Gilead (GILD) | AbbVie (ABBV) | Breaking Down The HCV Pricing Battle

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Gilead Sciences, Inc. (NASDAQ: GILD)

AbbVie Inc (NYSE: ABBV)

Before I get into the details, this article was written as a request from Ward Agular Financial Inc. If you haven’t checked out their website, it’s well worth doing. Click here to check them out!

I’ve been following Gilead Sciences for quite some time now; and I have to say, the company is incredibly impressive. Currently, they have a stronghold on both the HIV and HCV markets. However AbbVie has made their entrance in the HCV market; leading to a ruthless price war. So far, GILD has been able to maintain its stronghold over the market, but ABBV is proving to be an incredibly worthy contender. Fortunately, I’ve recently had the opportunity to have conversations with patients using treatments from both companies, and I’ll share details of those conversations below. Also, we’ll talk about pricing, availability, and which of the two companies is more likely to win the battle for HCV popularity.

What I’ve Learned From Patients I’ve Had The Opportunity To Speak With

In an interest of privacy, I’ll keep the patients’ names out of the conversation today. Instead, we’ll give them the names GILD patient and ABBV patient. Here’s what I learned from conversations with them…

ABBV Patient – The first patient I spoke with is currently using the treatment provided by ABBV. After having HCV for an undetermined period of time (likely around 30 years) he started to feel symptoms and went to get a check up. Sure enough, he was one of the baby boomers that have contracted the hepatitis C virus. Because of the insurance company he uses, Blue Cross Blue Shield, he was prescribed the ABBV treatment rather than the GILD treatment. The determining factor in medication choice here was price. The reality is that ABBV is far less expensive than GILD; and since Blue Cross Blue Shield works closely with Express Scripts (a company that has a deal with ABBV), ABBV patient really had no option. Essentially, for his insurance to cover the more expensive, yet highly effective GILD treatment, he would have to be much more sick than he currently is. So, essentially he is not yet sick enough for top notch treatment in his insurer’s eyes.

As you can imagine, when I spoke with him about this, he was obviously upset. He explained that the treatment from ABBV uses Ribavirin; which unfortunately has horrible side effects. He also explained that the amount of medications he has to take with the current treatment is far more than he would like; and that he finds the GILD 1 pill a day treatment to be very intriguing. Nonetheless, the fact that he is “not sick enough” to receive GILD keeps him from trying the option.

GILD Patient – After speaking with ABBV patient, I remembered that one of my friends was another member of the baby boomer population that was currently undergoing treatment for HCV. So, I decided to give him a call and see what medication it was that he was taking. Fortunately, he was prescribed the GILD treatment. In his particular situation, he wouldn’t be sick enough to receive the GILD treatment under Blue Cross Blue Shield. However, his current carrier ETNA, doesn’t stop him from choosing the higher end treatment.

When speaking with him, he honestly seemed happy. He explained that any medication will have side effects and that he understands he’s “eating poison”, but all in all, the only side effect he experiences is lethargy from time to time. All in all, he had no gripes with the medication and even explained how happy he was that he was able to use GILD rather than ABBV. He also brought up an interesting fact that I hadn’t thought about before. He explained that his friend who used ABBV had the HCV come back after he was fully treated. At that point, the friend was prescribed GILD treatments and has been doing incredibly well since. Which led me to ask a new question…

How Much Money Can Insurance Companies Lose By Deciding Not To Pay More

It’s clear that GILD provides the better treatment. There’s only 1 pill per day, side effects are minimal, and success rates are incredibly high. If given any other option, why would anyone take it? The answer is price. On average the full treatment provided by GILD has a price tag of $94,500. However, ABBV’s treatment only has a price tag of $83,319. So, an insurance company saves an average of about $10,000 for every patient that is treated with ABBV over GILD.

The big question now is, are they really saving. In reality, ABBV’s success rate is around 90%. So, lets say that 1 in 10 patients end up with recurring issues and are placed on GILD. This completely eats away the roughly $10,000 per patient difference! Not to mention, the cost of transplants for those who ABBV fails. The reality is that HCV causes kidney failure, and in many with recurring HCV, this becomes a reality; which requires a transplant. In the US, the average cost of a kidney transplant is $292,900. If this were to happen with only 1 in 30 patients, this would also counteract any savings from placing patients on ABBV’s treatment rather than the treatment provided by GILD.

Final Conclusion

In the long run, I think that Gilead Sciences will maintain it’s dominant position in the HCV market. The reality is that while ABBV is a worthy contender, they’re not quite ready for the big league if their competition is GILD. As a matter of fact, after breaking down the numbers, I’m incredibly surprised that any insurance company would be willing to cover ABBV over GILD. In the long run, this could be a risky move that proves to be more expensive for Blue Cross Blue Shield and like minded insurance companies. Maybe that’s why ETNA is so willing to pay the higher price tag (food for thought). Nonetheless, the battle continues and only time will tell who wins.

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