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Never in modern times have such high hopes for millions of lives rested on one single company.

As the world struggles to fight off Covid-19, Gilead Sciences has been thrust in the spotlight with remdesivir, the antiviral drug that on Friday the Food and Drug Administration gave emergency authorization to treat coronavirus patients. Doctors are already preparing for a surge of requests from potential patients. Anthony Fauci, the nation’s top infectious disease expert, is sounding close to buoyant. The markets are showing signs of recovery. And President Trump, who has vilified the drug industry since before his election, welcomed Gilead CEO Daniel O’Day to the Oval Office.

But the 33-year-old biopharma company has a well-documented history of charging high prices for lifesaving therapies. And its next steps — notably how much it decides to charge for remdesivir — could determine whether Gilead, and even the drug industry itself, is lauded as the hero of the coronavirus pandemic or condemned anew as price gougers.

“At the end of the day, I think this will certainly help the industry’s reputation,” O’Day, told investors on a conference call last week. “The ability to solve a human crisis like this because of the decades of investments … the general public will see that.”

One pharma lobbyist who spoke on the condition of anonymity put it more bluntly: “We’ve got a perfect opportunity to show our value — and not come across like greedy bastards.”

In interviews with STAT, analysts, drug pricing experts, activists, and lobbyists — including those who work with Gilead — underscored the monumental challenge facing the company and O’Day. Gilead is building good will with a promise to donate enough doses to cover roughly 200,000 patients. But after those are used up, Gilead will have to start charging. Just how much has vast implications for Gilead’s business, reputation, and standing in the pharmaceutical industry.

If Gilead prices remdesivir too high, it will invite the scorn of the world, likely reigniting the bipartisan push in Washington for sweeping reforms to America’s drug pricing system. If it prices cheaply, the company is unlikely to recoup the roughly $1 billion it expects to spend on developing the drug, disappointing investors and tanking the stock price. Sitting on the fence could leave both sides unsatisfied.

“I think that Daniel O’Day and his ilk would be incredibly ill-advised to test the world’s patience on this,” said James Krellenstein, co-founder of PrEP4All, an organization that has fought Gilead over the cost of its HIV drugs. “An outreached hand does not mean you can’t make it into a fist.”

Learn how remdesivir works against the SARS-CoV-2 virus, which causes Covid-19. Alex Hogan/STAT

Attention — and scathing attacks — are not new to Gilead. The company brought America a hepatitis C drug that cost $1,000 a pill, found itself in a protracted and messy legal battle with the U.S. government over patents, and priced HIV drugs so high it birthed an international social movement of AIDS activists.

The company’s checkered past with pricing has lawmakers, activists, and even sympathetic lobbyists concerned that Gilead will squander its moment in the name of corporate profits. Gilead’s pricing scandals, including a backlash in 2013 from pricing its hepatitis C treatment Sovaldi at $84,000, still reverberate within the company.

“If there is one overriding sentiment, it’s to avoid another Sovaldi,” said a former Gilead executive, who spoke on condition of anonymity to speak candidly about the company’s current leadership. Gilead’s mistake wasn’t the price itself, the executive said, but a failure to clearly explain to the public why Sovaldi was worth the money.

“This is an incredible challenge,” the executive added. “At the end of the day, this is a price that Dan O’Day and the board are going to have to live with.”

THE CONTROVERSY:
Breakthroughs beget acrimony

For AIDS activists in particular, Gilead has represented a corporate villain like no other.

Larry Kramer, the legendary playwright and firebrand who founded the activist organization ACT UP in 1987, is now 84. But in an email to STAT, his animus toward the company was hardly tempered.

“Gilead has always been selfish, greedy, tricky pigs,” Kramer said. “I have always hated them.”

He’s not alone. Gilead transformed AIDS from a death sentence to a chronic condition: The company has marketed 11 AIDS drugs since its founding, including the first FDA-approved drug for the prevention of HIV, Truvada. Despite those advances, Gilead has earned the reputation of price gougers from the HIV community, who have protested the company in the streets, in the courtroom, and in Congress.

Protestors mark the 10th anniversary of the formation of ACT UP in March 1997, blowing whistles, beating drums, carrying signs, and chanting along Wall Street in New York to call attention to the high price of AIDS drugs. Mark Lennihan/AP

Among the most vociferous criticism is over a drug called tenofovir, approved in 2001 as the HIV treatment Viread. Over the ensuing years, tenofovir would become the backbone of highly effective — and highly lucrative — combination therapies for HIV, including Atripla, Complera, and Truvada. As revenues for the medicines piled up, Gilead had discovered a novel version of tenofovir, abbreviated TAF, that appeared more potent and less likely to cause bone damage and kidney toxicity.

According to HIV activists, who sued in 2016, Gilead deliberately left TAF on the shelf for several years in order to milk the remaining patent life of the original tenofovir, raising the prices of its medicines all the while. The first TAF-containing HIV regimen was approved in 2015, 14 years after the debut of tenofovir. Gilead has denied the accusation.

Truvada, first approved as a treatment for HIV in 2004, became the center of Gilead’s most contentious pricing controversy. In 2010, researchers funded by the Bill and Melinda Gates Foundation determined that Truvada was dramatically effective at preventing uninfected people from contracting HIV. The drug won approval for a pre-exposure prophylaxis, or PrEP, in 2012.

At the time, Gilead’s executives repeatedly insisted that PrEP had no commercial future, expressing doubt that HIV prevention would catch on. And then it did. Over the past seven years, the number of patients taking Truvada for PrEP soared into the hundreds of thousands.

But activists say the biggest barrier to getting more patients on PrEP — and preventing untold HIV transmissions — is Gilead’s insistence on charging $20,000 a year for the drug. That price, which has steadily risen since 2004, has galvanized a global movement to force Gilead to charge less and give up the patents behind PrEP. Gilead, now in a legal fight with the federal government over Truvada’s patents, has committed to donating enough of the drug to supply 200,000 patients each year for up to a decade, but activists see that as more of a stunt than a substantive solution.

“For years they said they didn’t view PrEP as a commercial opportunity,” said Krellenstein, of PrEP4All. “Fast forward a few years and it’s a multibillion-dollar franchise driven by their price-gouging on the drug. We haven’t seen any hopeful signs yet.”

Gilead has earned the scorn of the hepatitis C community, too.

When the company launched Sovaldi in 2013, public outcries over the drug’s price erupted from Delhi and Madrid to San Francisco and Paris.

Protestors haunted Gilead executives everywhere they went, from the J.P. Morgan Healthcare Conference in San Francisco, to the Leerink Conference in New York, and even an AIDS conference in Melbourne.

Activists wore then-Gilead CEO John Martin’s face as a mask and plastered it on oversized $1,000 dollar bills. They even organized marches complete with hearses and planes towing anti-Gilead banners.

A protester holds a mask of then Gilead Sciences CEO John Martin while demonstrating at the company’s Foster City, Calif., headquarters in November 2012, calling on the drug maker to lower prices for its Stribild AIDS medication. Noah Berger /AP Images for AIDS Healthcare Foundation

Each time Gilead has garnered the scorn of activists, lawmakers in Washington have taken notice, too.

In May 2019, Gilead CEO O’Day was dragged before the House Oversight Committee to answer questions about the price of Truvada.

“People are dying for no reason,” Rep. Alexandria Ocasio-Cortez (D-N.Y.) told O’Day.

In July 2014, the Senate Finance Committee launched an 18-month investigation into the cost of Sovaldi, exposing, the authors argue, that Gilead’s sky high price tag had less to do with how much it spent developing the drug and was more about finding the highest possible price without inviting unmanageable scorn from activists. Gilead has disputed the report’s findings.

The 134-page report was laden with evidence supporting that conclusion, from internal Gilead charts graphing potential activist anger, to quotes from Gilead executives urging the company not to “fold to advocacy pressure.”

THE PROFITS:
A company that needs a hit

For all of its high-priced medicines and accusations of profiteering, there’s an unsettling reality inside Gilead’s glassy campus in Foster City, Calif: The company has been getting less and less profitable.

In late 2015, when Gilead’s stock price hit an all-time high, the company’s franchise of hepatitis C medicines minted about $5 billion every quarter. Today, thanks to price cuts and competition, that figure has been decimated to just $700 million. The company’s HIV business remains strong, but Gilead’s forays outside of antiviral medicine — most notably a $12 billion acquisition of the cancer drug maker Kite Pharma — have failed to pay off in substantial new revenue.

Investors have grown listless, pressuring the company to buy one or more of its rivals before its position worsens and it falls prey to an unwanted takeover.

Gilead needs a hit.

And then came remdesivir. Last week’s news that the drug significantly sped up recovery time for patients with Covid-19 happened to arrive the day before Gilead’s conference call to discuss first-quarter earnings. The company has said again and again that it isn’t looking at remdesivir as a major business opportunity and doesn’t intend to profit from the pandemic. But Wall Street analysts, who speak on behalf of investors the world over, had a consistent response: Why not?

“I’ll ask a controversial question,” said Geoffrey Porges, a well-regarded analyst from SVB Leerink, on last week’s call. “Gilead has generated attractive returns for investors from treating hepatitis C …, from treating HIV and turning it into a chronic disease, and from building a really important global stockpile of antiviral for influenza. So, what’s special about Covid?”

Why, Porges continued, shouldn’t investors assume Gilead will produce Sovaldi-like profits on remdesivir once the company’s donated doses have elapsed?

O’Day, who faced three versions of the same question, was noncommittal.

“We need to be very thoughtful about how we can make sure we provide access to our medicine to patients around the globe and do that in a sustainable way for the company, and for you as shareholders,” he said. “We acknowledge that.”

Defining “sustainable” seemed to unsettle Wall Street. After the call, two analysts downgraded Gilead’s stock over concerns about remdesivir’s profitability. Others forecast only modest revenue from the drug, at a margin far below what Gilead investors might come to expect. The next day, Gilead’s share price fell 8%.

For many analysts gaming out the economics on remdesivir, there’s simply no path to blockbuster sales. Phil Nadeau, a biopharma analyst at Cowen, sees remdesivir topping out at a few hundred million dollars a year in revenue, a figure so small it’s almost immaterial to Gilead’s profits and losses.

“I think to their credit they probably realize that and think, why would we take any reputational risk over what is, to them, basically pennies?” Nadeau said in an interview.

Not everyone on Wall Street is pessimistic about remdesivir’s bottom-line potential. And there’s a justification in Gilead’s own history: Tamiflu. The drug, an influenza treatment invented by Gilead and marketed by the pharma giant Roche, was not a cure but a medicine that shortened the duration of infection. At its peak, it brought in more than $1 billion a year. When flu outbreaks were particularly severe, that number rose as high as $5 billion. All the while, it carried a cost of just $50 to $150 for a course of treatment.

If, as many scientists expect, Covid-19 turns out to be a cyclical problem for the planet, remdesivir could become a steady profit driver for Gilead until there’s a widely available vaccine. Using Tamiflu as a model, Mizuho analyst Salim Syed is projecting that Gilead will charge about $750 per patient for remdesivir. If the novel coronavirus persists, that would make remdesivir a roughly $3 billion drug. Analysts at Piper Sandler consider it “a multibillion-dollar opportunity,” they wrote in a note to investors.

The biggest risk, in the minds of analysts, is that any price above free is likely to spark calls for the government to seize Gilead’s patents or violate its intellectual property by approving knock-off versions of remdesivir. If the company cannot recoup its investment in remdesivir — expect to hit $1 billion this year alone — it could be financially painful for Gilead and disastrous for the drug business at large.

“This, in our view, will be the ultimate irony,” Leerink’s Porges wrote in a note to investors last week. “If a company that has maintained the capability and product library to respond to this kind of massive infectious disease threat is then saddled with mandatory licensing and zero profit, it would have to impress even the most misinformed lawmakers as a negative signal to the rest of the industry.”

THE ACTIVISTS:
What do they want now?

The question that unites Wall Street, Washington, and the activists who have squabbled with Gilead for years is simple: What does the company deserve for inventing remdesivir?

The drug, conceived as a generic antiviral, has benefitted from public funding in its path to becoming a treatment from Covid-19. But it came from a library of potential medicines that would not exist if Gilead didn’t have a prayer of making a return in the future.

“No one is saying Gilead shouldn’t make a substantial profit on remdesivir, but they should also not bankrupt the world,” said Aaron Lord, a member of PrEP4All who is also a neurologist at NYU Langone Health in New York City. Gilead is entitled to a reward, he said, but only if everyone in the world who needs remdesivir is able to get it.

O’Day, Gilead’s CEO, insisted to STAT that the company is “going to make sure that access is not an issue” with remdesivir. But that’s cold comfort for activists, who are increasingly pushing Gilead to take steps virtually unheard of in the pharmaceutical industry.

Activists told STAT that they have no intention to wait for Gilead to set a price for remdesivir, or to take the company’s vague assurances about affordability to heart.

“The standards from people in my position are just getting tougher,” said Peter Maybarduk, director of Public Citizen’s access to medicines program. “What the world needs is considerably more dramatic.”

Activists are demanding, for example, that the company forgo enforcing any patents or exclusive rights to make the drug, especially in the developing world, which has had difficulty gaining access to infectious disease treatments in the past. On Monday, Public Citizen demanded Gilead price remdesivir at $1 per day.

They’re pushing, too, for Congress to pass legislation mandating Covid-19 treatments be made affordable.

It’s too early to say, however, whether that push for legislation gains steam in Congress. But there’s early signs lawmakers are closely watching Gilead.

“Gilead’s history of prioritizing profits over patient access raises concerns about what will happen if the company succeeds in developing a treatment for COVID-19,” Sen. Ron Wyden (D-Ore.) who co-led the Senate investigation into Gilead, told STAT in a statement. “Without tools to take on price gouging, America’s strained health care system will be at the mercy of the pharmaceutical industry.”

The Democrat in charge of the committee that summoned O’Day before Congress last year has already sent a letter to PhRMA requesting that all of its member companies commit to affordable pricing for coronavirus treatments. The letter called out Gilead by name.

But the wisest course for activists may be to push Gilead to think twice before setting a high price for remdesivir.

Daniel O’Day attends a meeting with President Donald Trump, members of the Coronavirus Task Force, and pharmaceutical executives in the Cabinet Room of the White House, in Washington, March 2020. Andrew Harnik/AP

In half a dozen interviews, lobbyists told STAT that they all were acutely aware that the fate of action in Washington on drug pricing may rest in Gilead’s hands. They insisted that if Gilead sets a high price for remdesivir, it’ll reignite bipartisan momentum for sweeping drug pricing reforms, which has been stalled since December. On the other hand, if Gilead underprices the drug, the industry’s reputation in Washington may quickly improve.

“If Gilead goes out and prices the darn thing pretty exorbitantly, then you’re going to see a backlash and it could rebound in a horrible way,” one lobbyist said. “Depending on how they’re priced that could either provide us with a further reprieve or hasten our demise.”

THE FUTURE:
No more $1,000 pills?

Already, there are signs the Gilead known for the $1,000 dollar pill or the pricey HIV drugs may be the Gilead of the past.

The clearest sign: a brand new C-suite. In 2018 Gilead lost its two stalwart leaders who ran the company since its foray into the mainstream: John Milligan and John Martin — known collectively as “The Johns” by watchers of the company. In the proceeding months the company lost its chief patent officer, chief scientific officer, and chief financial officer, too.

In Washington, Gilead has endured a similar transformation.

In 2017, the company hired Chuck Clapton, former health policy director for the Senate HELP Committee and a lobbyist for PhRMA as executive director of congressional affairs. Soon after, the company added Mike Boyd, a veteran lobbyist for AbbVie and Pfizer, as its senior vice president of government affairs and policy. Multiple lobbyists told STAT that both Clapton and Boyd are well-regarded on Capitol Hill and on K Street for their thoughtful style and strategic sense.

Gilead also now has the firepower of the lobbying group PhRMA on its side: The company joined PhRMA in January 2019 after a long courtship.

Gilead has already had some missteps that have inflamed activists. But the company, to its credit, seems to have recognized those mistakes.

Earlier this year Gilead requested a so-called orphan drug designation for remdesivir, a lucrative FDA designation doled out to companies making drugs for rare diseases who otherwise might not make back their investment. That designation comes with seven years of the exclusive rights to sell a drug, as well as lucrative tax breaks.

When FDA granted the request, it was rapidly panned by activists. Gilead requested the FDA rescind the designation, less than a week after doling it out.

In Wall Street’s eyes, the body language has changed, too. In his brief time as CEO, O’Day has been more transparent than his predecessors, analysts said, and the remdesivir saga has come with frequent open letters, conference calls, and an unprecedented promise.

“This commitment to basically not make any profit [on remdesevir] is not something we had heard historically from Gilead,” said Nadeau, the Cowen analyst. “Would John Martin have done the same? It’s not something that happened in the past.”

Activists, however, aren’t quite ready to believe Gilead has changed its ways.

“I want to believe in the good in people and the possibility for organizing and advocacy to make powerful people change their ways,” said Christopher Morten, a fellow at NYU School of Law that has represented PrEP4All. “But I have not seen any promising signs just yet.”

  • “Gilead’s mistake wasn’t the price itself, the executive said, but a failure to clearly explain to the public why Sovaldi was worth the money.”

    Oh, brother. If insanity is doing the same thing over and over expecting a different result, the measure of pharma’s insanity is its clinging to the “people-just-need-to-understand-the-value-of-medicines-and-then-they’ll-love-us” delusion.

    Repeat after me: people just need to be able to **afford** medicines.

  • We have people graduating from college who have been taught profits are evil. But ask them what will the motivation be to come up with a cure for other diseases and they just shrug their shoulders.

    The left is exploiting the Covid-19 panic in its long term goal of destroying capitalism. As Bernie Sanders has said…The pandemic “exposes the incredible weakness and dysfunctionality” of the U.S. health system; the cure is centralized, socialized care. Americans can’t get the drugs they need because “a bunch of crooks” run drug companies, “ripping us off every single day.”

    Government will save us? How’s that working out for Italy? Yet these claims are fantasy. Here’s the lesson of the virus so far: Relying solely on government bureaucracy is insane. To the extent America is weathering this moment, it is in enormous part thanks to the strength, ingenuity and flexibility of our thriving, competitive capitalist players.

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