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UPDATE 1-U.S. health insurers say Gilead hepatitis C drug too costly

(Adds response from Gilead Sciences in paragraphs 8-9)

May 20 (Reuters) - The leading U.S. health insurance trade group on Tuesday hit out at the extremely high cost of new specialty medicines, accusing drugmakers of taking advantage of the insurance system by pricing products at unsustainable levels.

The latest salvo in the war on escalating U.S. healthcare costs came from AHIP - America's Health Insurance Plans - and targeted Sovaldi, the new $84,000 hepatitis C treatment from Gilead Sciences Inc.

"Sovaldi has shown tremendous results, and it's the kind of medical innovation we need to sustain. Unfortunately, the drug's maker has priced it at an astronomical level that is not sustainable for consumers, innovation, or society," AHIP said on its Coverage blog.

Sovaldi is the first in a new wave of all-oral treatments for the liver disease that has been a tremendous advance over prior treatments. The new drug has demonstrated an ability to cure well over 90 percent of patients in just 12 weeks or less with few side effects.

Prior to the Sovaldi approval, hepatitis C treatments took 24 or 48 weeks, cured about 75 percent of patients and involved many more pills as well as injectable interferon that causes flu-like symptoms and other side effects that led many people to avoid or discontinue treatment.

But concern that hundreds of thousands of patients will seek treatment with the Gilead drug that costs roughly $1,000 per pill has provided a rallying point for insurers and others seeking to rein in the skyrocketing cost of new medicines in the United States, which has no price controls on drugs, unlike Europe and other countries.

In its first full quarter on the market, Sovaldi had more than $2 billion in sales, shattering previous pharmaceutical records.

Cara Miller, a spokeswoman for Gilead, defended the drug's pricing in an emailed statement: "While Sovaldi greatly enhances the standard of care for hepatitis C, it was priced such that the total regimen cost is equal to that of prior standard of care regimens.

"Sovaldi reduces total treatment costs for HCV - taking into account the cost of medications (including those for side effects or complications) and healthcare visits - and it represents a finite cure, an important point to consider when comparing the price of a pill or bottle to the lifetime costs of treating a chronic disease."

The campaign against Gilead may also be an effort to pressure other drugmakers, such as Merck & Co, AbbVie and Bristol-Myers Squibb Co, before they set prices for their hepatitis C drugs that are expected to gain regulatory approval in the next year or two.

AHIP said promising new drugs are being priced in a way that threatens Americans' access to them. "We need to find a solution that ensures important drugs like Sovaldi are priced at sustainable levels so that we can foster even more life-saving innovation."

John Castellani, chief executive of PhRMA, the leading pharmaceutical industry trade group, said the problem is an insurance system that pushes too much of the cost of treatment onto the patient with high co-pays and deductibles for drugs.

"The insurance model makes medicine seem like the most expensive part of the healthcare system," Castellani said.

(Reporting by Bill Berkrot and Caroline Humor; Additional reporting by Ken Wills; Editing by Ken Wills)