ear Secretary Price,
The state of Louisiana has a serious problem paying for pricey hepatitis C medicines, and as secretary of the Department of Health and Human Services, you can do something to help.
A federal law gives you the ammunition to make it possible for the state to treat, and quite possibly cure, thousands of infected low-income people without busting its budget. To take action would require gumption, because it would involve involuntarily licensing patents, which is certain to rile the pharmaceutical industry.
But in taking such a step, you could send a meaningful signal that the Trump administration is truly serious about addressing the high cost of medicines.
Are you up to the task?
Here’s the back story: The new hepatitis C treatments that came to market over the past three years, with list prices nearing $100,000 per patient, have strained many state budgets. Last year, Louisiana had to ration care and treated just 320 people enrolled in its Medicaid program. Why? Covering the cost of hepatitis C treatments at current prices would run an estimated $764 million, according to the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center. To do so would require the state to cut other services sharply.
“We have a public health crisis. The current system is not working,” Dr. Rebekah Gee, the Louisiana health secretary, told me. “They’re charging Bentley prices and Louisiana can’t afford a Bentley. It would cost me less to put everyone in the state on a cruise ship for 12 weeks than pay for Sovaldi,” one of two medicines sold by Gilead Sciences, which dominates the hepatitis C market.
To cope, Gee last month turned to Dr. Josh Sharfstein, a former FDA deputy commissioner, who assembled an informal panel of experts to review a couple of options she wants to consider.
The first would be to seek a license from Gilead so that another company could make lower-cost versions of its drugs. Gilead has actually made such an arrangement with seven generic drug makers based in India, letting them sell lower-cost versions of its hepatitis C medicines in 101 low-income and middle-income countries.
“It would cost me less to put everyone in the state on a cruise ship for 12 weeks than pay for Sovaldi.”
Dr. Rebekah Gee, Louisiana health secretary
The idea is appealing enough that a committee of the National Academies of Sciences, Engineering, and Medicine last month recommended this approach as a way to eradicate the disease in the United States. The rationale is that a license would also benefit Gilead, because it could get some added revenue while ensuring its medicines reach a population that would otherwise never be able to afford the drugs.
Whether Gilead would be willing to strike a deal for a state Medicaid program is uncertain. A company spokesman sent me a statement that did not address this specific question, but noted that Gilead is open to talks with the states. He added that the average price per bottle for Harvoni, a follow-on to Sovaldi, is now less than $10,000 for states that provide open access to all Medicaid patients.
Gee, however, said that talks with Gilead have so far gone nowhere. The company offered “long-term financing,” which she argued does not really lower long-term costs, although she remains open to discussion.
This brings us to the other option, which is where you come in, Mr. Secretary.
If Gilead is unwilling to offer a voluntary license, the Department of Health and Human Services could tap a century-old federal law to use a patented invention without permission. Known as Section 1498, this is like a form of eminent domain. A drug maker can demand a “reasonable” compensation — such as royalties — but cannot stop the government from overriding a patent.
“If Price and [President] Trump are interested in lower-priced drugs, they have access to a tool that enables them to do that,” explained Rachel Sachs, an associate professor at the Washington University School of Law who participated in the informal panel advising Louisiana. “This has been invoked repeatedly by the federal government regarding other technologies.”
Of course, this is no slam dunk.
The law allows HHS to get around the patent, but the Food and Drug Administration also offers market exclusivity periods that may run beyond a patent. The time frame varies for each drug, although as Sachs pointed out, the first exclusivity for Sovaldi runs out next year.
Also, setting compensation may get contentious.
“If Price and Trump are interested in lower-priced drugs, they have access to a tool that enables them to do that.”
Rachel Sachs, Washington University School of Law
“It is certainly true that 1498 can be used to buy drugs without regard to patent status, but that comes at an uncertain price,” said Jamie Love of Knowledge Ecology International, an advocacy group that focuses on patents and access to medicines. “A judge would decide how much money the patent holders would be compensated, and that can take a while.”
More broadly, some say involuntarily licensing patents would send the wrong signal to drug makers and result in less innovative research and development, because companies would be less inclined to spend money discovering new medicines if they thought their patents wouldn’t be respected. In an essay last year, Duke University economics professor Henry Grabowski argued it would be “fanciful” to think there would be no adverse consequences.
Right now, Gee is soliciting public comment and talking with state lawmakers before deciding what to do. Meanwhile, a Gee spokeswoman tells me that two other states have expressed interest in taking similar action.
Involuntarily licensing patents may seem like a last-resort solution, Secretary Price, but there is clearly a need for drastic action. Even the mere threat might get a company to think differently about negotiating a voluntary license.
Your boss likes to brag about tough dealmaking. This is an opportunity to lead the way and alleviate a national problem. Or is all the talk from the administration about high drug prices just whimsical chatter designed to placate the public?