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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: MNTNH who wrote (57235)	5/3/2016 6:32:26 AM
From: Ditchdigger	1 Recommendation Recommended By Jurgis Bekepuris Read Replies (1) \| Respond to of 78748

Is that $80k the list price or negotiated price for GILD's drug. I haven't followed this sector in 4 or 5 years(was following VRTX), what's the cure rate of these drugs now, 90% +. Quick back of the hand calc. 10 years ago, the cure rate(sustained virologic response) was about 50/50, after having completed a 48 week course of treatment. Drugs used were peginterferon and ribavirin. $1000/wk for the drugs ($48,000). During the course of treatment dozens of CBC blood tests, as well as dozens of viral load pcr tests were done ($15,000+) in order to monitor treatment progression. Many couldn't complete the full treatment. Chances are during treatment blood booster drugs would be needed (whites/hgb) in order for the patient to even complete the full 48 week course of treatment ($20,000+) The treatment was only administered by a specialist (hepatologist/gastro) and closely monitored over the 48 weeks at a much higher cost than a GP. Chances of successful treatment (svr), 60% at best. Many relapsed after completing the treatment and would have to be retreated again. (start doubling costs) As I said, Hep C treatment costs have not increased much in a decade.

To: MNTNH who wrote (57235)	5/3/2016 7:09:44 PM
From: Graham Osborn	Respond to of 78748

Hi MNTNH, I don't have much to add. I haven't run the numbers on GILD for their ASP vs their competitors and how that is trending, i.e. what is the annual price increase is. I just know that relative to 10 or even 5 years ago there is tremendously more pressure coming from CMS down through the insurers to healthcare systems to choose the economic option - which means price wars. Formerly price was a MUCH lower factor, i.e. physicians might select a particular drug with slightly higher efficacy or slightly lower toxicity even if it cost twice as much. Insurance would just pass the cost on to the government and prices got out of control with all the new agents coming online, because physicians said that was the best thing for patients. Consequently, the competition for market dominance among drug companies (outside the generic space) was driven by getting that last little percentage point of safety/ efficacy in your clinical trial data. With the price pressure from CMS (recently ramped up by the releasing a list of top drug expenditures to the system itemized by product), the branded space has become much more like the generic space in terms of that pricing pressure. Now the healthcare systems and insurers push back on EVERYTHING. If your drug is double the cost with a roughly similar S&E profile they WILL dump you (even if the McKesson or Cardinal is willing to stock you). This is a secular trend that is going to substantially reduce the excellent ROEs that pharmas have enjoyed for the past few decades at least. Orphan diseases may be somewhat protected because although the meds are expensive the overall cost to the system in low compared with big areas like multiple myeloma or hepatitis C. But for the blockbuster drugs in chronic disease that cost a couple hundred grand per year, you can't go to a medical conference without hearing some contrarian doctor bashing the drug companies. What I anticipate is that the spurt of medical research and innovation we have seen since the 90s is coming to a close, and we will enter a period where the focus is on finding cheaper versions of existing agents. This trend is bad for pretty much all drug companies (branded or specialty generic) except maybe some of the Indian low-cost manufacturers etc, and I see it taking a big chunk out of valuations.