Controversy surrounding the pricing of
) blockbuster hepatitis C virus (HCV) treatment, Sovaldi, does not
seem to end. The latest act in this episode came when two members
of the U.S. Senate Finance Committee, including its chairman Ron
Wyden, issued a letter to the biopharmaceutical company asking to
justify the high price of the treatment in the U.S. We note that
the drug, which is available in the U.S. since December last year,
costs $84,000 for a 12-week treatment period.
What the Letter States
The senators in their letter stated that the methodology used by
Gilead to arrive at such a high price for the treatment remains
cloudy particularly if one considers the patient population.
Incidentally, HCV affects a sizable population in the country (many
of whom are in the low income group). The letter voiced concerns
about the excessive load on the payors of healthcare Medicaid and
Medicare exerted by the steep Sovaldi price in the U.S.
The senators further stated that the U.S. government's spending on
other programs including healthcare costs for HCV infected
prisoners would escalate dramatically due to Sovaldi's exorbitant
price. The lawmakers said that the cost would increase further for
HCV patients requiring Sovaldi treatment for more than 12 weeks.
The lawmakers also the rationale behind the hefty discounts
offered on Sovaldi prices in other countries such as Egypt.
As per the senators, the original developer of the drug,
Pharmasset, had planned to sell the therapy for only $36,000 per
round of treatment. We remind investors that Gilead gained access
to Sovaldi through its acquisition of Pharmasset in early 2012.
Multiple Documents Wanted
The lawmakers, while launching an investigation on Sovaldi's high
price in the U.S., asked the company to furnish a host of documents
within the next two months to assist in investigations. The
documents wanted include those related to Gilead's purchase of
Pharmasset and costs associated with the development and marketing
of Sovaldi, among others.
Price Concerns Expressed Earlier
Criticisms regarding Sovaldi's high price tag in the U.S. are not
new. In March this year, Gilead received a letter from the
Congress' Committee on Energy and Commerce expressing concerns
about the pricing of the drug (read
Gilead Down on Sovaldi Price Issue
). The letter from the lawmakers not only impacted Gilead's stock
price adversely but also triggered a selloff in biotech
stocks. We however do not expect such an extreme reaction
this time. All the same, we expect investor focus to remain on
updates regarding the latest controversies surrounding Sovaldi's
Gilead carries a Zacks Rank #3 (Hold). Better-ranked stocks in the
healthcare sector include
The Medicines Company
). While The Medicines Company and Biogen are Zacks Ranked #1
(Strong Buy) stocks, Celgene holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
MEDICINES CO (MDCO): Free Stock Analysis Report
GILEAD SCIENCES (GILD): Free Stock Analysis
CELGENE CORP (CELG): Free Stock Analysis Report
BIOGEN IDEC INC (BIIB): Free Stock Analysis
To read this article on Zacks.com click here.