Massachusetts Attorney General Maura Healey has threatened to sue Gilead Sciences (GILD) if the drug maker fails to lower prices for its hepatitis C treatments, but whether the tactic will actually work is another matter.
In a Jan. 22 letter to the drug maker, Healey claims Gilead violated the state Consumer Protection Act. Several legal experts, however, say it is uncertain that her argument will succeed, because the state would have to prove that charging a high price is an unfair practice. As part of the challenge, a key, but hard-to-answer question is “How high is too high?”
“Pricing may be a matter of public policy, but it’s hard to imagine how it violates consumer protection,” said Erik Gordon, a professor at both the Ross School of Business and the School of Law at the University of Michigan. “I think she loses in any court in Massachusetts and any court in the country. I know of no case where you win because you say someone is charging a high price and it’s not justified.”
Another expert noted that Healey’s letter failed to cite a specific case or legal precedent to justify her claim that Gilead is violating state law.
“This is unchartered territory,” said Harry First, a professor at the New York University School of Law, who specializes in antitrust matters. “But if you really have a case, you don’t write a letter, you file a lawsuit. This letter is dramatically unspecific.”
Nonetheless, sources familiar with the effort say the attorney general is confident that the state consumer protection law is sufficiently broad to encompass the Gilead pricing policies, which were described as a “unique set of circumstances.” The state law notes that the courts should look to interpretations of unfair trade practices from the US Federal Trade Commission and federal courts.
In her letter to Gilead, Healey acknowledged the drugs may cure a life-threatening ailment. But the high cost “effectively allows” hepatitis C to “continue spreading through vulnerable populations, as opposed to eradicating” the disease, she wrote. The result is “massive public harm.”
A Gilead spokeswoman said the drug maker plans to meet with state officials. Details of the meeting have not yet been worked out.
The medicines, which have cure rates exceeding 90 percent, cost from $63,000 to $94,500, depending upon the drug and regimen, before rebates or discounts. The price tags helped spark a firestorm over the cost of prescription medicines, even though Gilead argues that its drugs represent worthwhile value compared with longer-term costs of liver disease, cancer, and transplantation.
Healey cites a recent US Senate report that charged Gilead deliberately placed profits before patients in setting the price of Sovaldi at $1,000 a pill. Instead, the company refused to lower its prices or offer meaningful discounts in order to maximize and outmaneuver competition. Launched in late 2013, Sovaldi was the first Gilead treatment to become available, while Harvoni debuted early last year.
“It’s not surprising to see a request from a state to the drug company for lower prices for this treatment,” said Sen. Chuck Grassley (R-Iowa), one of two lawmakers who spearheaded the report, in a statement. “States, private insurers, and federal programs are trying to figure out how to afford this blockbuster drug for the greatest number of people who could benefit from it.”
To bolster her case, Healey cited a raft of data.
For instance, in 2014, state Medicaid programs spent $1.3 billion on Sovaldi before rebates, which allowed just 16,281 enrollees to receive the drug. This amounted to less than 2.4 percent of Medicaid recipients believed to be infected, she wrote. MassHealth, the state Medicaid program, is spending $180 million for Sovaldi for 2,000 patients before rebates, according to sources familiar with the situation.
Meanwhile, she noted that in Egypt, Gilead sells Sovaldi for about $10 per pill and roughly $4 in India. The company struck licensing deals with several generic drug makers to make and supply its pills to more than 90 countries at lower prices. Despite these discounts, the prices charged in the United States helped to generate “staggering profits” for the company.
Healey also pointed out that the prevalence of hepatitis C in prisons is 17 times the rate for the general population. Last year, a proposed class action lawsuit was filed by two inmates in Massachusetts state prisons for failing to provide hepatitis C treatment to most infected prisoners. The attorney who filed the suit blamed the high cost of the drugs as a key issue.
“Given the ability of these drugs to eradicate a life-threatening infectious disease, these decisions raise serious questions about ethics and fairness that go well beyond a company’s right to recoup a fair and even a substantial profit,” Healey wrote.
Whether other state attorneys general also take this step is unclear. A source said the letter has been shared with other state officials, but a spokeswoman for the National Association of Attorneys General said that neither its consumer protection nor antitrust committees are discussing the issue.