Letters
Costs of New Treatments for Hepatitis C Infection To the Editor In seeking to rationalize sofosbuvir pricing, Drs Brennan and Shrank1 assumed $11 billion in development costs. Even if this were reasonable, Gilead’s $2.27 billion first quarter revenue would suggest that the price was grossly inflated. But the development of sofosbuvir did not cost that much. Normally, a commercial sale includes an amount for intangible assets, such as goodwill. In the acquisition of Pharmasset by Gilead for $11 billion, these assets were estimated at only $74.8 million.2 Despite 3 hepatitis C virus (HCV) drugs in development at Pharmasset (with only $62.4 million attributed to sofosbuvir development in 2009-20113), Gilead accounted for almost all the remaining tangible assets as the “fair value” of sofosbuvir.2 Consistent with standard accounting practice, the fair value was classified as an intangible asset.2 It is therefore incorrect to consider the $11 billion as research and development costs. The authors also compared the costs (and potential benefits) of sofosbuvir with existing treatments, pointing out that the alternatives may be both more expensive and less effective than sofosbuv ir and suggesting that in a costeffectiveness analysis sofosbuvir is likely to be dominant. However, overinflated prices of the alternative drugs are likely to make the cost-effectiveness of sofosbuvir appear more favorable. Even though cost-effectiveness should be assessed against the therapy most likely to be replaced in practice, if that comparator is not cost-effective to begin with, the analysis is not going to be informative. More importantly, even the most costeffective therapy may be unaffordable if the scale of treatment is large. Irrespective of potential downstream savings, sofosbuvir will be unaffordable for most public programs, and as a specialty drug, so will the coinsurance for many patients. Acquiring Pharmasset was an investment decision, not a research and development expense, and the risk should be borne by Gilead shareholders. Instead, the expense is being transferred to patients with HCV and cash-strapped public programs that, unlike private insurers, cannot refuse to cover the drug, even when cheaper alternatives enter the market. Sofosbuvir may well prove to be a good value at $84 000, but that cannot be assumed without explicit and rigorous costeffectiveness assessment and long-term data confirming the durability of the sustained virologic response.
To the Editor Drs Brennan and Shrank1 raised several important questions regarding the imperative of balancing individual and societal benefits of certain new medications against their large financial expense. Equitable return on investment is commonly deemed acceptable; however, defining a reasonable standard for return on investment requires appropriate and complete information. The authors’ use of Pharmasset’s sales price as a proxy for the cost of developing sofosbuvir greatly overestimates the true development costs. Pharmasset’s aggregate research and development costs were less than $266 million in 2004-2011, whereas general and administrative expenses were another $88 million. 2,3 True development costs, excluding opportunity cost, could not have exceeded $354 million. Additionally, Pharmasset was developing treatments for human immunodeficiency virus and hepatitis B virus, both of which consumed a portion of the company’s expenditures and were assets acquired as part of the sale to Gilead. Even though the return on investment to Gilead may be loosely estimated as 20 to 1 based on the purchase price, this ignores the 30-to-1 return on investment paid to Pharmasset investors. One might argue that because these initial investors took on substantial risk, this latter return on investment is reasonable; but such rich rewards for Gilead’s small risk undertaken in a late-stage acquisition seems far less decent. Moreover, substantial ethical questions are raised when the market then bears a 600-to-1 overall return on investment for this drug. Jonas B. Green, MD, MPH, MSHS Author Affiliation: Cedars-Sinai Medical Care Foundation, Beverly Hills, California. Corresponding Author: Jonas B. Green, MD, MPH, MSHS, Cedars-Sinai Medical Care Foundation, 200 N Robertson Blvd, Beverly Hills, CA 90210 (jonas.green @csmns.org). Conflict of Interest Disclosures: The author has completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and none were reported. 1. Brennan T, Shrank W. New expensive treatments for hepatitis C infection. JAMA. 2014;312(6):593-594.
Ruth Lopert, MD Craig Welch Author Affiliations: Department of Health Policy, George Washington University, Washington, DC (Lopert); LWC Health Pty Ltd, Canberra, Australia (Welch). Corresponding Author: Ruth Lopert, MD, LWC Health Pty Ltd, 1300 13th St NW, Washington, DC 20005 ([email protected]). Conflict of Interest Disclosures: The authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and none were reported. 1. Brennan T, Shrank W. New expensive treatments for hepatitis C infection. JAMA. 2014;312(6):593-594. 2. US Securities and Exchange Commission. Gilead Science Inc: SEC filings. http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany &CIK=0000882095. Accessed July 22, 2014. 2168
3. US Securities and Exchange Commission. Pharmasset Inc: SEC filings. http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany &CIK=0001301081&owner=exclude. Accessed July 22, 2014.
2. US Securities and Exchange Commission. Pharmasset Inc: SEC filings. http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK= 0001301081&owner=exclude. Accessed October 28, 2014. 3. Wikinvest. Pharmasset 10-K 2008 filing. http://www.wikinvest.com/stock /Pharmasset_%28VRUS%29/Filing/10-K/2008/F3360267. Accessed August 22, 2014.
In Reply Dr Lopert and Mr Welch and Dr Green make the point that the Gilead purchase of Pharmasset does not accurately reflect the true costs of development of sofosbuvir. We agree. Our point was simply that the $11 billion price was the most that one could say that it cost Gilead to bring sofosbuvir to market, and even then their return on investment is extraordinary.
JAMA November 26, 2014 Volume 312, Number 20
Copyright 2014 American Medical Association. All rights reserved.
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Letters
In addition, Lopert and Welch call for a formal costeffectiveness analysis. We agree and are currently undertaking that research. Troyen A. Brennan, MD, JD, MPH William H. Shrank, MD, MSHS Author Affiliations: CVS Caremark, Woonsocket, Rhode Island (Brennan); CVS Caremark, Cumberland, Rhode Island (Shrank). Corresponding Author: Troyen A. Brennan, MD, JD, MPH, CVS Caremark, One CVS Drive, Woonsocket, RH 08095 ([email protected]). Conflict of Interest Disclosures: The authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and reported that they are employees of CVS Caremark, a retail pharmacy and pharmacy benefits management company that purchases and sells hepatitis C treatments.
CORRECTION Incorrect Figure: In the JAMA Clinical Evidence Synopsis entitled “Exercise for Depression” published in the June 18, 2014, issue of JAMA (2014;311[23]:2432-2433. doi:10.1001/jama.2014.4930), there were 3 errors. The mean differences for the Blumenthal and Bonnet studies were switched, the list of studies was inverted, and the Blumenthal study should not have been included in the Figure. The study year for Mutrie was changed from 1998 to 1988. This article was corrected online. Collaborators Omitted: In the Original Investigation entitled “Effect of Selfmonitoring and Medication Self-titration on Systolic Blood Pressure in Hypertensive Patients at High Risk of Cardiovascular Disease: The TASMIN-SR Randomized Clinical Trial” published in the August 27, 2014, issue of JAMA (2014;312[8]:799808. doi:10/1001/jama.2014.10057), 4 TASMIN-SR collaborators representing West Midlands South were omitted from the end matter. The section should read: West Midlands South: Atherstone Surgery, Dr Trevor Gooding; Churchfields Surgery, Dr Ian Morrey; The Marches, Dr Crispin Fisher; and Trinity Court, Dr David Buckley. This article was corrected online.
Missing Byline Author: In the Original Investigation entitled “Newborn Screening for Severe Combined Immunodeficiency in 11 Screening Programs in the United States,” published in the August 20, 2014, issue of JAMA (2014;312[7]:729-738. doi: 10.1001/jama.2014.9132), there was an author missing from the byline. Vincent R. Bonagura, MD, should have been included in all related author information. This article was corrected online.
Guidelines for Letters Letters discussing a recent JAMA article should be submitted within 4 weeks of the article's publication in print. Letters received after 4 weeks will rarely be considered. Letters should not exceed 400 words of text and 5 references and may have no more than 3 authors. Letters reporting original research should not exceed 600 words of text and 6 references and may have no more than 7 authors. They may include up to 2 tables or figures but online supplementary material is not allowed. All letters should include a word count. Letters must not duplicate other material published or submitted for publication. Letters not meeting these specifications are generally not considered. Letters being considered for publication ordinarily will be sent to the authors of the JAMA article, who will be given the opportunity to reply. Letters will be published at the discretion of the editors and are subject to abridgement and editing. Further instructions can be found at http://jama.com/public /InstructionsForAuthors.aspx. A signed statement for authorship criteria and responsibility, financial disclosure, copyright transfer, and acknowledgment and the ICMJE Form for Disclosure of Potential Conflicts of Interest are required before publication. Letters should be submitted via the JAMA online submission and review system at http: //manuscripts.jama.com. For technical assistance, please contact [email protected]. Section Editor: Jody W. Zylke, MD, Deputy Editor.
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JAMA November 26, 2014 Volume 312, Number 20
Copyright 2014 American Medical Association. All rights reserved.
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2169
Costs of New Treatments for Hepatitis C Infection To the Editor In seeking to rationalize sofosbuvir pricing, Drs Brennan and Shrank1 assumed $11 billion in development costs. Even if this were reasonable, Gilead’s $2.27 billion first quarter revenue would suggest that the price was grossly inflated. But the development of sofosbuvir did not cost that much. Normally, a commercial sale includes an amount for intangible assets, such as goodwill. In the acquisition of Pharmasset by Gilead for $11 billion, these assets were estimated at only $74.8 million.2 Despite 3 hepatitis C virus (HCV) drugs in development at Pharmasset (with only $62.4 million attributed to sofosbuvir development in 2009-20113), Gilead accounted for almost all the remaining tangible assets as the “fair value” of sofosbuvir.2 Consistent with standard accounting practice, the fair value was classified as an intangible asset.2 It is therefore incorrect to consider the $11 billion as research and development costs. The authors also compared the costs (and potential benefits) of sofosbuvir with existing treatments, pointing out that the alternatives may be both more expensive and less effective than sofosbuv ir and suggesting that in a costeffectiveness analysis sofosbuvir is likely to be dominant. However, overinflated prices of the alternative drugs are likely to make the cost-effectiveness of sofosbuvir appear more favorable. Even though cost-effectiveness should be assessed against the therapy most likely to be replaced in practice, if that comparator is not cost-effective to begin with, the analysis is not going to be informative. More importantly, even the most costeffective therapy may be unaffordable if the scale of treatment is large. Irrespective of potential downstream savings, sofosbuvir will be unaffordable for most public programs, and as a specialty drug, so will the coinsurance for many patients. Acquiring Pharmasset was an investment decision, not a research and development expense, and the risk should be borne by Gilead shareholders. Instead, the expense is being transferred to patients with HCV and cash-strapped public programs that, unlike private insurers, cannot refuse to cover the drug, even when cheaper alternatives enter the market. Sofosbuvir may well prove to be a good value at $84 000, but that cannot be assumed without explicit and rigorous costeffectiveness assessment and long-term data confirming the durability of the sustained virologic response.
To the Editor Drs Brennan and Shrank1 raised several important questions regarding the imperative of balancing individual and societal benefits of certain new medications against their large financial expense. Equitable return on investment is commonly deemed acceptable; however, defining a reasonable standard for return on investment requires appropriate and complete information. The authors’ use of Pharmasset’s sales price as a proxy for the cost of developing sofosbuvir greatly overestimates the true development costs. Pharmasset’s aggregate research and development costs were less than $266 million in 2004-2011, whereas general and administrative expenses were another $88 million. 2,3 True development costs, excluding opportunity cost, could not have exceeded $354 million. Additionally, Pharmasset was developing treatments for human immunodeficiency virus and hepatitis B virus, both of which consumed a portion of the company’s expenditures and were assets acquired as part of the sale to Gilead. Even though the return on investment to Gilead may be loosely estimated as 20 to 1 based on the purchase price, this ignores the 30-to-1 return on investment paid to Pharmasset investors. One might argue that because these initial investors took on substantial risk, this latter return on investment is reasonable; but such rich rewards for Gilead’s small risk undertaken in a late-stage acquisition seems far less decent. Moreover, substantial ethical questions are raised when the market then bears a 600-to-1 overall return on investment for this drug. Jonas B. Green, MD, MPH, MSHS Author Affiliation: Cedars-Sinai Medical Care Foundation, Beverly Hills, California. Corresponding Author: Jonas B. Green, MD, MPH, MSHS, Cedars-Sinai Medical Care Foundation, 200 N Robertson Blvd, Beverly Hills, CA 90210 (jonas.green @csmns.org). Conflict of Interest Disclosures: The author has completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and none were reported. 1. Brennan T, Shrank W. New expensive treatments for hepatitis C infection. JAMA. 2014;312(6):593-594.
Ruth Lopert, MD Craig Welch Author Affiliations: Department of Health Policy, George Washington University, Washington, DC (Lopert); LWC Health Pty Ltd, Canberra, Australia (Welch). Corresponding Author: Ruth Lopert, MD, LWC Health Pty Ltd, 1300 13th St NW, Washington, DC 20005 ([email protected]). Conflict of Interest Disclosures: The authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and none were reported. 1. Brennan T, Shrank W. New expensive treatments for hepatitis C infection. JAMA. 2014;312(6):593-594. 2. US Securities and Exchange Commission. Gilead Science Inc: SEC filings. http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany &CIK=0000882095. Accessed July 22, 2014. 2168
3. US Securities and Exchange Commission. Pharmasset Inc: SEC filings. http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany &CIK=0001301081&owner=exclude. Accessed July 22, 2014.
2. US Securities and Exchange Commission. Pharmasset Inc: SEC filings. http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK= 0001301081&owner=exclude. Accessed October 28, 2014. 3. Wikinvest. Pharmasset 10-K 2008 filing. http://www.wikinvest.com/stock /Pharmasset_%28VRUS%29/Filing/10-K/2008/F3360267. Accessed August 22, 2014.
In Reply Dr Lopert and Mr Welch and Dr Green make the point that the Gilead purchase of Pharmasset does not accurately reflect the true costs of development of sofosbuvir. We agree. Our point was simply that the $11 billion price was the most that one could say that it cost Gilead to bring sofosbuvir to market, and even then their return on investment is extraordinary.
JAMA November 26, 2014 Volume 312, Number 20
Copyright 2014 American Medical Association. All rights reserved.
Downloaded From: http://jama.jamanetwork.com/ by a University of St. Andrews Library User on 05/24/2015
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Letters
In addition, Lopert and Welch call for a formal costeffectiveness analysis. We agree and are currently undertaking that research. Troyen A. Brennan, MD, JD, MPH William H. Shrank, MD, MSHS Author Affiliations: CVS Caremark, Woonsocket, Rhode Island (Brennan); CVS Caremark, Cumberland, Rhode Island (Shrank). Corresponding Author: Troyen A. Brennan, MD, JD, MPH, CVS Caremark, One CVS Drive, Woonsocket, RH 08095 ([email protected]). Conflict of Interest Disclosures: The authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and reported that they are employees of CVS Caremark, a retail pharmacy and pharmacy benefits management company that purchases and sells hepatitis C treatments.
CORRECTION Incorrect Figure: In the JAMA Clinical Evidence Synopsis entitled “Exercise for Depression” published in the June 18, 2014, issue of JAMA (2014;311[23]:2432-2433. doi:10.1001/jama.2014.4930), there were 3 errors. The mean differences for the Blumenthal and Bonnet studies were switched, the list of studies was inverted, and the Blumenthal study should not have been included in the Figure. The study year for Mutrie was changed from 1998 to 1988. This article was corrected online. Collaborators Omitted: In the Original Investigation entitled “Effect of Selfmonitoring and Medication Self-titration on Systolic Blood Pressure in Hypertensive Patients at High Risk of Cardiovascular Disease: The TASMIN-SR Randomized Clinical Trial” published in the August 27, 2014, issue of JAMA (2014;312[8]:799808. doi:10/1001/jama.2014.10057), 4 TASMIN-SR collaborators representing West Midlands South were omitted from the end matter. The section should read: West Midlands South: Atherstone Surgery, Dr Trevor Gooding; Churchfields Surgery, Dr Ian Morrey; The Marches, Dr Crispin Fisher; and Trinity Court, Dr David Buckley. This article was corrected online.
Missing Byline Author: In the Original Investigation entitled “Newborn Screening for Severe Combined Immunodeficiency in 11 Screening Programs in the United States,” published in the August 20, 2014, issue of JAMA (2014;312[7]:729-738. doi: 10.1001/jama.2014.9132), there was an author missing from the byline. Vincent R. Bonagura, MD, should have been included in all related author information. This article was corrected online.
Guidelines for Letters Letters discussing a recent JAMA article should be submitted within 4 weeks of the article's publication in print. Letters received after 4 weeks will rarely be considered. Letters should not exceed 400 words of text and 5 references and may have no more than 3 authors. Letters reporting original research should not exceed 600 words of text and 6 references and may have no more than 7 authors. They may include up to 2 tables or figures but online supplementary material is not allowed. All letters should include a word count. Letters must not duplicate other material published or submitted for publication. Letters not meeting these specifications are generally not considered. Letters being considered for publication ordinarily will be sent to the authors of the JAMA article, who will be given the opportunity to reply. Letters will be published at the discretion of the editors and are subject to abridgement and editing. Further instructions can be found at http://jama.com/public /InstructionsForAuthors.aspx. A signed statement for authorship criteria and responsibility, financial disclosure, copyright transfer, and acknowledgment and the ICMJE Form for Disclosure of Potential Conflicts of Interest are required before publication. Letters should be submitted via the JAMA online submission and review system at http: //manuscripts.jama.com. For technical assistance, please contact [email protected]. Section Editor: Jody W. Zylke, MD, Deputy Editor.
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JAMA November 26, 2014 Volume 312, Number 20
Copyright 2014 American Medical Association. All rights reserved.
Downloaded From: http://jama.jamanetwork.com/ by a University of St. Andrews Library User on 05/24/2015
2169
