The healthcare industry is starting to turn on itself as pressure over drug prices heats up

This week, that came in the form of an interview in which an executive at Gilead blamed high prices on pharmacy benefit managers, the companies that help insurance plans determine what drugs they'll cover and how much they'll pay.

Gilead's executive vice president of worldwide commercial operations, Jim Meyers, suggested contracts with PBM's are one reason price of its hepatitis C drug as high as it is. (Which is high: the drug, called Sovaldi, has a list price — not accounting for any discounts or rebates — of $84,000, or $1,000 per pill).

"I have never met, in this entire experience, a PBM or a payer outside of the Medicaid segment that preferred a price of $50,000 over $75,000 and a rebate back to them," Meyers said in an interview with Bloomberg News. Rebates paid by the drugmakers to the PBMs are meant to be passed along to whomever is paying for the drug, but the PBM is able to keep some, depending on the agreement.

Now, the largest PBM — Express Scripts — has responded, by calling on the company to go ahead and lower its prices.

"Not only would we agree to a lower list price, we’re asking you to offer one," Everett Neville, senior vice president of supply chain and specialty at Express Scripts wrote in a letter to Gilead's CEO. The letter was shared with Business Insider. "We won’t rip up our contract. In fact, we are happy to honor all the terms of our contract and expect you to do so as well. A lower price does not affect that."

Gilead declined to comment on the letter.You can read more about how drug prices are set here.

Here's the full letter, sent to Gilead CEO John Milligan:

Dear John,

We read with great interest the remarks Jim Meyers made this past Friday, which claimed that pharmacy benefit managers keep prices high.

I’m sure we all agree that Gilead sets the price of its drugs, unilaterally introduced Sovaldi at $1,000 per pill per day, and only reduced the price of Sovaldi and Harvoni for employers and health plans once Express Scripts preferred another curative therapy. In none of those scenarios does Express Scripts keep the price high. You do. In fact, our job is to get the price lower, which we did, as we’re sure you are also aware.

We found a few quotes particularly noteworthy:

“If we (Gilead) just lowered the cost of Sovaldi from $85,000 to $50,000, every payer would rip up our contract.”

Let me assure you, we welcome a lower price. Not only would we agree to a lower list price, we’re asking you to offer one. We won’t rip up our contract. In fact, we are happy to honor all the terms of our contract and expect you to do so as well. A lower price does not affect that.

“You would have predicted there would be tremendous uptake (in reference to Merck’s Zepatier and its performance in the marketplace to date). But their share has been capped.”

You’ve led us to believe that the reason Harvoni and Sovaldi have greater market share is because they are superior products. So, does it turn out that, in your view, Zepatier and Harvoni are basically the same? That was the consensus of our independent expert panel of reviewers, and we’re pleased to read that you agree. Since that’s the case, we would also expect no penalty to us for including Zepatier on the formulary.

Given these new comments, we have a few formal requests:

Repay all costs, above $50,000 per course of treatment that our clients, and federal and state governments, have incurred since the launch of Sovaldi. If you’re saying that the drug really is worth about $50,000, then it’s only right to make sure payers are made whole for overpaying.
Cut the Wholesale Acquisition Cost (WAC) of Harvoni and Sovaldi to $50,000, effective immediately.
Make the WAC for Epclusa $50,000.
Waive all penalties for including Zepatier on our formulary.

We look forward to your quick response, and your improved understanding of supply chain economics.

Sincerely,

Everett Neville

Senior Vice President, Supply Chain and SpecialtyExpress Scripts

CC: Jim Meyers, Executive Vice President, Global Commercial Operations, Gilead SciencesDr. Steve Miller, Senior Vice President, Chief Medical Officer, Express Scripts