Georgian marketing test produces mixed results for Gilead

Georgian marketing test produces mixed results for Gilead
Gilead's practices are the subject of intense public scrutiny.
By Carmen Valache in Istanbul August 4, 2016

American biopharmaceutical company Gilead Sciences has received little love from patients' rights advocates recently. From lawsuits over questionable patenting practices to accusations of tax dodging in the US by shifting intellectual assets to Ireland, the company is the subject of intense public scrutiny. Activists even travelled all the way to South Africa, where the 21st International Aids Conference was held in July, to protest against the company's practices.

Foremost amidst the wave of criticism that Gilead has received is the pricing of its hepatitis C medications Harvoni and Sovaldi (Sofosbuvir), which together account for over half of Gilead's turnover. The two drugs are some of the most effective hepatitis C treatments in the world, with success rates exceeding 90% for some genotypes of the virus.

Yet at $1,000 per pill or $84,000 per course of treatment for the cheaper version Sovaldi, they are hardly accessible to patients in the US or in most of Europe; Harvoni runs at an even higher price of $94,500 per course of treatment in the US. Indeed, even in poorer EU countries such as Latvia and Lithuania, a treatment course for Sovaldi and Harvoni runs at more than $73,000.

But in the small Caucasian country of Georgia, Gilead is celebrated as a philanthropist. That is because, thanks to a 10-year agreement with Gilead signed in April 2015, the Georgian government is able to provide for free a course of treatment using Sovaldi to cure the life-threatening disease.

The agreement is of particular importance for Tbilisi, which has the highest incidence of the disease in Eastern Europe and Central Asia, and the third highest in the world at 7.5%. The incidence among three groups of Georgians in particular – prisoners, intravenous drug users and HIV sufferers – is 50% and above, according to data from the country's health ministry, meaning that targeted treatment of these groups could make Georgia virtually hepatitis C-free. 

Perfect guinea pig

But the arrangement is a money-losing deal for Gilead, which provided Georgia with almost $1.5bn worth of free medication (at market prices) in the first half-year alone, on top of more than $400mn worth of drug donations in 2015.

Looking at its recent (poor) financial results and increased competition in the hepatitis C drug market from the likes of AbbVie and Merck & Co, Gilead's agreement with the Georgian government might appear illogical. However, a year and a half ago, when the Nasdaq-listed company was riding a wave of a high share price and less competition (the shares have since fallen over 30%), Gilead saw an opportunity to use Georgia as a way to market its treatments.

According to Reuters, at the time Gilead CEO Gregg Alton was seeking to convince governments and multilateral agencies worldwide that hepatitis C could be eradicated by using Georgia as an example. If the experiment proved successful, Alton was looking to attract lucrative deals from other countries and donors that would involve high initial investments in purchasing the drug with the promise of eliminating the viral disease.

And Georgia was the perfect guinea pig for Gilead to showcase that hepatitis C could be eradicated. The country is small, with a population of just 3.7mn, and has a very high prevalence that is very concentrated. "It is a nice country for us to evaluate," Alton reportedly told Reuters.

Since signing the agreement with Gilead, Tbilisi has got the project off the ground by enlisting the help of the US Centre for Disease Control (CDC) and Emory University, and now has 14,900 patients signed up for the programme, the country's Health and Social Affairs Ministry tells bne IntelliNews in an email commentary.

"So far, we have treated 12,000 patients, two thirds of whom have completed the treatment. The sustained virologic response – i.e. rate of success – has been 90%. The state budget for the programme was GEL8mn ($3.41mn) in 2015 and GEL22mn in 2016. In 2017, we will allocate between GEL22mn and GEL24mn to it," the health ministry explains. Starting in July, the ministry is seeking to increase the number of patients to 20,000 per year in order to eradicate the disease in 10 years' time.

Curing diseases, winning elections

The early success of the hepatitis C programme is a source of pride for Georgia's ruling party, Georgian Dream-Democratic Georgia (GDDG), which is currently campaigning for the parliamentary elections in October. At a campaign rally on July 18, GDDG chairman and Prime Minister Giorgi Kvirikashvili listed the hepatitis C programme among his administration's top achievements.

And GDDG needs the boost that a success story like the hepatitis C programme can provide in order to win the elections. Recent opinion polls show that the party is locked at a 20% approval rating compared with 19% for the leading opposition party United National Movement (UNM). 

Opinion polls also show that Georgians have a more favourable view of the current government's healthcare programme than they do of any other area of policy. Indeed, while Kvirikashvili singled out the hepatitis C programme during his campaign speech, Tbilisi's overall healthcare reforms launched in 2013 have been tremendously popular and received positive assessments from the World Health Organisation (WHO) and World Bank.

Thanks to the reforms, the number of medical procedures that the government's universal healthcare programme covers has more than doubled between 2012 and 2015.  But the programme has also been incredibly expensive for the small country – the health Ministry received 35% of the 2015 state budget, more than three times the budget for the second largest recipient, education.

Given how expensive the universal healthcare programme has been, the GDDG administration would have been unable to afford its hepatitis C eradication programme had it not been for Gilead's largesse.

Price wars

But this year, Gilead's sales of its star drug Harvoni have suffered as a result of increased competition from cheaper alternatives, such as Merck's Zepatier, which runs at a more affordable price of $54,600 per course of treatment in the US.

Eastern European and Central Asian countries are relatively unaffected by the price wars in Western Europe and the US, according to a hepatitis C report that Ukraine-based Alliance for Public Health (APH) shared with bne IntelliNews. Thanks in part to a licensing agreement between Gilead and 11 Indian generic manufacturers that allows the sale of generic versions of the drugs to low income and lower middle income countries, and in part to state-sponsored hepatitis C programmes, sufferers in the region can receive treatment for less than $1,000 – a fraction of the market price in the US.

In the market of unregistered drugs, Sofosbuvir (Sovaldi) costs some $130 per bottle in Uzbekistan, and $155 per bottle in Ukraine and Belarus, APH estimates, or 0.5% of its cost in the US. In light of the price discrepancy, it is little wonder that Gilead derives almost 90% of its sales from the US, Western Europe and Japan, and that the EECA is negligible in terms of its contribution to the company's bottom line.

But if Gilead – which refused to comment for this article – does not bounce back from the current sales slump in its core markets, it becomes questionable for how much longer it will decide to pursue its sponsorship agreement with Georgia. As for the wider Eastern Europe-Central Asia region, it must be only a question of time until the company will look to limit its generic licenses in order to crack down on the unregistered trade of its drugs at bargain prices.