A lot of prescription drug research, development, and innovation is funded by taxpayers through the National Institutes of Health (NIH) and other federal programs. But all too often, the federal government does the hard work, and then companies exploit monopolies to charge incredibly high prices.
This happens even though the companies are engaging in price gouging and did not contribute to innovation! Fortunately the government is beginning to take action. In a long overdue case, the Department of Health and Human Services (HHS) just filed a lawsuit against the drug company Gilead for infringing patents on two HIV prevention pills and unfairly reaping hundreds of millions of dollars from taxpayer-funded research.
The Centers for Disease Control and Patients holds the patents and funded research into HIV prevention that led to the development of two pills, Truvada and Descovy. Both of these pills are sold by Gilead. Truvada is also known as PrEP, for pre-exposure prophylaxis, and it is a daily pill with very few side effects that is almost totally effective at preventing HIV infection.
However only a fraction of the people who are at risk for getting HIV are on PrEP. Why? Because Gilead charges $1,750 per month for the pill, or $21,500 per year! And the pill's price has steadily climbed since it was introduced in 2004. Overseas a generic version of PrEP only costs $6 per month!
Normally the federal government licenses out patents to companies and gets paid royalties from the sales. However, Gilead did not do that, and instead claims that the HHS patents are invalid and that it invented Truvada. Negotiations between the federal government and Gilead broke down-and a Financial Times article estimated that Gilead owes HHS about $1 billion in royalties.
In a strongly worded statement, HHS announced that "Despite multiple attempts by HHS to license its patents, Gilead has refused. In the complaint, HHS alleges that Gilead has willfully and deliberately induced infringement of the HHS patents. The complaint further alleges that, as a result of such infringement, Gilead has profited from research funded by hundreds of millions of taxpayer dollars and reaped billions from PrEP through the sale of Truvada and Descovy." The administration pointed out that Gilead has persistently refused to obtain licenses for the use of these patents, and Secretary Azar said bluntly, "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."
It is unclear how much the federal government will seek in damages. While a court process will take time, the federal government may also use this lawsuit to force concessions from Gilead. And for too long drug companies have been given a green light to charge incredibly high prices with no consequences.
HHS's lawsuit against Gilead is an excellent sign that things are changing.