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Gilead Sciences Inc.’s (GILD - Analyst Report) pricing of its hepatitis C virus (HCV) drug, Sovaldi, came under the scanner leaving investors jittery and sending the share price down about 4.6%. Gilead received a letter from the Congress’ Committee on Energy and Commerce raising concerns about the pricing of the drug.

Sovaldi was approved in December last year, as a combination therapy for treating patients suffering from HCV. The drug was granted Breakthrough Therapy designation in the U.S. Gilead priced its potential blockbuster drug at $84,000 per treatment, which as per the U.S. lawmaker is beyond the affordability of most patients even with public or private insurance cover.

Moreover, the lawmakers are concerned that if the drug is prescribed with other treatments, the cost will go up even further. Considering the fact that the prevalence of hepatitis C is higher in low-income and minority patients, the pricing policy from Gilead has come under severe criticism.

The letter has raised several questions including the methodology used by Gilead for the drug’s pricing and the extent to which the company is providing discounts to lower-income patients. Gilead has time until Apr 3, 2014, to respond to the questions raised in the letter.

Sovaldi’s approval was a milestone event for Gilead. The drug is expected to not only boost the company’s top line significantly but also to strengthen its position in the lucrative HCV market. Most importantly, with the approval of Sovaldi, the duration of therapy for HCV patients comes down to a minimum of 12 weeks as opposed to the current standard of care treatment of up to 48 weeks. As per Centers for Disease Control, around 3.2 million people are suffering from HCV in the U.S.

Sovaldi is off to a strong start and recorded sales of $136.4 million in its first few days in the market in the fourth quarter of 2013. We believe the drug has multi-billion dollar sales potential. At present, investor focus will remain on Gilead’s response to the questions raised in the letter. Last year, Johnson & Johnson’s (JNJ - Analyst Report) Olysio in combination with peg-IFN and ribavirin was also approved in the U.S. for treating chronic HCV patients.

Gilead, a biopharmaceutical company, carries a Zacks Rank #1 (Strong Buy). Some other stocks worth considering in the same sector include Alexion Pharmaceuticals, Inc. (ALXN - Analyst Report) and Alkermes (ALKS - Analyst Report). Both stocks carry a similar bullish rank.

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