Sovaldi’s Price Just Got A Lot Harder to Defend

As we’ve noted, two powerful senators have just launched an inquiry into the high price of important new Hepatitis C drug Sovaldi. Senators Wyden and Grassley want to know how Gilead, the drugmaker, can justify charging $1,000 per pill for the treatment.

And they’ve uncovered some interesting information that will make doing so even harder: the company that originally discovered the drug believed it could be sold profitably for less than half what Gilead is charging today.

You see, Gilead did not develop Sovaldi itself. No, in 2011, the company purchased Pharmasset, Inc, a smaller pharmaceutical company that did the research and development that created the breakthrough drug.

And according to Securities and Exchange Commission (SEC) documents highlighted by the senators’ investigation, Pharmasset reported that the R&D costs for the drug totaled $62 million and that it had $177 million in R&D costs company-wide over the three years that the drug was being developed.

With that amount of investment, Pharmasset believed it could price the drug at $36,000 for a course of treatment, according to the SEC documents.

That’s a remarkably high number on its own. But it looks like a steal compared to what Gilead is charging for Sovaldi today: $84,000 for a course of treatment – or $48,000 more than Pharmasset was going to sell it for.

That’s some price hike for doing little more than buying someone else’s research.

Most health care companies like to focus on what value they add to the system. In the case of Gilead, the most apparent thing they’ve added to system here is $48,000 for each person struggling with a terrible disease.

Among many others, this is just one reason why Gilead is going to have one heck of a time offering any rational justification for Sovaldi’s price.

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