Sovaldi Pricing May Constitute Unfair Trade Practice Says Mass Attorney General

Last month Massachusetts Attorney General, Maura Healey, sent a letter to the prescription drug company Gilead. The letter opened a new fight in the state’s efforts to keep prescription drug prices down. Healey threatened Gilead with legal proceedings unless they lower the price on their blockbuster treatments for hepatitis C. The legal case would attempt to declare Gilead’s high prices to be in violation of Massachusetts law. These drugs are very expensive and they cost private insurers and state programs more than they can sustainably spend. Gilead will try to discredit the Attorney General’s motives by calling it political grandstanding, but they would be unwise to ignore the letter. This is Massachusetts top law enforcement officer attacking prescription price gouging head on. The Boston Globe recently reported on the letter and the industry reactions to it when it was made public.

Gilead Sciences Inc. is the world’s largest biotech company. They produce two treatments for hepatitis C, Harvoni and Solvaldi. Both drugs have a very successful cure rate for the disease, and each are extremely expensive. Healey believes that the prices are negatively impacting public health programs and limiting access to the drugs for many sufferers in her state.

In her letter Healey wrote “that the high price of the company’s Sovaldi drug, $84,000 for a full 12-week course of treatment, and its Harvoni regimen, at $94,500, may constitute an unfair trade practice in violation of Massachusetts law, because they are too expensive for many patients.”

These drugs are wonderfully successful innovations, but they are priced to extract the most taxpayer money possible. Hepatitis C is a disease that attacks the liver and can be spread sexually or through blood contact. It is a disease that thrives in impoverished and disaffected areas, and the rates of infection are increasing as the country suffers from a spike in heroin addiction. The typical sufferer is often poor. Many people in Massachusetts with hepatitis C are enrolled in MassHealth, which is Massachusetts’ medicaid plan. Last year the state spent $160 million to treat the disease.

Just like the revolutionary science behind these drugs, Healey is using a novel interpretation of the law and her authority as Attorney General. It is believed to be the first time a state AG has used consumer protection law to attack price-gouging by a pharmaceutical company. This approach has the potential to be adopted in other states. Healey targeted Gilead because they are far and away the lead producer in this class of treatments. In the letter she emphasized the drug maker’s responsibility for patient access, as well as the strains of high prices on public programs.

Gilead’s allies countered the letter, arguing that the full benefits of these drugs as a cure are being underestimated. Without these treatments there would be more hospitalizations or costly surgeries associated with untreated hepatitis C. Some believe that Gilead is being punished for its success. Gilead responded by agreeing to meet with Healey’s team and discuss the treatments and the company’s pricing strategy. They will likely defend their prices and justify them with the usual rhetoric about the high costs of research and development. This is the pharmaceutical company’s playbook.

AG Healey believes that because of their high cost, Sovaldi and Harvoni are not living up to their promise as a great universal cure. Because they are too expensive, very few people are getting the treatment they need.

“Gilead’s treatments have cured more than 95 percent of the hundreds of thousands of hepatitis C patients who have taken the drug. But fewer than 10 percent of the estimated 2.7 million to 3.9 million Americans infected by the virus have been treated.”

She frames her argument by agreeing that the drug is certainly special, but it is too rarely being utilized. She believes that her team can prove prices were set to boost profits despite knowing it would limit access, and Gilead would be in violation of state consumer protection laws. She contends Gilead’s pricing does the public more harm than good.

In her letter she concludes that “because Gilead’s drugs offer a cure for the serious and life-threatening infectious disease, pricing the treatment in a manner that effectively allows [hepatitis C] to continue spreading through vulnerable populations, as opposed to eradicating the disease altogether, results in massive public harm.”

In their first 21 months on the market, Harvoni and Sovaldi earned Gilead $20.6 billion in revenue. There can be arguments back and forth between the company and the Attorney General, but the fact is that the drugs are too costly to serve the greater good. Gilead should be able to earn money from their efforts, but not at the expense of public health. AG Healey is trying a new approach to fill the regulatory vacuum. Massachusetts has been a leader in healthcare and this effort may be their latest innovation.