Gilead's Greed
that Kills
Jeffrey Sachs
July,
27, 2015.
Gilead Sciences is an American pharmaceutical company driven by unquenchable greed. The company is causing hundreds of thousands of Americans with Hepatitis C to suffer unnecessarily and many of them to die as the result of its monopolistic practices, while public health programs face bankruptcy. Gilead CEO John C. Martin took home a reported $19 million last year in compensation--the spoils of untrammeled greed.
Hepatitis
C is a global public health crisis, called a "viral time bomb" by the
World Health Organization. 150 million people or more worldwide are estimated
to be living with the disease. Untreated Hepatitis C can progress to cirrhosis,
liver failure, and liver cancer. Every year, at least 700,000 people die from
these complications--although HCV can be easily cured with just 12 weeks of
medicines being sold by Gilead.
Gilead
insists it is saving lives. It claims that it is a hero of innovation, bringing
new wonder drugs to the market to cure Hepatitis C, an often-lethal disease
that infects almost three million Americans and perhaps 80 million or more
people worldwide. The company certainly could be a hero, but is the
opposite today. Gilead is the main obstacle between tens of millions of very
sick individuals and the medicine that could end their suffering and save their
lives.
Gilead
owns the monopoly patents on two life-saving Hepatitis C drugs, Solvadi and
Harvoni. Gilead did not discover or develop these drugs, except for a brief and
modest role at the end of the drug-approval process. Gilead bought these drugs
from their discoverers and developers in 2011, after a decade-long discovery
and development process, and just before the FDA licensed the drugs in 2013. It
bought them with the knowledge that it would use its greed and lobbying power
to rip off the American people and deprive people around the world of the
benefits of these wonder drugs.
Gilead's
gambit worked like this. The US Government funded most of the basic research
for Sofosbuvir, the scientific name of the drug that underpins Gilead's two
brand name drugs. Yet despite Sofosbuvir being discovered, developed, and
tested through phase 2 clinical trials mainly with US Government funds, the
government-funded scientist and some early investors took the patent rights.
Their private company, Pharmasett, had invested less than $200 million in
R&D. In truth, the US Government should own most of the intellectual
property on Sofosbuvir, but under U.S. law and practices it is private investors
who reap the rewards and taxpayers who bear the burden and the consequences.
Gilead
paid Pharmasett $11 billion because it knew very well that it was about to rip
off the American people and quickly recoup this sum and much more. Gilead
announced that it would use its newly acquired monopoly rights to charge a
whopping $84,000 per treatment for Solvadi (and $96,000 for Harvoni, a slightly
different formulation), even though the actual production costs are estimated to be somewhere around
$68 - $136. Gilead's markup over costs may
be close to 1,000-to-1, probably a world record.
How
did Gilead choose the price? It chose it for one reason: because it could get
away with it. Washington allows this kind of abuse to occur, indeed insists
upon it. Medicare is obliged -- in one of the most absurd policies of our era
-- to accept whatever price a pharmaceutical company asks for its
patent-protected medicines! The result is a level of drug prices that bear no
resemblance whatsoever to the costs of production (including the R&D), or
to the socially optimal drug pricing that would enable sick people to be cured
of their illness.
Gilead
says that $84,000 approximates the current last-ditch alternative (a liver
transplant) but this is a ridiculous comparison; the new drug indeed allows
people to be cured at a very low cost, so there is no reason to hark back to an
out-of-date, ineffective approach that is too expensive for the vast majority
of people suffering from the disease. Indeed, the taxpayers pay twice: first to
fund the innovation, and second to feed a monopoly. From the company's point of
view, soaking the taxpayer is the strategy; curing people is a sideshow at
best.
By
setting an outrageous retail price, Gilead tapped into federal spending on
drugs under Medicare and Medicaid, and billed the US and the states for around
$6 billion last year, something like $4 billion paid by Medicare and $2 billion
paid by Medicaid, according to recent estimates. The federal and state
governments therefore probably paid for more than half of the $10 billion that
Gilead collected in revenues in the first year of sales, basically enough to
recoup the purchase price in less than two years.
Given
the monopoly price, tens of thousands of Americans and millions of people
around the world infected with Hepatitis C are being told by their doctors,
their health insurers, or Medicaid, that they don't "yet" qualify for
Sofosbuvir because they are not yet sick enough. Their livers are not yet
scarred enough. They are not yet dead enough. They should come back when they
are nearly dead, if it's not too late.
Sofosbuvir
could reach tens of millions of people worldwide if the drug were available at
its true production cost (inclusive of R&D). At $500 per treatment, or even
$1,000, millions of people around the world would be able to access this cure.
But today, only a tiny fraction do, those who are covered by Medicare,
Medicaid, or private insurance to pay $84,000 or some other astronomical price
set by Gilead, or a sliver of people abroad who are lucky recipients of some
specialized access program. Outside of the US, countries and patients must jump
through so many burning hoops that access is fatally compromised, and the human
right to health is fundamentally violated.
The
end result is a continuing epidemic of Hepatitis C at the very moment that the
disease could actually be eliminated or at least close to it. The New York
Times has recently reported a new mass outbreak among IV-drug users, who are
not able to gain access to treatment. These people are being left to die.
America
has handed life and death decisions to corporate greed. Gilead is indeed the
death panel that we were once warned about. Yet the Gilead death panel rations
a life-saving cure not because it is too expensive to provide, but because it
serves the interest of a patent-protected corporate monopoly. It is time for
the US citizens to demand the intellectual property rights that US
Government-backed science should give them; and for the Government to use
rational price-setting to tame untrammeled corporate greed and the monopoly
power created by a highly inefficient and unfair patent system.
