(Source: South Park Studios/Comedy Central)
Who says money can't buy a cure? Taxpayer money will fund much of the drug's costs in the U.S.

Characterized by inflammation of the liver, Hepatitis C remains one of the most common and dangerous viral epidemics afflicting mankind.  Spread via blood-to-blood contact -- typically via unsanitary medical equipment, blood transfusions from a carrier, or sharing of needs during intravenous drug use -- the chronic variant of the disease afflicts an estimated 150-200 million people worldwide, including roughly 3.2 million individuals in the U.S.  Symptoms include fatigue, cognitive deficiency, cirrhosis of the liver, and a predisposition to liver cancer.

I. From AIDS to Hepatitis C -- Gilead Ready to Storm New Market

But now a drug cocktail devised by Gilead Sciences (GILD) is claiming a 100 percent cure rate -- if you can pay its high asking price.

Gilead's solution is called Solvadi, and in Dec. 2013 it won approval from the U.S. Food and Drug Administration (FDA) following incredible Phase III clinical trial results.

Gilead -- a top AIDS drug company -- is sitting on another goldmine, with exclusive rights to produce the first real "cure" for Hepatitis C. [Image Source: AP]

Founded in 1987 by Dr. Michael L. Riordan, a graduate of the Johns Hopkins School of Medicine and the Harvard Business School, Gilead was a pioneer in gene therapy medications, and perhaps the first truly succesful creator of drug cocktails to block the progress of the AIDS virus.

So naturally, when Gilead turned to a new epidemic -- Hepatitis C -- it pulled out its old tricks.  Using a type of gene therapy known as nucleotide blockers, Gilead tested mixtures of drugs before finally coming to the perfect combination -- sofosbuvir, ledipasvir, and ribavirin.

Solvadi logo

The cocktail is branded under the trade name Solvadi in the U.S.  But before we get to the glaring issue of its sky-high costs, let's look at how it's made and what's in it.

II. Sofosbuvir -- the $11B USD Hired Hand

The first component in the cocktail is Sofosbuvir, a compound that interferes with the RNA polymerase that the virus uses to replicate itself.  The compound was under development by Princeton, New Jersey Pharmasset, Inc. from 1998 to 2011.

In many ways Sofosbuvir is similar to past experimental drugs that essentially mimic a ribonucleotide, selectively stalling the production of viral RNA.  The problem with past drugs was that the creation of triphosphate variants -- a necessity to make the drug usable by the viral polymerase -- was way too slow.  

Sofosbuvir solves this problem by bundling the first phosphate in.  Normally that phosphate would be too reactive, but Pharmasset protected it with an anisole (see the benzene ring) derived side chain and an alanine derive second side chain bonded to the phosphate on the amino end.  In the cell, enzyme strip away these protection molecules quicky.  The naked phosphate has skipped the slow step and transforms into a triphosphate quickly.  But when used by the viral polymerase the fluorine (in place of a hydrogen) clogs up and "breaks" the transcription process.
Sofosbuvir -- one of three drugs that form Solvadi [Image Source: Wikimedia Commons]

By itself, Sofosbuvir has a relatively high chance of completely eliminating a Hepatitis C infection.  Gilead wisely saw the value in Sofosbuvir and in 2011 purchased Pharmasset for $11B USD.  Stifel Nicolaus analyst Maged Shenouda at the time of the purchase, commented:

It could be the dominant player in a new, non-injectable paradigm for the treatment of hepatitis C.  That's the bet, but it's a big bet at $11 billion.

University of Michigan's Ross School of Business Professor Erik Gordon complained at the time that the purchase was an "amazing risk".  He commented:

At that price, everything had better work perfectly.

But everything has worked perfectly and Gilead has proved its doubters wrong, at least on a technical basis.  Used alone the price of Sofosbusvir in the U.S. (for a 12 week course of treatment) runs from between $84,000 USD and $168,000 USD, according to media sources.

III. Ribavirin, the Tried-and-True Multipurpose Veteran

The second component of Solvadi is a guanosine analog called Ribavarin, in which the fused ring responsible for base-pair bonding is broken.  Ribvarin suffers from the problem mentioned above that Sofosbuvir aimed to solve -- it has no bonded phosphate.  While that allows for a simpler (read: cheaper) molecule, it also makes it act much slower.

Ribavirin, an anti-viral gene therapy treatment [Image Source: Wikimedia Commons]

Nonetheless, Ribavarin has showed itself as a useful treatment against a wide variety of RNA and DNA viruses, plus against certain cancers.
A 3D model of Ribavirin [Image Source: Wikimedia Commons]

Ribavarin is produced by a number of companies in various countries, and has been used since the 1970s.  However, by itself it's not terrible affective in combatting chronic Hepatitis C.

IV. Ledipasvir -- The New "Secret Sauce" of Solvadi

But the secret sauce of Solvadi is Ledipasvir, a massive, bizarre manmade concoction.  How exactly Gilead devised this massive molecule is anyone's guess, but a solid bet would be a lot of modeling and a lot of trial and error.

The molecule appears to mimick certain small protein factors and inhibits HCV NS5A, a crucial Heptatitis C protein.  HCV NS5A is thought to be the boss protein of sorts, controlling where Hepatitis C hides in cells, when it chooses to go active, and recruiting the NS5B protein -- Hepatitis C's RNA polymerase -- to replicate the viral genome.
Ledipasvir, is the complicated third component for Solvadi.  It interferes with a key Hepatitis C protein. [Image Source: Wikimedia Commons]

Gilead's massive compound interferes directly with the protein.  By killing the boss, it delivers a fatal blow to viruses.  It might not always work, but combined with Sofosbuvir, it's a deadly duo.  The Ribavirin just adds to the fracas, further punishing the hapless virus.

Ledipasvir interferes with the 5A factor, a "boss protein" that tells Hepatitis C proteins how to act inside a cell. [Image Source: Virology]

Together this trio -- one modestly effective legacy drug, one moderately and highly effective modern drug purchased from a third party, and one massive in-house-created bizarre superdrug -- can kill virtually any Hepatitis C infection.  But it's going to cost you.

V. Sorry, Americans, You Have to Pay More

Controversy is growing over Solvadi's asking price.  

The trio can cure 90 percent of chronic hepatitis patients within 3 months, but its official price is $1,000 USD a day, so that treatment is roughly $90,000 USD.  For those able to afford longer treatment regimens, the cost may accumulate to a couple hundred thousand dollars, but the cure rate rises to 100 percent.

Solvadi bottle

There are other treatments to Hepatitis C, but the problem is that many of them have many bad side effects.  By contrast Solvadi has virtually no known side effects.

Doctors are under pressure to prescribe it.  Insurance companies are bracing themselves for the pressure to pay for it.  Some consumers may be forced to pay part of the massive costs out of pocket.  But Gilead has the only guaranteed cure.

Forbes estimates that Gilead could make $227B USD if it treated all the Hepatitis C infections in the U.S. alone.  And considering that as little as 1 out 100 infections worldwide occurs in the U.S., the global market could easily make Solvadi a $1T USD drug.

Until the pending insulin pill reaches the market we may not see another drug that has such a massive and disruptive impact on the insurance and medical industry.  According to The Wall Street Journal American insurance companies may see their earnings cut by 18 percent due to the incredible cost of the drug.

To Gilead, it's doing nothing wrong asking so much. It reminds its critics of the $11B USD it paid for Sofosbuvir and the literally billions spent on clinical trials to win FDA approval.  That $11B USD is certainly looking like an incredibly small price to pay for one of Solvadi's key components at this point.

Gilead protest
[IMage Source: AIDS Healthcare Foundation]

The drug's high costs -- and the similarly high costs of Gilead's AIDS treatment drug cocktails -- have provoked recent protests against Gilead in San Francisco and other major U.S. cities.

The company has tried to silence critics by offering the $1,000 USD drug at discounts based on an intriguing tiered pricing scheme that works with insurance companies to offer discounts based on the GDP in each region.

Based on Gilead's tiered pricing scheme, the U.S. patients (and their insurers) will pay the most -- roughly $84K USD.  By contrast German patients will pay $66K USD, and UK patients pay $57K USD, according to Reuters.  And the Associated Press reports that patients in Europe will receive a 99 percent discount, only paying $900 USD out of pocket.

Buyers in Egypt will pay only $900 for a 90-day regimen of the drug that costs $84,000 USD in the U.S. [Image Source: Getty Images]

It's unclear exactly how much the pill -- and the three drug molecules blended into it -- cost to make.  But even with the complex Ledipasvir, it likely costs under $10 USD to produce a week's dose.  In that regard the U.S.'s "discount" may be going from a hundred-fold markup to a roughly ten-fold markup -- still enough to anger many.

VI. Tax and Prescribe

The pill could lead to higher taxes for Americans.

An estimated half of the nation's Hepatitis C infections occur in people on some form of guaranteed federal medical assistance -- veterans, prisoners, uninsured, or those on Medicaid.  The government is expected to have to pay taxpayer money to buy the treatment.

tax me more
[Image Source: American Dream Report]

That could add as much as $100B USD in a temporary surge in the federal budget, plus a couple billion per year in ongoing costs.  Many would argue that's a small price to pay compared to the loss in productivity that untreated hepatitis infections causes.  Nonetheless, some dependent groups (e.g. prisoners) may stoke more controversy that others.
A letter [PDF] from the House Energy & Commerce Committee, signed by Rep. Henry Arnold Waxman (D-Calif.) -- the ranking member -- and other committee members, pointedly asks Gilead to explain its pricing strategy and how it make affect public health.
Henry Waxman
Rep. Henry Waxman (D-Calif.) isn't happy with Gilead. [Image Source: Infowars]

The letter clearly subjects Gilead to some negative publicity, and compels it to respond.  But will it force it to lower prices in the U.S. and shrink its windfall?  Probably not.

VII. Don't Even Think of Buying Solvadi in Canada, That's a Felony

As Gilead knows all too well, the federal government may whine and moan, but in the end, it typically ends up paying with taxpayer money.  The U.S. doesn't have any publicly funded guaranteed healthcare solution -- be it provided by the government itself or via private sector contractors (the model Canada and Europe adopt).  

Even under "Obamacare" -- the program that regulates the insurance and hospital marketplaces -- patients are merely guaranteed the ability to buy insurance and treatment.  Americans have no universal healthcare solution, nor do they have the ability to collectively pool to buy drugs at a lower cost from drugmakers as Canadians do.  It's actually illegal for Americans to engaged in so-called "drug reimportation" by purchasing prescription drugs at cheaper rates in Canada.

Drug reimportation
In America it's illegal to buy drugs that are legal in the U.S. at a cheaper price in Canada or Mexico. [Image Source: United Republic]

Many Americans are so desparate to get treatment that they'll risk prison time to buy their needed medications in Canada, where they can afford the costs.  The broken system has also created a thriving black market of smugglers who transport large amounts of pharmaceuticals, including heart medications and AIDS medication, from Canada and Mexico.

While this "cartel" of sorts appears to be providing a service to Americans, it is also actively opposing the U.S. government's FDA which is backed by the big money pharmaceutical lobby.  And that means no matter how many Americans they're helping to treat or cure, smugglers face stiff prison fines from their government cartel rivals, if caught.

VIII. Taxpayers Pay Big to Treat America's Record-Setting Prison Population

But while the U.S. government offers no universal public healthcare, it does offer its own health insurance to select government dependents, including its prison population.  And that means the U.S. does sort of have a public healthcare system that mirrors Canada or Europe -- but only Americans behind bars get to enjoy it (at the expense of everyone else).

If the U.S. had incarceration rates like Canada or Europe, that wouldn't be as big a concern to taxpayers.  With incarceration rates quadrupling since the 1980s, the U.S. now imprisons more of its people (officially, at least) than any other nation in the world.  Currently an estimated 2.4 million Americans are "in prison" at jails, traditional prisons, and other forms of confined sentencing.  That means that 1 in 100 Americans is behind bars.

When Americans hear the phrase the 1 percent they typically think of the wealthiest 1 percent of Americans, the group whose income is riding at record highs, accounting for a fifth (20 percent) of the income earned by all Americans.  But when it comes to expensive drugs America is facing a crisis involving a different 1 percent -- the 1 percent of Americans in its record-holding prison population

Prison bars
Approximately 1 percent of Americans are behind bars; those with Hepatitis C get free treatment at the expense of taxpayers.  Law-abiding U.S. taxpayers do not receive this perk.
[Image Source: AP]

A 2001 study [PDF] estimated that of the nation's 20,000+ HIV positive prisoners, each would infect roughly 4 other people -- including fellow prisoners in incidents of rape or concensual homosexual sex.  The estimated cost of treating the prisoners and federal dependents they infect was estimated to be $125,000 USD.  And society itself is estimated to bear an addition $550,000 USD in costs (e.g. from members of the public they infect, or lost productivity).

Those numbers skirt the fact that the government avoids paying for the most expensive and potentially most potent cocktails of drugs -- something many insurance groups do as well.  Such pricey cocktails often remain the privilege of America's ultra-wealthy as parodied in the South Park episode "Tonsil Trouble".

South Park AIDS cure
Turns out money really does cure disease! [Image Source: South Park Studios/Comedy Central]

Gilead has applied for FDA permission to treat patients with a blend of just Ledipasvir and Sofosbuvir.  This could cut costs, but whether the biggest winner is Gilead or the U.S. consumers remains to be seen.

For now, when it comes to Hepatitis C the sucess rate is so high and the distinction between Solvadi and other less effective solutions is so stark that the federal government will likely be forced to pay for $84,000 pill program.

Solvadi in hand

That's bad news if you're an average payer, but music to the ears of Gilead and its investors who are salivating at their potentially trillion dollar drug.

Sources: House Energy & Commerce Committee, FDA [press release], Reuters, Gilead

"I'd be pissed too, but you didn't have to go all Minority Report on his ass!" -- Jon Stewart on police raiding Gizmodo editor Jason Chen's home

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