is “still making a substantial amount of money” in Egypt, says Rohit Malpani, director of policy and analysis for the organization’s access campaign.
What’s Gilead’s margin in Egypt? Alton won’t say. He acknowledges the price is above the manufacturing cost, though he won’t disclose it. There are other expenses, he says, including for marketing, educational and legal matters.
“We can’t price to the poorest person,” Alton says. For one thing, there’s the don’t-lose-money mandate. What’s more, he says, Gilead doesn’t want “to create an artificially low price for the generic companies coming in after us.”
There’s another set of calculations for middle-income nations. In Brazil, for instance, Gilead charges $6,875 for 12 weeks -- 8.2 percent of the U.S. retail price but, according to critics, too much for a nation where per-capita income is about $15,838.
Gilead has a “very sophisticated strategy,” says Tahir Amin, co-founder of the nonprofit group Initiative for Medicines, Access and Knowledge. The company has excluded Chinese generic-makers that could have hastened delivery but would have cost Gilead profits, Amin says. And Gilead “could certainly do more” for middle-income countries not among the 101, he says, singling out China, Brazil and Ukraine, where the disease-burden is high.
Hepatitis C related liver diseases kill about 500,000 annually, most of them in middle- and low-income countries. Until Sovaldi, treatments were marginally effective and often had brutal side effects. When the drug hit the U.S. market in 2013 it was a stunner, for its efficacy and list price: $84,000 for 12 weeks.
That kicked off a new round in the argument over how to reward the innovation that produces cures while not throwing up hurdles for those who need them.
Some public and private U.S. insurers have limited prescriptions to only the sickest. A bipartisan U.S. Senate Finance Committee report chastised Gilead, saying it was focused more on profits than patients. Gilead responded that it priced Sovaldi thoughtfully, based on existing treatments on the market.
Most in Big Pharma make the lion’s share of their money in the U.S., where prices aren’t regulated and insurers negotiate discounts, so hardly anyone pays full freight. Still, Sovaldi’s U.S. sales have made the company and some shareholders rich, but Alton says that’s fair. Gilead is “incentivizing investors -- otherwise they would invest in social media or something else.”
Gilead has made some money-losing arrangements. One of the most unusual is with Georgia. Davit Sergeenko, minister of health, labor and social affairs in the former Soviet republic, e-mailed Alton in 2014, saying the country had a fund to combat hepatitis C. Could they do a deal? The amount set aside -- $5 million -- was a pittance. But Alton says his team realized it might be possible to eradicate the disease in the country, which has a population of less than 5 million and an infection rate of almost 7 percent.
Gilead agreed to provide Sovaldi for free, and Alton says the virus could be eliminated in 10 years or less. “It’s a strong case study to take to the U.S.,” he says. He’s not suggesting Sovaldi be free in America, but, counter-intuitively, that success in Georgia could show how it makes sense for private and public insurers to spend big upfront to reduce health-care costs over time.
Alton’s team is continuing to strike deals in countries where it might sell discounted Sovaldi; he says it’s working now on China and Mongolia. A windowsill in his office in Foster City, south of San Francisco, testifies to his globe-trotting, lined with mementos including Georgian silver drinking horns and a beaded African staff.
What’s frustrating, he says, is that the good Gilead does in other countries is overshadowed by reverberations from the U.S. sticker shock. However his company tries to explain the value it brings to patients, it can’t compete, he says. “It’s never going to be as powerful as ‘$1,000 a pill? Is that fair?’”