This December, the FDA will decide whether or not to approve AbbVie's (NYSE:ABBV) hepatitis C drug cocktail. If they give AbbVie the green light to begin marketing its hepatitis C drug, it will give AbbVie an opportunity to wrestle market share away from Gilead Sciences (NASDAQ:GILD), the drugmaker behind Sovaldi and Harvoni, the two top selling hepatitis C drugs.
A tough road ahead
AbbVie will likely find it hard to win away business from Gilead Sciences. After winning FDA and EU approval this past year, Sovaldi has gone on to rack up over $8 billion in sales during 2014. And Gilead Sciences' next generation hepatitis C drug, Harvoni, appears to be off to a fast start, too. Since winning the FDA go-ahead in October, reports suggest that the number of Harvoni prescriptions being written is already exceeding the levels achieved by Sovaldi at the same time during its launch.
Since Sovaldi (and now Harvoni) have become the standard of care in hepatitis C, AbbVie may have to cut prices if it hopes to carve away some of Gilead Sciences' script volume. A price cut from AbbVie would be welcomed by health care payers, including health insurers and state Medicaid programs, struggling to contain spiraling costs associated with Gilead Sciences' drugs.
However, even if AbbVie does offer a price discount, it's far from a lock that AbbVie will significantly dent demand for Harvoni. Here's why.
1. Better efficacy
The goal of any therapy is a 100% cure rate. Less than a decade ago, the current standard treatment for hepatitis C was a combination of the side-effect-laden drugs peginterferon and ribavirin, which achieved a functional cure in just half of patients treated. Even as recently as 2012, the best drug for treating the indication -- Vertex Pharmaceuticals' Incivek -- cured just 80% of patients. But the introduction of Sovaldi and Harvoni has changed the outlook for hepatitis C patients dramatically. Sovaldi offers cure rates in the low 90% range and Harvoni offers cure rates as high as 99%.
Since Harvoni works so well, AbbVie may find it tough to win over doctors. AbbVie's cocktail cures about 90% of patients with genotype 1a hepatitis C; the most common variation of the disease. Meanwhile, Harvoni boasts cure rates of 94% or better in genotype 1a patients. Adding ribavirin to AbbVie's drug regimen in patients with genotype 1a improves cure rates to 97%, but because of side effects, doctors have been trying to avoid, rather than embrace, the use of ribavirin.
2. Easier on patients
One of Harvoni's top selling points will be its easier dosing schedule. Harvoni is a once-daily pill that most patients will take for 12 weeks. That matches up favorably to AbbVie's three-pills-a-day therapy.
AbbVie's cocktail consists of Viekirax taken once daily and Exviera taken twice daily for 12 weeks, and since patients will need to take three pills instead of one, doctors are likely to be concerned about patient adherence -- especially, if ribavirin is included in the AbbVie cocktail. During trials, 88% of patients taking AbbVie's therapy plus ribavirin took the drugs as prescribed at least 80% of the time. While that may be a "solid" adherence rate, it's far from an ideal one.
Additionally, 6% of AbbVie's patients stopped taking AbbVie's cocktail prematurely, with 1.8% doing so because of adverse events. That isn't as good as Gilead Sciences' Harvoni, which saw less than 1% of those participating in its trials stop taking Harvoni because of adverse events.
3. Shorter treatment duration
Harvoni offers an additional benefit over AbbVie's cocktail in the form of a potentially shorter treatment period for many patients. In addition to being approved for 12 weeks, roughly 40% of patients can be prescribed Harvoni for just eight weeks.
Those that qualify for this shorter treatment period are those that have not been previously treated, do not have liver cirrhosis, and have levels of hepatitis in their bodies below a certain level.
Gilead Sciences' 40% estimate of how many people may qualify for the shorter treatment plan suggests that as many as 1.2 million of the 3 million people living with chronic hepatitis C in the U.S. could be eligible for the eight week therapy.
AbbVie may have a hard time competing for scripts against Harvoni in those patients given that, if approved, it would require all patients to receive treatment for 12 weeks. It may also be hard for AbbVie to beat out Harvoni on price for those patients given that Harvoni, which costs $94,500 for 12 weeks, would cost just $63,000 over eight weeks.
Globalizing a cure
The total market for hepatitis C treatment globally is massive. The World Health Organization estimates that between 150 million and 170 million people worldwide have chronic hepatitis C. Many of those patients are in far flung regions of the world, suggesting that the battle for treatment market share won't be limited to developed markets like the United States and Europe. So far, Gilead Sciences has a significant edge in those regions, too. This past fall, Gilead Sciences announced deals with a slate of generic manufacturers to make and market Sovaldi for those markets. As a low cost generic Sovaldi gets more entrenched overseas, AbbVie may find that its role in treating hepatitis C is that of a niche player. That said, a niche drug in such a massive market could still make this a blockbuster therapy for AbbVie. Some analysts think that AbbVie's cocktail could eventually generate as much as $3 billion per year in sales. However, that will pale in comparison to Harvoni, which could see sales of $10 billion in the next year.