Lower $1,000 Pill Price? We'd Love It, Says Express Scripts

  • Gilead, Express Scripts get in spat over drug costs, rebates
  • Pharmacy manager sends letter to Gilead asking for price cut

More than two years after Express Scripts Holding Co. helped kick off a debate over U.S. pharmaceutical costs by starting a price war over Gilead Sciences Inc.’s expensive hepatitis C pills, the companies are fighting again.

Last week, a senior Gilead executive said that pharmacy benefit managers like Express Scripts profit from high drug prices because it lets them take a bigger slice of the discounts they negotiate for clients. PBMs wouldn’t even let drugmakers cut prices if they asked, said the executive.

On Monday, Express Scripts wrote Gilead’s CEO and dared him to go ahead.

“If you’re saying that the drug really is worth about $50,000, then it’s only right to make sure payers are made whole for overpaying,” Everett Neville, Express Scripts’ senior vice president of supply chain and specialty, wrote in a letter to Gilead obtained by Bloomberg News. He said Gilead should repay the costs that “our clients, and federal and state governments, have incurred since the launch of Sovaldi,” referring to one of the hepatitis C drugs that came to market with a list price of $84,000 for a 12-week course.

Though the debate over drug costs is now years old, it’s gained new life after President Donald Trump made a surprise attack against drug prices in January. Trump has repeatedly criticized pharmaceutical companies since then. On Tuesday, he sent pharmaceutical stocks down once again after tweeting that he’s working on a “new system where there will be competition in the drug industry,” part of a series of tweets where he talked about reforms to the U.S. health care system and repealing the Affordable Care Act.

Express Scripts slumped as much 3.7 percent, the biggest drop in the Standard & Poor’s 500 Health Care Index, while Gilead dropped as much as 1.9 percent.

For more on Trump’s latest tweet on drug prices, click here.

Behind their spat between the PBM and the manufacturer is the complex system of rebates and discounts that underlie how treatments are paid for in the U.S. Drugmakers like Gilead announce a list price. Then, they negotiate discounts and rebates with PBMs like Express Scripts in return for preferred spots on lists of covered drugs. PBMs’ profits come in part from taking a portion of those rebates.

In the case of hepatitis C, Gilead initially offered only minimal discounts when the drug came to market without much competition, according to Express Scripts. After AbbVie Inc. entered with a competing therapy, the PBM was able to force deep discounts from both companies.

Drugmakers are trying to deflect some of the blame by pointing out that the list price of a drug doesn’t reflect how much they take home in revenue. A top drug lobbying group, Biotechnology Innovation Organization, launched a “Drug Cost Facts” website on March 2 to defend the industry. Manufacturers argue that PBM finances are a black box, and that they actually benefit when there’s a large spread between a high list price and lower negotiated one, since they can take a bigger cut. PBMs deny such claims.

The latest fracas kicked off thanks to a remark by Jim Meyers, Gilead’s executive vice president of worldwide commercial operations, who said in an interview with Bloomberg News published March 3 that “if we just lowered the cost of Sovaldi from $85,000 to $50,000, every payer would rip up our contract."

In the letter three days later to Gilead Chief Executive Officer John Milligan, Neville said he wouldn’t.

“Let me assure you, we welcome a lower price,” the Express Scripts executive wrote to the Gilead CEO. “Not only would we agree to a lower list price, we’re asking you to offer one. We won’t rip up our contract.”

Michele Rest, a Gilead spokeswoman, declined to comment.

Piling On

At a PBM industry conference in Orlando Tuesday, however, Express Scripts Chief Medical Officer Steve Miller piled on.

“When they say it is the rebate that causes prices to be high, it is absolute garbage,” Miller said during a speech at the event, referring broadly to the drug industry. Afterward, he called Gilead’s comments last week part of “a deliberate strategy” on the part of the entire brand drug industry to shift the responsibility for high prices to other organizations. “They are trying to spread the blame,” he said.

Sovaldi, Gilead’s hepatitis C drug, was approved in December 2013 and changed the paradigm of treatment of the viral disease, offering a cure for almost all patients within 3 months of treatment. At the same time, payers and politicians decried the treatment as too expensive. It and Gilead’s related drugs have become some of the fastest-selling treatments of all time, and last year had U.S. revenue of $8.43 billion.

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