The Repercussions of Medicare's New Hepatitis C Push

This week, the Centers for Medicare & Medicaid Services, or CMS, announced a big shift in health policy. CMS intends to cover screening for hepatitis C for members who fall into either of two buckets: those who are considered to be at high risk for the disease (those who injected illegal drugs or had a blood transfusion before 1992), and anyone born between 1945 and 1965. This could significantly increase the number of people diagnosed with hepatitis C in the United States at a time when major cures are finally hitting the market.

We're investors, so the big question for us is simple: Who benefits? What stocks are poised to profit from this big trend?

Gilead Sciences  (NASDAQ: GILD  ) is the first name that comes to everyone's mind. After all, Gilead's drug Sovaldi, which is a single pill that is interferon-free for type 2 and 3 hepatitis C, sold $2.3 billion last quarter, its first full quarter on the market, shattering previous drug uptake records and almost doubling Gilead's top line year over year. What's more, physicians (off-label) can prescribe Sovaldi with Johnson & Johnson's  (NYSE: JNJ  ) Olysio to create an interferon-free combination for type 1 hepatitis C. And with the nasty, flu-like symptoms interferon can cause, that's a big plus.

Of course, there are competitors coming to market as well -- AbbVie  (NYSE: ABBV  ) has a six-pill combination drug that is moving toward its final regulatory hurdles, while further back Bristol-Myers Squibb and Merck have their own potential competitors pushing through trials and posting strong data as well. With the market to itself right now but looking increasingly crowded over the next few years, can Gilead make its billions off Sovaldi, or will competition reduce prices and profitability?

In the video below, from Where The Money Is, the Motley Fool's investing show, health care analysts Michael Douglass and David Williamson talk through the changes and investors' opportunity in this space.

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  • Report this Comment On June 08, 2014, at 3:20 PM, vdecarlo2 wrote:

    It's a fickle market regarding GILD. The biggest med to EVER hit the market is slowed down due to it's arguably high price. A SURE cure med for HepC pricey? Give it a second thought and tell me what is the price of life vs the price of continued care for a possible(!) cure for life. Considering Gilead has (globally) priced it's med in accordance with a regions affordability eases the shock of the cost. Americans should rejoice that they have been considered to be able to afford the $1,000/pill for ~84 days. Given time, realizations will set in that GILD is a strongEST buy. I have it at about 25% of my portfolio. I've had a few similar stocks that finally leveled out (or dropped) but none compare to the "guaranteed" future income for Gilead. I fell like I am (and analysts are) talking to myself when I see GILD's stock price drop on any given day. My reaction is to smile when I have the opportunity to do temp buy on unreal dips.

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Michael Douglass

As the Motley Fool's Health Care Editor/Analyst, I focus on all things health care -- although my greatest interest is in the megatrends reshaping the American health care system, including the Affordable Care Act, Accountable Care Organizations, a shifting regulatory landscape, and the new drug discoveries fundamentally changing disease management and treatment.

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