Biotech and Pharma

For Sovaldi patients, expensive hepatitis C cure is priceless

Staggering drug price tag

Gilead's blockbuster drug Sovaldi has become a lightning rod in the debate over rising specialty drug prices. The one thing is indisputable, for patients the drug works remarkably well.

Four weeks into treatment with Sovaldi, 55-year old Michelle Carver of New York said she feels better than she has in years.

"I'd stopped doing everything because I thought, my liver was failing," she said. Like so many with the virus, she had felt constant fatigue. "Now, I feel so much better. I'm in the gym. I'm eating."

Carver said she doesn't know how she acquired hepatitis C, which is most common in the U.S. among baby boomers exposed before testing for the virus was developed in the early 1990s. Her best guess is that she might have been exposed from a blood transfusion during an operation, or when she got a tattoo, years ago.

"I was in shock, when I found out I had it. And I'm in shock to find out that it actually can leave my body," she said.

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She said her course of treatment couldn't be easier. She takes just two pills a day at breakfast: Sovaldi, and the companion medication Olysio, made by Johnson & Johnson.

"It's like taking vitamins every day," she said. "I haven't had one side effect."

Four weeks into the treatment, Carver was testing negative for the hep C virus, which accounts for one of the leading causes of cirrhosis and liver cancer.

A breakthrough treatment

"We're talking about curing people with 98 percent success rate," said Dr. Ari Bunim, a hepatologist at New York Hospital Queens. "It's a whole new ball game."

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But it comes at a steep price. The 12-week course of treatment with Sovaldi costs $84,000$1,000 per pill. Taken along with Olysio, the new cure tops $140,000. That's three-times the cost of older hep C drugs. But those treatments often have costly side effects and aren't as effective.

An associate scientist at Gilead Sciences.
David Paul Morris | Bloomberg | Getty Images

Retired New York City firefighter John DeFazio underwent several rounds of treatment with the antiviral Interferon, before trying Sovaldi and said the earlier treatment made him feel worse than the disease.

"In the beginning, you would have flu-like symptoms and you would be sick, but that would go away somewhat, but then the big thing is depression," he said. "I used to hide from people."

Sticker shock is relative

Doctors argue the extra costs associated with complications that arise from Interferon treatments, including blood transfusion requirements and weekly doctor visits, can easily rival the costs of Gilead's drug. And the course of treatment is not nearly as successful.

"It might seem like sticker shock, but the truth of the matter is, you're saving money in the long term," said Bunim.

Sovaldi isn't the first sticker-shock drug, but it may be the biggest. Hepatitis C is not a rare disease—an estimated 3 million Americans are infected with the virus. So demand for the drug is strong.

"We have a large number of people that are really willing to be treated that have previously resisted treatment because of the side effects," said Dr. Hillel Tobias, a hepatologist and liver disease specialist at NYU Langone Medical Center.

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Gilead saw more than $2 billion in Sovaldi sales in its first three months, and analysts say indications are that drug is on pace for another $5 billion in sales during the second quarter of the year

Challenge for health plans

For payers, the launch of Sovaldi has represented a kind of perfect storm. The drug was approved in December, and the price set after insurers, Medicaid and Medicare plan budgets were set for 2014. Its launch has also coincided with the start of Obamacare, as more Americans gained insurance coverage for high-priced drugs.

"It is both a high-price and a high-volume, and that's what makes people very nervous about what it means to the cost of care and the cost of programs and to the cost of insurance," said Tricia Neuman, a senior vice president of the Kaiser Family Foundation.

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Because the drug is so effective, insurers and health plans are approving coverage, though they are proceeding slowly in some cases. A number of state Medicaid programs have only recently added Sovaldi to their approved drug lists, or formularies. Analysts expect the financial impact on the federal-state health program for the poor will increase in the second half of the year.

Carver had worried her insurer would balk at Sovaldi's cost. She felt blessed to hear otherwise and that she can put hep C behind her.

"I thought it was something I would live with the rest of my life," she said.

As many as three new hepatitis treatments are expected to gain approval by 2016, and that could help bring prices down through competition. But for now, Sovaldi has a lock on the market.

—By CNBC's Bertha Coombs