Gilead Sciences: The Senate Just Wrote Me a Letter

The Box Tops hit”the Letter” was about rushing to get home to a girlfriend who can’t live without the singer anymore. Gilead Sciences (GILD) received a letter a letter, too, but I’m guessing it could live without this one.

Special to The Chronicle

Reuters has the details on the letter sent to Gilead by two Senators:

Two members of the U.S. Senate Finance Committee, including Chairman Ron Wyden, on Friday asked Gilead Sciences Inc to defend the more than $80,000 cost of its  breakthrough treatment for hepatitis C, citing the expense to federal healthcare programs.

“Given the impact Sovaldi’s cost will have on Medicare, Medicaid and other federal spending, we need a better understanding of how your company arrived at the price for this drug,” the lawmakers said in a release. “It is unclear how Gilead set the price for Sovaldi.”

RBC Capital Markets’ Michael J. Yee and team and team aren’t particularly concerned:

In our view, the bottom line is 1) it’s not clear how much jurisdiction if any, the Committee will have on enforcing timely and complete information exchange, 2) it’s a significant uphill battle for anything to actually change because it’s Congressional law that Medicare cannot negotiate drug pricing and this would require new legislation and an overhaul in part of the CMS pricing system (extremely unlikely for anything to get done or to start during an election year….?), 3) this is not surprising anyways as one should expect the “headline” pricing of Sovaldi to generate lobbying and pressure to get Gilead Sciences to reduce Sovaldi price just like this all happened years ago during the HIV days for Viread, 4) it’s not clear if hearings could even happen …and for anything to actually result out of it (public complaints by the Committee but can’t do anything in reality), and 5) rational free markets have lots of justification for why Sovaldi pricing is what it is based on drug development R&D risk, significant risk in the acquisition of VRUS, and significant breakthrough in treatment (a cure).

Investors don’t appear to agree. Shares of Gilead Sciences have dropped 0.4% to $88.56 at 3:01 p.m. on a day when other biotech stocks are rising. Celgene (CELG) has gained 1.5% to $89.13, Regeneron (REGN) has advanced 1.1% to $317.96 and Biogen Idec (BIIB) has risen 1.1% to $322.62. The iShares Nasdaq Biotechnology ETF (IBB) is up 0.6% at $257.10.