License to Deceive? A Big Drug Company’s Smokescreen on Hepatitis C

By unnecessarily pricing its hepatitis C drugs out of reach, Gilead has manufactured a reality where 73 million people living with hepatitis C around the world remain excluded from the license. These people have to pay high prices or go without the drug.

When a big pharmaceutical company announces that it’s giving away licenses to make cheap versions of its medicine, it’s either stepping up to its public responsibility or putting up smoke and mirrors to hide something else. The latest announcement from Gilead Sciences looks like the second kind of case.

On September 15, at a press conference in Delhi’s gilded Taj Palace Hotel, Gilead, a California-based pharmaceutical giant, announced that it would issue a license enabling seven Indian companies to make cheaper versions of its new hepatitis C drug, sofosbuvir, to sell in 91 designated countries. Much of the resulting press coverage described the license as a way to increase access to this life-saving drug, which markets as Sovaldi.

The announcement actually unveiled Gilead’s strategy to control the market by locking out generic competition in key lucrative countries with the highest rates of hepatitis C. Over half of the 91 countries included in the license are among the poorest countries in the world, where most people can’t even afford malaria pills at $1 per treatment.  

The countries left out of the license are mostly middle-income nations, home to the vast majority of people living with hepatitis C, and where most people pay for medicines out-of-pocket. These countries—like Ukraine, Thailand, China, Argentina, Georgia, and Brazil that, together, are home to 37 million hepatitis C patients—have systems to diagnose and treat a large number of patients, and governments that want to expand access to treatment.

But making that aspiration a reality is contingent on medicines being affordable. These countries are also considered profitable “emerging” markets by Gilead and other pharmaceutical companies. By excluding them from the license, Gilead has decided that they will have to continue to pay its high prices, wait for generics to enter the market—a process that could take decades—or try to negotiate a low price.

Given these facts, why is Gilead proclaiming this to be an “access” strategy?

One reason may be that it’s answering public pressure. Gilead is right about one thing: cheaper versions of this drug are needed. In the United States, sofosbuvir is priced at $1,000 a pill, making it one of the most expensive and most profitable drugs in the world. But another reason may be more straightforward.

According to researchers, it costs approximately $100 to make sofosbuvir. In the first six months after the drug hit the market, Gilead made nearly $6 billion on sofosbuvir. With margins like those, a drug company might focus on keeping a market to itself, and Gilead seems to be doing just that. Its drug can be sold at exorbitant prices in relatively wealthy countries, while poorer, less attractive markets are open to Indian companies.

Gilead’s announcement primarily distracts from the fact that it is in complete control of the high price it sets. Rather than lowering the price of sofosbuvir everywhere, this license will allow Gilead to continue making record-breaking profits on a drug that has been priced out of reach of the majority of people who need it.

Patients, meanwhile, are suffering. Even in the United States, private insurers and government programs, unable to pay the high price of treatment, are rationing sofosbuvir. The same is true in the UK, where prohibitively high prices mean that only select patients will get it. In Australia, the Pharmacy Benefits Program, akin to Medicaid, cannot afford to offer the drug to patients. How does Gilead propose to address these gaps?

By unnecessarily pricing its hepatitis C drugs out of reach, Gilead has manufactured a reality where 73 million people living with hepatitis C around the world remain excluded from the license. These people have to pay high prices or go without the drug. We are all for consumers in poor countries gaining quicker access to treatment, but this raises a different question.

Instead of doing the most sensible thing to increase access—significantly lowering its price everywhere, as well as allowing generics to come onto the market—Gilead is placing the responsibility onto Indian producers, who are now expected to provide the drugs at a more reasonable price. But why do we expect this of them, and not also of Gilead?

18 Comments

Hide

Thanks, Azzi for an excellent post. This seems even worse than a smoke screen. If I understand correctly, this limited voluntary license will take the wind out of efforts to oppose the patent on sofosbuvir and further consolidate Gilead's control of other markets. So are we even worse off than we were before?

Thanks Jonathan for raising this question. What people may not know is that the patent on Gilead's sofosbuvir is weak. This means it's not novel or innovative enough from a scientific standpoint (how we determine patentability). On these grounds, the patent has been opposed in India and hasn't even been granted in Egypt. While this voluntary license limits the number of companies that could produce generic versions of this lifesaving drug, it makes patent oppositions even more relevant. We need more companies (not under Gilead’s control) to produce generic versions and make them widely available, which means we have to be sure patents don't stand in the way.

I have had many people forward me the news of the Gilead deal, saying how excited we must be at this good news. I feel almost mean-spirited when I have to reply that it's not as great as it seems. Your article really puts it all together really clearly and concisely and is really helpful in explaining why. I will be sharing it widely!

My understanding is that Sovaldi, while expensive, has the most effective cure rates by far in comparison with other drugs on the market.

In addition, your article neglects to mention that in excess of 80% of new molecules in trials are never approved, which means the revenue from approved drugs must fund the losers. If Gilead and others are not able to charge market prices for their drugs, how will they fund new research and development?

Hi Ben. Thanks for your comments. I completely agree that Sovaldi is a revolutionary drug for the treatment of hepatitis C, but I don't think that justifies the exorbitant price charged by Gilead.

Many antibiotics, like penicillin (http://bit.ly/1rktQz2), and other life-saving and revolutionary treatments, like vaccines, have not historically been priced so exorbitantly as to exclude the majority of patients who need treatment. Drug companies today are charging whatever they can get away with, justifying their high prices with the argument that it costs billions to bring a drug to market, that this figure includes the so-called “cost of failure,” and that these high R&D costs push up the price of the drugs.

But this argument has several holes in it. The most widely used estimate is that it costs 1.2 billion USD to bring a drug to market—a figure that Andrew Witty, CEO of GlaxoSmithKline, has called “one of the greatest myths of the industry” (http://reut.rs/1xq1RQN). Other independent estimates put the cost at closer to $55 million (http://bit.ly/1rpmlV1). The truth is, because the industry is so opaque, we don’t know the real cost of R&D for each drug—something that Senators Grassley and Wyden are trying to get to the bottom of in the case of Sovaldi (http://1.usa.gov/1sHNcv6).

Breaking this argument down further may be the topic of my next blog. But for now, even if you accept the 1.2 billion USD figure, Gilead is doing just fine recouping those costs. The company made close to $6 billion in sales on Sovaldi in the first half of this year: that’s nearly five times the industry-estimated R&D cost of $1.2 billion.

Hi Azzi, thanks for your response and I'd love to see the topic of your next blog.

However, I do think you're glossing over the fact that as a public company, Gilead has a fiduciary responsibility to its shareholders—who include many like you and me, either directly or indirectly—to generate strong and consistent profits.

And since you're neither an employee of Gilead or—I hope—a patient of Sovaldi, I'm not sure what supports your opinion on such matters.

Perhaps a better question might be, what do you believe a reasonable price to be, and what is the basis for your rationalization?

Compulsory licenses sound like a good tool to fight such bald-faced price gouging. If India wasn't included on that list, they'd probably start making generics anyway. Now if only the US was brave enough to call 'shenanigans' on these fantastically high medicine prices by issuing our own compulsory licenses...

"...Gilead is placing the responsibility onto Indian producers, who are now expected to provide the drugs at a more reasonable price. But why do we expect this of them, and not also of Gilead?"

Perhaps because Gilead spent considerable time, money and resources in developing Sovaldi and the Indian producers did not?

I might, *might*, understand the price gouging by Gilead IF Solvaldi was its only drug, but it's not. It's made $6 Billion already on Solvaldi alone this year!

It has many drugs it's making money from just check their website.

Yes Gilead has a responsibility to their shareholders. But it has a responsibility to their patients too.

I'd like to know what grants and other funding they received to create this drug.

Nothing will convince me they aren't being just plain greedy!

not entirely sure if you're seeing the irony here...

you're writing your comment on a site financed by someone who maximised his firm's income (in his case, $billions), not by developing a valuable product, but by trading currencies.

yet you criticise gilead for maximising their income by providing a product that improves people's lives worldwide?

Outrage on the part of both high-income and low-/middle-income country HCV patients and advocates over the high price of Sovaldi and other DAAs is clearly justified! Experts show the minimum cost of production for Sovaldi, including a profit for its owner, is US $101/course.

As M. Balasegram of MSF reminds us, "first, a lot of the R&D behind successful new drugs is heavily subsidised by the tax payer—globally, about half of all R&D is paid for from the public purse and by philanthropic organisations. In effect, we’re paying twice for new drugs. Secondly, there is a lack of transparency from the pharmaceutical industry— so we don’t really know how much it costs, and how much this can vary." Gilead couldn't care less about people with HCV, and acts beholden only to its own shareholders.

Yesterday in the NY Times it was revealed that Gilead's Sovaldi patent rights were transferred to an Irish subsidiary..."So Gilead’s profits from the booming sales of Sovaldi are taxed at Ireland’s rate, which is well below the American one." - Tax rates there are 1/3rd of what Gilead would pay here! Shame, shame, shame.

"Lo importante no es mantenerse vivo, sino mantenerse humano." - G. Orwell

Every single developed country who has put on Sovaldi in its health care coverage has questioned the unaffordable cost. Patients knows that there is a cure, yet die, because they cant pay for it nor can their governments. Perhaps this is the drug which has got the most negative coverage due to high cost in recent history.

The voluntary license is one way that Gilead tried to make up for its negative image in the media. Production out of the VL will not happen immediately. There's no timeframe available as to when will the licensees start selling the medication. Let's remember here that Gilead sold 6 billion dollars in the first 6 months of its launch. So every month delay in India is a Billion dollar for them . Lets also remember the first 6 months had limited availability and now its much widely available so sales can go up in the coming months.

Gilead was asked by DCGI in India to submit its registration (waiving off the CT) which they did in September first week. But Gilead seem so naïve on how to submit a registration dossier that they forgot to submit the executive summary while submitting the papers for registration. DCGI again asked for submitting the summary and they are preparing and thus will take another 3 months (and thus 3 billion dollars for them).

The VL is more than a smokescreen to cover up the negative image. Gilead has made way more than the 11 billion dollars they paid through stocks and sales already. The VL is announced in a hurry to show as if it will improve access to generics while reality is licensees will not be able to produce and sell it immediately.

Karyn, , sorry but saying that it costs only $100 to manufacture Sovladi is a stupid argument. They spent $11 Billion (yes, Billion) to acquire the company that had the rights to sofosubuvir (Sovaldi). And there was probably much, much more spent in R&D, clinical trials etc. What kind of profit do you think they will make if they sell it for $101?

It is my understanding that they price this drug based on average national income, so Europe, Japan and other countries pay less than US. That doesn't sound like a company that is trying maximum advantage. To me, the big injustice is in the US, where those with inadequate insurance really getting screwed. Why offer every other country discounts but charge US HCV patients these very high prices? So much for national loyalty!

While I am sure that Gilead is acting in its best interests, which is something that companies are supposed to do for their share holders, it has offered what seems to me an incredible deal to allow immediate generic versions to be produced and sold at much lower prices. Call it a smoke screen or whatever you want, but I think most of us with HCV are really, really happy with a chance at having this cure. For those who can't come up with a few thousand perhaps Mr. Soros can reach into his pocket and write a check for a couple billion dollars (also Mr. Gates and a few other very, very rich people).

Dear Azzi, This drug is vital to around 15% population of Mongolia who suffers from hepatitis C. Our government has been reluctant to approve the request from Gilead due to previous regulations requiring 3 years of observation in other markets. In reality there is no other local producer who can make this drug so I don't see any other option for our market.

Globalization breaks down the boundaries around individual countries' patient experience. There will be more pressure for equitable treatment across national borders and greater access to treatment. While individual countries are collectivizing purchase and policy as a tactic, it will be the collective need and demand from patients - people who are suffering, in pain and anguish, scared of dying - that will make change inevitable. We already know that India is a hotbed of medical tourism. Does anyone think that first world patients won't flock there for treatment, and a cure for the price of a vacation? The ethicists may pull their hair out but when you're in pain and with limited options, certain choices will be made.

Is it possible to order these drugs from India in an effort to treat those who need it most but can't afford the costs?

Did you also attack Vertex Pharmaceuticals when they came out with their cure for HCV? You fail to mention that Harvoni is a once a day well tolerated Ribivarin and interferon free drug with an extremely high cure rate for both naive and previously treated patients. Did you show the same outrage to Mark Zuckerberg or Steve Jobs? Without free market capitalism their would be no innovation and Michael Sofia who discovered and engineered the drug sofosbuvir would never have been able to discover this miracle cure that has already cured over 100,000 people.

Add your voice