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The price of Sovaldi in France: Goodwill or a strategic move?

30 January 2015 Choukri Genane

On November 17th 2014, the French Economic Committee on Health Care Products (CEPS) spelled out the final price of the hepatitis C blockbuster, Sovaldi (sofosbuvir), at EUR488.095 per pill (USD598.3). After 10 months of intense negotiations with Gilead, the price of the three-month treatment has gone down from EUR56K (USD71K) to less than EUR41K (USD50.3K), one of the lowest in Europe. Even if the price set initially in France was specific to a temporary authorisation for use (ATU) for very severe patients, and patients who could not wait a year, it is still legitimate to ask how the French authorities succeeded at cutting the initial price by 26.8%.

Spend more to save more…
With a target population for Sovaldi representing 70,000 to 80,000 patients in France, the potential cost for the health insurance system is predicted to amount to almost EUR3 billion (USD3.7 billion). That said, it is important to highlight the fact that the agreement between the pharmaceutical company and the government implies discounts and reductions in proportion to sales volumes, in line with the 2015 Social Security Financing Act. In addition to that, Gilead will have to reimburse the Health Insurance the difference between the price charged during the ATU period and the final price that has been fixed by the CEPS. What is more, for its part, Gilead contends that Sovaldi works quickly (three weeks), which may help to reduce the number of patients in future. Michel Joly, General Manager at Gilead Sciences in France, makes his point loud and clear that Sovaldi will in fact help the National Health Insurance to achieve net savings.

The final price is not considered "satisfactory" according to Joly. To confront the idea that its treatment targets a wide population and could jeopardize the Health Insurance financial balance, the main argument put forward by Joly during negotiations was that a "treatment that heals is not a chronic treatment". In other word, the French payer would not have to pay Sovaldi's price for an extended period of time unlike with a chronic treatment, resulting in potentially significant savings.

Facing public opinion
Gilead has emphasised that in addition to its ease of use, Sovaldi is a curative treatment with a 90% cure rate, while other treatments barely reach 50% to 80% and also include strong side effects. Joly has reiterated that it does not make sense to reason in terms of a price for a pill, but instead the price of Sovaldi should be analysed as the price for healing.

Because it is hard to know what happened around the negotiation table, many stakeholders (healthcare professionals and patients) fear the financial consequences of the Gilead-CEPS agreement. The task for the American drug maker will now be to convince the French public to consent to the financial effort needed to support the hepatitis C treatment and to consider the final price as an investment for the future.

A master move on the chessboard?
Is Gilead's willingness to settle on what it perceives to be an "unsatisfactory" price in France a gest of goodwill or a strategic move made by the pharmaceutical company? The future arrival of the follow-up treatment Harnovi (a fixed-dose combination of sofosbuvir and ledipasvir) on the French market brings another perspective to the negotiation's final result. Indeed, by agreeing to lower the price for the single drug, Gilead paves the way for negotiations for the combination treatment, which is likely to be more expensive.

At an international level, the French price granted to Gilead is likely to impact the American company's global strategy: indeed, given the importance of France in the international reference pricing puzzle, the question now is what will be the consequences in other markets where the drug will be approved in future?

Our multi-client study, International Reference Pricing: A Strategic Guidebook to the New Global Pharmaceutical Pricing Paradigm, will shed some light on the potential ramifications on prices in the French market.

Choukri Genane is a Life Science Analyst for IHS
Posted 30 Januarty 2015



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