Payers see price leverage with entry of Merck hepatitis C drug

U.S. health insurers and pharmacy benefit managers expect the launch of Merck Co Inc’s new hepatitis C pill to improve their leverage in price negotiations with drugmakers.

The Food and Drug Administration on Thursday approved Merck’s Zepatier for treatment of patients infected with the most common form of the liver-destroying virus, genotype 1, as well as the less common genotype 4.

The list price for the new drug is $54,600 for a 12-week regimen – compared with $94,500 for Gilead Sciences Inc’s Harvoni. A multi-pill regimen, Viekira Pak, from AbbVie Inc has a list price near $83,000.

Express Scripts Holding Co, the largest manager of U.S. prescription drug plans, CVS Health Corp, the No. 2 drug benefit manager, as well as health insurers Aetna Inc and Anthem Inc told Reuters on Friday that they are evaluating the new drug in terms of medical benefit and cost.

AbbVie in late 2014 secured an exclusive contract with Express Scripts, resulting in Gilead being forced to discount its own contract prices with a range of other payers. Merck said it priced Zepatier in line with net prices for competing drugs.

“We look forward to working with Merck,” Express Scripts said in an emailed statement. “Having multiple, clinically effective options allows us to again leverage competition and make medicine more affordable for our clients.”

No changes have been made as yet to Express Scripts’ preferred formulary, but Harvoni will be added to its Medicare formulary on March 1.

CVS, which now gives preferred status to Gilead’s hepatitis C drugs, said that it is “employing a strategic assessment of the therapy landscape and engaging with drugmakers to evaluate options.”

Aetna, which also lists Gilead drugs as preferred hepatitis C options, said it plans “a thorough review of Merck’s new hepatitis C drug.”

Brian Skorney, an analyst at financial services firm Baird, said Merck will likely discount its price by at least 20 percent, due in part to rebates that are required by law to certain government-sponsored healthcare plans. He expected a negative market reaction “as it could indicate additional pricing pressures.”

Shares of Gilead were down 5 percent at $83.00 in Friday Nasdaq trading – their lowest since June 2014. Merck shares were up 2 percent at $50.35 on the New York Stock Exchange.

Analysts estimate that Gilead, with $14 billion in hepatitis C drug sales for the first nine months of 2015, controls about 93 percent of the U.S. market, compared with AbbVie’s 7 percent.

“Given Merck’s interest in participating in such a large market, we model and fully expect increased price competition and we also view Merck’s list price as a rational way to stay out of the drug pricing spotlight,” Seamus Fernandez, an analyst with healthcare investment bank Leerink, said in a research note.

UBS has forecast that Merck will get 8 percent of the U.S. genotype 1 market this year, rising to 15 percent in 2019.

Both Zepatier and Viekira Pak require periodic liver function tests. In addition, Harvoni remains the only eight-week treatment option for genotype 1 patients.

(Reporting by Deena Beasley and Caroline Humer. Additional reporting by Bill Berkrot; Editing by Andrew Hay)

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