Gilead Sciences (GILD) is back in the news last week after pharmacy benefit manager Express Scripts granted approval solely to AbbVie to be the provider of their new hepatitis C (HCV) treatment Viekira Pak. AbbVie has struck a deal with Express Scripts to provide an unspecified discount for its therapy. Reaction to the news had Giliead’s stock plunging over 20% to $86 from $108 as investors headed for the exits before recovering to $96 this week. Analysts are stating that Gilead must now strike a discount deal of their own and offer a lower price for their most recent HCV therapy Harvoni.

Will Gilead be forced to “play ball” and cave to pricing pressures? In my view, their “no comment” response to that question suggests a definitive “no.”

Currently, Gilead has two anti-viral 12 week therapies for HCV; Harovani and Sovaldi. Harvoni is a single pill therapy taken once daily and Solvaldi is a two-pill combination with Ribovirin that is taken twice per day. The cost is $94,500 and $84,000 respectively and both therapies cure HCV genotypes (GT) 1, 2 and 3. With the side effects from Ribovirin, and the far higher likelihood of developing drug resistance when patients fail to take all the pills as prescribed, a single-pill solution is always a far superior treatment.

By contrast, priced at $83,000 AbbVie’s Viekira Pak is a 4 to 6 pill therapy which is also administered for 12 weeks but only treats GT 1. With the more limited application, and the significantly greater number of pills the patient needs to keep track of, the Gilead solutions are far superior. If Express Scripts limits access to the Gilead solutions, this puts doctors in an ethical bind.  Will they now be forced to deny treatment to a patient who is GT 2 or 3 because Express Scripts won’t pay for treatment of a non-GT 1 patient?

An estimated 3.9 million people in the US have HCV (170 million worldwide) 75% of whom are GT 1. Express Scripts has 30% of the US prescription market and an estimated 30% of them are part of the formulary which restricts their choices. This will shave about 10% from Gilead’s US market and boost AbbVie’s sales in the US. Globally, however, Gilead’s Harvoni and Sovaldi are likely to thrive because of their wider application and ease of use. With analysts projecting global HCV therapy sales of $10.9 billion (and likely far more as diagnosis improves), Gilead stands to dominate the global HCV therapy market.