The Other Shoe Drops on Price Competition with the Launch of AbbVie’s New Pangenotypic Regimen.
On August 3, 2017, the FDA approved AbbVie’s pangenotypic regimen, Mavyret, a novel dual fixed-dose combination of a NS3/4A protease inhibitor (glecaprevir) and NS5A inhibitor (pibrentasvir) for the treatment of HCV patients with genotype 1-6 infections irrespective of cirrhosis statusa. In a surprising move, AbbVie elected to set a list price of only $26,400 for 8-weeks of therapy. Since the launch of Gilead’s Sovaldi and Harvoni, which reached the U.S. market with list prices of $84,000 and $94,500 per 12-week course, respectively, payers and patient advocacy groups alike have demanded lower-cost HCV therapies. The list price for Mavyret represents a 52% discount to established regimens such as Merck & Co’s Zepatier’s list price (12 weeks), and a 57% discount to Harvoni’s list price (8 weeks). However, the list prices for direct acting agents (DAAs) are generally far higher than those negotiated and paid for by payers and pharmacy benefit managers (PBMs), with most patients having access to therapy at around a 50% discount to list price (Decision Resources HCV Disease Landscape and Forecast). AbbVie’s price point is still a significant step forward in driving down costs. Prior to the launch of Mavyret, only those patients with a reduced treatment duration, such as genotype 1 patients with a low viral load eligible for an 8-week Harvoni treatment, have ever come close to this low a price for an HCV cure. As such, AbbVie’s new price strategy, in turn, should allow payers to shift their focus away from cost containment thereby allowing for an increase in diagnosis rates and access to therapies, a highly beneficial development for patients suffering from chronic HCV infection and society at large, but ultimately may induce a swift decline in HCV revenues.
AbbVie’s aggressive pricing strategy mirrors that of Merck & Co’s. Given that Merck’s HCV regimen Zepatier was a late market-entrant and required resistance testing for a large segment of the HCV population, the company employed a 58% discount to a 12-week course of Harvoni. Merck’s strategy was to initially focus on the public insurance market given that commercial payers and PBMs already had standing contracts with Gilead or AbbVie offering undisclosed discountsb. AbbVie recently stated in their 2017 Q2 earnings call that they are similarly focused on the public channels: “On the commercial side of the business, much of that is under contract with the market leader on exclusive contracts. So we don't see a significant opportunity for that in 2017 and probably certainly even halfway through 2018. …a significant part of our strategy will focus early on in the U. S. in the public channels, because those will become available more rapidly.”c
The question moving forward is whether AbbVie has initiated another round of price wars in which manufacturers will aggressively compete in both the public and commercial insurance markets. Such a price war could lead to a substantial decline in commercial sales in the HCV space while providing a huge cost relief to payers, who to date, have maintained restrictions based on a patient’s liver disease state or initial denials as a means to defer treatment costsd. A removal of payer-imposed restrictions would be welcomed by physicians, who continue to report that payers limit their ability to treat all their HCV patients seeking treatment. Notably, DRG estimates that the majority of untreated HCV patients in the United States are part of the non-commercial market. Thus, AbbVie’s pricing strategy will allow Mavyret to be more competitive in the non-commercially insured HCV patient population, a relatively untapped segment of the HCV market.
The U.S. HCV market has become increasingly competitive, driven by improved clinical efficacy and declining costs. Mavyret is poised to capture a large portion of the market beginning in 2018 due to a favorable clinical profile and competitive price. Gilead’s competing pangenotypic Epclusa enjoys a one-year first-to-market advantage over Mavyret, but launched in mid-2016 with a notably higher list price of $74,760 for a 12-week regimen. Absent significant discounting from Gilead, Mavyret will most likely displace Eplcusa and capture the majority of genotype 2 and genotype 3 patients in the U.S.
Nevertheless, the primary competitive segment of the U.S. HCV market is within the genotype 1 patient population. The availability of the 12-week Zepatier, 8-week Harvoni, and the newly approved 8-week Mavyret regimens already outline a competitive space offering relative price equivalence between the three regimen options. However, AbbVie’s Mavyret may be considered by physicians to be a superior option given that it is not subject to the same clinical limitations imposed on other two options, such as Harvoni’s 8-week viral load restriction or Zepatier’s resistance screening requirements in genotype 1a patients. Conversely, Harvoni has become a well-entrenched option trusted by physicians who may be reluctant to change their prescribing choices, exemplified by the remarkable resilience of Harvoni with respect to maintaining market share after the entry of lower-cost Zepatier. Though, it should be noted that the first-to-market advantage of Harvoni that lead to exclusive contracts with payers may also be a substantial contributing factor to Harvoni’s continued dominance in the HCV space.
The U.S. HCV market is shrinking as a result of both the declining cost of therapy and the number of treated patients. Nevertheless, a decrease in the overall budget impact of HCV drugs as a result of increased competition will likely lead to the removal of remaining payer restrictions, which in turn could lead to an increase in drug treatment rates. The reduced number of patients starts signals that we are quickly depleting the diagnosed HCV patient population, and therefore marketers will soon face the difficulty of finding undiagnosed patients to help sustain market growth. As such, revenue in the HCV market will increasingly depend on the rates of new diagnoses, and will likely require dramatic increases in screening and linkage-to-care among baby boomers and injection drug users unaware of their infection. Therefore, AbbVie’s aggressive pricing strategy is poised to allow the company to capture maximum market share during this limited period (1-3 years) while the drug treatable population is still highly accessible. Ultimately, lowering the financial burden of curing HCV benefits the patients seeking a lower cost for a cure. Given the prior public backlash surrounding pricing of HCV agents, AbbVie’s strategy meets the public demand to bring greater access to curative agents, which could be the bigger overall gain for AbbVie moving forward.