Pricing wars heat up over hepatitis C drugs

Announcing its first dividend, annual revenue that doubled the prior year's performance and a $15 billion buyback plan wasn't enough to buoy Gilead Sciences' shares when it dropped a bomb during its fourth-quarter earnings conference call: Discounts on the company's hepatitis C drugs this year will be 46 percent, way more than investors and analysts expected.

"That really escalated quickly," Brian Skorney, an analyst with Robert W. Baird, wrote in a note to clients Wednesday. The discount "is meaningfully worse than expectations" in the 25 to 30 percent range, and as a result, Skorney lowered his estimate for Gilead's hepatitis C revenue by 20 percent to $12.9 billion.

Gilead said part of its adjustment reflects a shift toward more patients who are covered by Medicaid and the Veterans Administration receiving the drugs at rebates of more than 50 percent.


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