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.”
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.