THE BLOG

The Cure for Gilead

08/03/2015 07:07 am ET | Updated Aug 03, 2015
ASSOCIATED PRESS

Gilead has the cure for Hepatitis C (HCV) known as Sofosbuvir, which is taken alone or in combination with other drugs. Now we need a cure for Gilead. By pressing the company to make Sofosbuvir-based therapies accessible to all who need them, the Hepatitis C epidemic in America and worldwide can be brought to an end. The lives of 5 million HCV-infected Americans and an estimated 160 million HCV-infected people worldwide are at stake.

We should hold Gilead to the following simple standard: ensure that everybody who needs Sofosbuvir or a Sofosbuvir-based combination therapy can get it at an affordable price. Gilead should be held responsible, morally and legally, for all of the HCV-related illnesses and deaths that occur as the result of their unacceptable pricing policies. Despite record-breaking profits, Gilead continues to keep the price of Sofosbuvir so far above its modest production costs that millions of HCV-infected individuals are unable to access the treatment they require.

Put another way, if Gilead is going to be a patent-protected monopolist with exclusive rights to market Sofosbuvir until 2029, at the very least it should be a "discriminating monopolist" that ensures access to live-saving medicines. If Gilead charges high monopoly prices for those who can afford it, it must also offer sufficiently deep discounts for those who cannot afford the higher prices and are not covered by government programs that can make up the difference. Of course, Gilead should not be bilking taxpayers via super-high prices charged to Medicare and Medicaid.

Nor is Gilead paying its proper share of taxes on profits from Sofosbuvir or Harvoni (see here). Remarkably -- or perhaps not remarkably in our utterly corrupted republic - Gilead reportedly takes its profits in Ireland, based on the absurd legal fiction that the intellectual property for its drugs is located there. Of course the only thing located in Ireland is low tax rates; there is nothing about the actual intellectual development of the products.

The bottom line must be access. Gilead's patent rights must not be construed as the right to leave millions to suffer or die from a disease for which a low-cost cure exists. By abusing patents in that way, Gilead and the US political system in recent years have turned the proper use of patents -- as an important tool to incentivize R&D -- into a veritable license to kill, which must never become acceptable in a sane society.

Gilead already knows the access principle from its own HIV drugs. It charges high prices on antiretroviral drugs in the U.S., where patients can afford them or federal and state government programs cover them, but it offers cut-rate prices on antiretroviral to low-income countries. This "segmented market" has helped to bring 15 million HIV-infected people in developing countries on to anti-retroviral treatments. If these patients (or the Global Fund to Fight AIDS, TB, and Malaria on their behalf) had been forced to pay the list price, these 15 million individuals would be dying or dead. However, we should note that even here, Gilead cuts corners and cuts lives short; it denies the low-cost access to "emerging" middle-income countries, thereby limiting access to many people who will suffer and die as a result.

The problem with Sofosbuvir is that Gilead is currently leaving millions to die both in the U.S. and abroad. Rather than being a discriminating monopolist, it is being a ruthlessly crude monopolist. It has set an outlandish price for Sofosbuvir of $84,000 for twelve weeks of treatment, or a staggering $1,000 per daily pill. Harvoni is priced at $94,500. These prices should be compared with an actual production cost of Sofosbuvir, estimated to be around $100, or $1 per pill. Government-funded programs, notably Medicare and Medicaid, are probably covering more than half of the sales by Gilead at these astronomical prices. Gilead is getting rich by bilking the taxpayer.

Gilead is offering discounts to some government and private insurers, but these discounts are limited, generally around 50 percent, thereby leaving the net price at a whopping $40,000 or so. Mainly Gilead has chosen to ignore the deadly consequences for those who cannot afford to pay tens of thousands of dollars for treatment. Gilead knows very well that it is leaving vast numbers to suffer and die as a result, but it has chosen to do so to maximize profits and the wealth of its CEO and management team. It is probably worried as well that deeper discounts for non-governmental buyers would also stiffen the resolve of Medicare and Medicaid to resist Gilead's outlandish prices of the drugs for government programs.

The anecdotal and research reports flooding in from around the US are shocking and contemptible for a society that believes itself to be civilized. Because of the cost of the drug, thousands upon thousands of Americans infected with HCV are turned away from treatment, and told by their doctors and insurers to wait until their livers are even more diseased. They live in pain, disorientation, and risk of gravely accelerated death, and not only from liver damage but also from non-liver related disorders as well, including respiratory failure and heart disease. The HCV epidemic in the US is raging out of control in some communities. Some insurers are reportedly denying coverage even to patients with advanced liver disease, delivering not a sentence of unnecessary prolonged illness, but of death. A systematic scholarly study of access denial was just published and can be found here.

Gilead's failure to ensure access to Sofosbuvir is especially galling given how much money the company is making on the drug. Gilead bought the patent rights to Sofosbuvir for $11 billion in late 2011, paid for Phase 3 trials, and put the drug on sale at the end of 2013 immediately after FDA approval. In 2014, Gilead had sales of around $12.4 billion for Sofosbuvir (sold under the trade name Sovaldi) and a Sofosbuvir-based fixed-dose combination (sold under the trade name Harvoni), and then has remarkable revenues of $4.6 billion for Sovaldi and Harvoni in the first quarter of 2015.

Thus, Gilead has had revenues of around $17 billion in just the first 15 months of sales. With production costs of the drugs well under $1.5 billion for this period, Gilead's net profits have been well over $11 billion, taking into account its R&D outlays, marketing costs, and legal costs. In other words, Gilead recouped its $11 billion investment in less than 15 months and stands to make a fortune in the coming years. Its soaring stock price has made CEO John Martin a billionaire.

While around 170,000 people have been treated with Solvadi and Harvoni to date, this is about 1 per 1,000 of HCV-infected individuals worldwide. In short, Gilead is making a fortune through astronomical pricing of Sofosbuvir that keeps the drug out of reach for the vast majority of those who need it.

There are at least three direct ways to hold Gilead accountable. The first is through legislation. Gilead and other drug producers that hold life-and-death patents should be mandated by Congress to establish pricing programs that ensure access to the life-saving medicines under their exclusive control. If they fail to do so, their patent rights should be subjected to compulsory licensing for generics producers who will make the drug available. The second is through litigation. Patients denied access to Sofosbuvir across the country should sue Gilead for reckless endangerment. By showing the gap between the market price and the production cost, many plaintiffs would have a good chance of winning. The third is through public outrage and activism. Public health activists around the country should document the deaths occurring at Gilead's hands, just as they did fifteen years ago when they forced Gilead and other companies to slash the prices on HIV drugs. The more the public understands how Gilead has put their own profits recklessly above other people's lives, the faster the company will be forced to change its ways and the more lives will be saved.

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