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Gilead Sciences Inc. will undercut the prices of its own blockbuster hepatitis C drugs beginning in 2019 by offering authorized generics of Epclusa (sofosbuvir/velpatasvir) andHarvoni (ledipasvir/sofosbuvir) at more than 60% discounts to the brands.

The generics will be introduced through a newly-created subsidiary called Asegua Therapeutics, Gilead announced Sept. 24. They will be list priced at $24,000 for the most common course of therapy.

That compares with list prices of $63,000 for an eight-week course of Harvoni and $74,760 for 12 weeks of treatment with Epclusa.

The price of the generics is on par with the cost of the brands after discounts and rebates, according to the firm. However, “due to the complexity and structure of the US healthcare system, these discounts provided by Gilead may not always translate into lower costs for patients,” the company explained.

Particularly impacted are those in high deductible plans or in the catastrophic phase of the Medicare Part D benefit, where seniors are responsible for covering 5% of a drug’s list price. 

Gilead framed its plan to release the generics years before the brands’ patents expire as a way to rapidly respond to patient distress over the high list prices for Epclusa and Harvoni. The move is also viewed as a way for Gilead to shore up its hepatitis C business against slowing sales. (Also see "Gilead’s HCV Authorized Generics Effort Will Draw Market Share From AbbVie" - Scrip, 24 Sep, 2018.)

“Launching these authorized generics is the best solution available to us today to quickly introduce a lower-priced alternative to our HCV medications without significant disruption to the healthcare system and our business,” Gilead President and CEO John Milligan said in the release.

“Existing contracts, together with laws associated with government pricing policies, make it challenging to quickly lower a product’s price once it is on the market,” Gilead said. The new generics “also will hopefully help increase transparency by more closely aligning our medications’ list prices with their cost.”

Payers will have the choice of offering either the authorized generics or the branded drugs; Gilead will continue to market Harvoni and Epclusa. Gilead said “we cannot predict how insurers and PBMs will respond to the option of covering” the authorized generics. 

Express Scripts Applauds Move

Nevertheless, such a move has been endorsed by pharmacy benefit manager Express Scripts Holding Co.  as a more workable solution than trying to lower the list prices for drugs already on the market. (Also see "Express Scripts Pushing Manufacturers To Lower List Prices By Offering Cheaper Brand Alternatives" - Pink Sheet, 15 Jul, 2018.)

And in a Sept. 24 statement on the Gilead announcement, Express Scripts said, “we offered a path to lower drug prices and Gilead listened.” The action “is a step in the right direction, and we are encouraged that a drug maker is taking meaningful action to bring prices down for cash-paying customers.”

By “re-launching a brand product under a new National Drug Code (NDC) with a lower list price, we create a competitive dynamic more similar to a generic coming to market. Cash-paying patients can have immediate access to the lower-priced medication. Meanwhile, plans and PBMs can choose which product to cover that is best for their plan and their members: the lower-priced option of the original brand, which may have a rebate.”

Over time, “plans, pharmacies and the rest of the supply chain can transition to a new pricing model and the drugmaker could ultimately retire their high list-priced product,” Express Scripts pointed out. Gilead did not discuss a plan for phasing out its brands.

Express Scripts has not announced how it will cover the new generics relative to the brands. “We’re evaluating what changes we will make to our National Preferred Formulary based on this announcement,” a spokesperson said in an email. Currently, Harvoni and Epclusa are included on the formulary as preferred agents. (Also see "Express Scripts Rewards Low List-Priced Brands In 2019 Formulary, Retains Focus On Rebates" - Pink Sheet, 7 Aug, 2018.)

Coverage by Medicare Part D formularies may have to wait until 2020. Plan sponsors submit their bids to the Centers for Medicare and Medicaid Services in June for the following year so bids for 2019 have already been filed.

Gilead’s move suggests the development of a trend. Mylan NV  took a similar route when it introduced an authorized generic for EpiPen in late 2016 at half the list price of the brand. And Eli Lilly & Co. has expressed interest in the idea but has not announced any plans for similar action to date. (Also see "Lilly Likes Concept Of Low-Cost Brand Alternatives As ‘Glide Path’ To No Rebates" - Pink Sheet, 6 Aug, 2018.)

However, the lower-cost NDC solution would apply to a relatively limited number of high-priced, highly-rebated drugs, perhaps “dozens,” with insulins being among the leading candidates, Express Scripts Chief Medical Officer Steve Miller suggested during a media briefing Aug. 2.

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