After more than a year of controversy, the federal government filed a lawsuit accusing Gilead Sciences (GILD) of infringing patents on a pair of HIV prevention pills and unfairly reaping hundreds of millions of dollars from research funded by taxpayers.

The patents are held by the Centers for Disease Control and Prevention, which helped fund academic research into HIV prevention that later formed the basis for a pair of pills — Truvada and Descovy — that are sold by the drug maker. The Department of Health and Human Services contended that Gilead refused to reach a licensing agreement despite “multiple attempts” at reaching a deal. “Gilead’s conduct was malicious, wanton, deliberate, consciously wrongful, flagrant, and in bad faith,” the suit states.

“HHS recognizes Gilead’s role in selling Truvada and Descovy to patients for prevention of HIV. Communities have put these drugs to use in saving lives and reducing the spread of HIV,” HHS Secretary Alex Azar said in a statement Wednesday. “However, Gilead must respect the U.S. patent system, the groundbreaking work by CDC researchers, and the substantial taxpayer contributions to the development of these drugs. The complaint filed today seeks to ensure that they do.”

advertisement

The move comes after AIDS activists have pushed HHS for months to collect royalties from Gilead, arguing that the drug maker has exploited the federal government by using the benefits of the intellectual property to charge ever-higher prices for Truvada, the first HIV prevention pill. The activists have maintained the federal government could use royalties to fund HIV prevention and treatment services. The issue prompted a Congressional hearing last June.

The pill, which is also sometimes referred to as PrEP, for pre-exposure prophylaxis, costs about $1,750 a month, or $21,100 a year, but its price has climbed steadily since it was approved in 2004 for treating HIV. At that time, the wholesale cost for a month’s supply was $650. In 2012, Truvada was approved to prevent HIV and the cost rose to $1,159, according to Truven Health Analytics. The drug maker has argued that pricing supported further innovative research.

[UPDATE: Later, a Gilead spokesman sent us this statement: “We strongly believe that the patents granted to HHS since 2015 for PrEP and PEP (post-exposure prophylaxis) are not valid and reject any notion of willful infringement. HHS improperly filed for patents without alerting Gilead, despite its obligation to do so, and we have openly explained the defects in the patents since becoming aware of them. Gilead has acted above board and in good faith to come to a resolution with HHS on the issue of the validity and ownership of the PEP and PrEP patents.”]

In its own statement, the PrEP4All activist group, said “HHS’s decision to sue Gilead for patent infringement on Truvada and Descovy PrEP is a necessary first step to ensure access to effective HIV prevention for everyone who needs it. For nearly a decade, Gilead’s price gouging on PrEP has prevented hundreds of thousands of Americans from accessing this technology, despite it being taxpayer funded. If HHS is truly invested in ending the HIV epidemic, it will use these patents as leverage to ensure that everyone who needs PrEP can get it.”

Last spring, Gilead attempted to appease the Trump administration by donating enough medicine to cover up to 200,000 patients over the next 11 years. More recently, Gilead won Food and Drug Administration approval to sell Descovy. Generic versions of Truvada are due next fall and Wall Street expects the followup pill to become a big seller. Last year, Truvada notched $3 billion in sales.

Meanwhile, last August, Gilead responded to the controversy by challenging patents held by the federal government. The drug maker asked the U.S. Patent and Trademark Office to examine the patents, which AIDS activists have argued would entitle the government to collect royalties from Gilead and use the funds to combat the virus. However, a Gilead official said the company refused to agree to a license in talks with HHS over the past three years.

[UPDATE: In its statement, Gilead maintained its patent challenge was a “good faith” attempt to resolve the standoff. The company further argued that “there is compelling evidence demonstrating that the HHS patents are invalid. Published materials clearly show that, well before HHS claims to have invented the concepts of PrEP and PEP in 2006, others had conceived of using an antiretroviral therapy, including Truvada, for both forms of prophylaxis.”

[Gilead added that it “invented Truvada and funded the clinical trials that led to its 2004 FDA approval for use in combination with other antiretroviral agents to treat HIV. The company has spent an estimated $1.1 billion on R&D related to Truvada – to develop the two individual drugs that make up Truvada, invent the combination product that is Truvada, invent its use for HIV treatment and support the clinical trials that led to the approval of Truvada for PrEP. Similarly, Gilead invented and shouldered the cost of developing Descovy. Any claim to the contrary is false.”]

Last June, the dispute prompted the House Committee on Oversight and Reform to hold a hearing, in which Gilead was skewered over its pricing policies for Truvada. Several U.S. senators also asked HHS to explain what, if any, steps are being taken to ensure that patents held by the federal government on an HIV prevention pill are properly licensed. The lawmakers also asked agency officials to demonstrate how they take into account whether medicines are affordable when considering licensing patents.

As for Wall Street, the lawsuit may complicate the financial outlook for the company, but not terribly, according to Jefferies analyst Michael Yee. “There are a number of dynamics at play here that make this a little more noisy than what we’d like to see, but we believe there would be modest or minor financial impact overall for investors,” he wrote in an investor note. This depends, of course, on whether Gilead ends up paying any royalties and the amount of money involved.

Leave a Comment

Please enter your name.
Please enter a comment.

  • A two-edged knife: without companies doing drug development this pill would not exist, nor would it without taxpayer moneys. As tax moneys have assisted in the development, the concept of royalties paid back by the drug makes sense. Unlike with vaccines (with government support) those who need this pill due to lifestyle choices should also expect to participate in the cost.

    • KJ, point taken. Pharm development is so intensely complex and risky, it makes Solyndra losses ($500,000,000) seem like pocket change.

      Anyone who think Harvard MD/PhD pharm-researchers are going to allow fact-clumsy goofs like Mr. Sanders and Ms. Warren to lecture them about their lives, s/he should sober up, STAT. They’ll just do pharm deals with Beijing, Moscow, Paris, or elsewhere. And the USA will keep falling apart.

      It is like when a country steals an inventor’s hard-earned patent. That may happen once — and there will NEVER be another inventor like that, again. No inventor will go down that path, again. Cheating happens only once.

      As for claims, “well, Salk didn’t get royalties” — the facts. He was tenured faculty. The patents belonged to his employer. Salk had NO patent rights to sell, to anyone. Facts don’t make pretty headlines — and headlines don’t pay the bills.

    • Hi Kathryn J,

      I agree that without some development work beyond taxpayer research, there would be medicines that would not exist.

      As for the PrEP pills, I don’t recall hearing from AIDS activists that they believe people should not participate in the cost – or pay for a pill, if that’s what you meant. Their argument has been about Gilead paying royalties back to the government.

      Beyond that, not sure what you mean by ‘lifestyle choices.’

      Regards
      ed at pharmalot

  • I concur with Russ. New drugs require research AND development (R&D). The research was funded by taxpayers, but the development (clinical trials, approval, manufacturing) was not. The Complaint was inaccurate there. The tax dollars only paid to allow a patient to go read about the discovery in a book on the shelf of a library while they continue to get infected with HIV. The investment in the development came from Pharma (including all the drugs that didn’t make it).

    There’s a deeper issue here than just getting Gilead to lower their prices (which will happen next summer anyway when the generic comes out with Teva partnership). More political strong-arming. It also sends the wrong message when patents are attacked by the same government that grants them in an ostensibly free-market economy.

    • To Russ and Stephen,

      I’m aware of the costs and failure rates of clinical trials, generally speaking, but thanks for the numbers, Russ.

      And Stephen, I understand your point. I think there is some validity to both arguments over the obligations and opportunities stemming from research that is funded with taxpayer dollars. This has actually been going on for decades and perhaps the outcome of this lawsuit will add some clarity.

      Meanwhile, Gilead has just sent me its comment which, not surprisingly, argues that it paid for the R&D that led to the invention of the product. And I have updated the story to reflect this. More to come, obviously, if not today, but certainly going forward.

      I appreciate that you took the time to write.

      Regards,
      ed at pharmalot

  • Mr. Writer: were there clinical trials? If so — who paid for them? What did they cost?

    What is the clinical trial failure rate, among govt patents? 97%?

    Facts. Without them, failure is always the outcome.

    • Hi Russ
      Thanks for the note.
      I understand your point and in the story I noted that Gilead has argued the prices charged for its pill was used to fund innovative research.
      Through the months of controversy, however, Gilead has otherwise not offered specifics about the cost of pertinent trials.
      I’ve asked Gilead for comment concerning the suit, as noted in the story, and will update the post with any information the company is willing to provide.
      Thanks for stopping by,
      ed at pharmalot

    • Sir: thx for reply. Let me help you, as so many political gas-bag know-nothings fail to actually do any first-hand research —

      1. Cost of clinical trials — can be greater than $2,000,000,000. Taxpayers do NOT pay for those.

      2. Failure rate in clinical trials — as high as 97%. A very high risk game.

      If the political gas-bags think they can do a better job — why haven’t they?

      Answer: because they know nothing. Zero. Beyond useless. They also have avoided hard work, too.

      Looking for more money for medicine? Why is smoking tolerated? Illegal drugs? Heavy booze? “Wild living?” There’s $500,000,000,000+/year in costs, right there.