(Bloomberg) — Nothing about a Washington state lawsuit called B.E. v. Teeter is as simple as it seems.
It was filed this year by two hepatitis C patients against the state’s Medicaid program to help the poor gain access to drugs such as Gilead Sciences Inc.’s $1,000-a-pill cure.
But behind the team bringing the case is Gilead itself. While the drug giant isn’t involved in the lawsuit, the company and its foundation have donated hundreds of thousands of dollars to the researchers, lawyers, patient advocates and medical expert who have helped build the case.
Gilead said its donations have nothing to do with the legal fight. If the plaintiffs prevail, however, Gilead and other drug companies stand to make billions because Washington’s Medicaid program would be forced to cover expensive treatments — and other states may be pressured to follow suit.
With the controversy swirling around high drug costs, the case in Washington comes as the pharmaceutical industry and some pharma-backed advocates are trying to shift the debate from price to the tight-fisted insurers and bureaucrats who are denying patients life-saving drugs. The Biotechnology Innovation Organization, an industry lobbying group, gave members talking points in June focusing on access to drugs over their price tags.
Or, as Robert Greenwald said in a 2015 PowerPoint presentation on the new class of hepatitis C drugs put it: “Reframe the response. Shift the focus from cost to cure.” The presentation sought to make people aware the disease has a cure, not just that it was costly to treat, said Greenwald. He runs the Harvard Law School center that’s representing the Washington plaintiffs. It’s also partially funded by Gilead and other drugmakers.
The Washington case illustrates a dilemma some patient advocates face: Many have few funding options beyond pharmaceutical firms, putting them in a ticklish position when criticizing prices. Gilead is the hepatitis C market leader, but rivals including AbbVie Inc. and Merck & Co. contribute to some of the same groups.
“We the payers need the advocates on our side to put pressure on either the manufacturers to bring the price down or on the federal government to help find some affordability solutions,” said Matt Salo, executive director of the National Association of Medicaid Directors. “But they are not going to do that if they are beholden to the pharmaceutical industry for money.”
Gilead said there wasn’t a quid pro quo with its grant recipients and that none of its contributions were intended for litigation against Washington state.
Amy Flood, a Gilead spokeswoman, said it wasn’t surprising that some grant recipients are fighting restrictions on hepatitis C drugs, which she described as “questionable policy for medications that are cost-effective, save the health-care system money and cure patients of a deadly and debilitating disease.” Gilead’s drugs are less expensive than treatments, such as liver transplants, that may be needed if the disease progresses.
Gilead rejects the “implication that providing funding for one project or activity translates to financing, influencing or endorsing everything an organization does,” Flood said in an e-mail. “Gilead’s grant program is not a commercial strategy.”
Brook Baker, a law professor at Northeastern University in Boston focused on international access to medicine, called it “very cynical” of Gilead to be providing money to the players involved in a lawsuit that “benefits them financially in the name of patient access.”
“The real issue is, with the price as high as it is, it’s a budget breaker,” Baker said. “Gilead has priced this in a way to wring every penny out of the system that it can.”
Merck’s donations are “an important way to advance our mutual objectives to improve health and advance patient care,” spokeswoman Doris Li said in an e-mail. Merck’s policies ensure its grants aren’t promotional or “provided to induce or reward prescription of our products.” AbbVie declined to comment.
Sovaldi debuted in 2013 and was the first reliable hepatitis C cure. It became one of the fastest-selling drugs in history despite its price: $84,000 for a 12-week course of treatment, the equivalent of $1,000 a pill. Even with discounts, it was so successful that profits for the Foster City, California-based drugmaker nearly quadrupled in 2014. Its successor, Harvoni, has a higher sticker price: $94,500. Today, Gilead boasts a market value of $104 billion, bigger than McDonald’s Corp.
But the prices touched off a firestorm that engulfed the industry. Democratic presidential candidate Hillary Clinton called out Gilead for criticism. A Senate investigation concluded “fostering broad, affordable access was not a key consideration in the process of setting the wholesale prices.” There are more expensive drugs, but most of them treat rare disorders — roughly 3.5 million Americans have hepatitis C, a slowly advancing liver virus that many contract from sharing needles.
From 2012 to 2015 Gilead’s lobbying budget more than doubled to about $3 million a year. That went to hepatitis C education and increasing drug access among government health programs, according to Bloomberg Intelligence.
Less than two years ago, as regulators approved sale of competing hepatitis C treatments, Gilead began negotiating steeper discounts. Under the law, Medicaid receives rebates and can try to negotiate further. Gilead says Medicaid programs get discounts “in excess of 50 percent” on Harvoni.
Still, the price remains high even after discounts for Medicaid, and some state-run health-care programs including Washington’s have rationed treatments to the sickest patients. In court, lawyers for the state defended its approach, saying the drugs’ long-term risks aren’t known and some patients may never develop cirrhosis or cancer, which the disease puts them at higher risk for.
In a major victory for the plaintiffs, a judge ruled in May that Washington state must provide all hepatitis C patients covered by Medicaid with treatment while the case proceeds. That sent the state’s Medicaid budget for hepatitis C treatment from $24 million in 2015 to $222 million by 2017. Washington gets help from the federal government funding Medicaid, but the state will still see its hepatitis C-drugs bill rise to $48 million in 2017 from $6 million in 2015.
“We’re in a bit of pickle,” said Robert Crittenden, special assistant for health reform for Governor Jay Inslee. “We are going to have to cut programs or raise taxes.”
Matthew Harrison, a Morgan Stanley analyst, estimated that if all state Medicaid restrictions were lifted and all patients from those plans were treated over a three-year period, $18 billion of additional revenue could be unlocked for Gilead, and another $12 billion if state-prison populations had full access to the drugs. At least four suits are pending over inmates with hepatitis C.
Could state lawsuits “be the growth the doctor ordered?” Harrison asked in a June note to investors.
“You will not find a hepatitis organization that is not heavily funded or exclusively funded by pharmaceutical companies.” (Image: iStock)