The list price for Merck's (MRK) newly approved hepatitis C drug is significantly lower than competing therapies offered by Gilead Sciences (GILD) and Abbvie (ABBV) , which means a new price war could be heating up.
On Thursday night, the U.S. Food and Drug Administration approved Zepatier, a single, daily pill combining two medicines to treat two different forms of hepatitis C. Merck said the list, or gross, price for Zepatier (ZEH-pa-teer) will be $54,600 for a 12-week regimen.
The price of Merck's drug is 32% lower than Gilead's Harvoni, which has a blended sticker price of $80,000 for eight and 12-week regimens. The list price of Abbvie's Viekira Pak is $83,000 for 12 weeks.
"We expect this price -- as well as our comprehensive access strategy to seek broad coverage across commercial and public segments -- will help broaden and accelerate patient access to treatment," said Merck spokesperson Pam Eisele.
Merck wouldn't mind bringing home billions of dollars in new revenue from Zepatier as well, which is the real reason behind the decision to undercut Gilead and Abbvie on price.
There's a lot at stake here. Gilead's two hepatitis C drugs, Sovaldi and Harvoni, dominate the market currently. Together, the two drugs are expected to deliver approximately $18 billion in sales to Gilead in 2015. (The company reports 2015 earnings next week.)
Gilead's hepatitis C business has thrived despite tons of criticism about the high price of its drugs (most recently this week from the Massachusetts Attorney General) and despite efforts by Abbvie to negotiate exclusive, discounted access deals with some major insurance companies and pharmacy benefit managers like Express Scripts.