“The analysis piece in the BMJ below summarises the crisis we find ourselves in. I am already depressed post-brexit and this article made me even more depressed. We have created the beast ‘Big Pharma’ to help commercialise innovation that we in academia don’t have the resources to do. Society has a deal with Pharma to act in a socially responsible way and instead we get pure greed. The issue of price gouging seems to be increasingly an industry-wide problem and not simply limited to a few rotten apples. I think it is time for Pharma to look itself in the mirror and ask some soul searching questions. At the end of the day people who work for Pharma, are no different to you and me, they get up and go to work in the morning, have relationships, get married, have children and they also get sick. However, Pharma people are in a very privileged position in that as a collective they make a massive difference to the world. In the example below, Pharma have commercialised a class of drugs that cures people. Wow this is the stuff of legends; we should be celebrating their success not denigrating their business practice. However, when Pharma perpetuate and widen the inequalities of the world, which have emerged with globalisation, we need to ask ourselves is there an alternative way for society to develop drugs? I am not sure a neoliberal approach works when it comes to healthcare; it is time for politicians to rethink, and renegotiate, the deals society has made with the pharmaceutical industry.”
- Gilead’s $11bn acquisition of sofosbuvir after phase II studies magnified the speculative costs of drug development
- The resulting $35bn in revenue has been primarily directed to shareholders via share buybacks rather than to further research and development
- The public pays “twice,” both funding pivotal early research and purchasing the drug at high prices
- Solutions include giving health systems increased power to negotiate pricing and payment models, limiting share buybacks, and testing other ways to encourage and reward drug development
….. Sofosbuvir based medicines have marked an important breakthrough for patients with hepatitis C infection, offering cure rates of over 90%. The virus is a leading infectious killer globally, disproportionately affecting vulnerable groups such as people who inject drugs or have HIV/AIDS.1 Even after discounts offered from a US list price of about $90 000 (£70 000; €80 000) per three month treatment course, however, the cost of these drugs, manufactured by Gilead Sciences, has challenged government budgets and led to rationing…..
…… One argument for the high prices has been that the curative drugs represent a major advance in value to patients and health systems. They are indeed more cost effective than many expensive medicines that provide only marginal benefit. Yet the company’s ability to charge high prices ultimately relies on monopoly protections via patents, which the industry has long argued are necessary to encourage costly research and development. Critics, however, charge that these costs are exaggerated…..5
….. During the 2000s, a small start-up called Pharmasset emerged from a publicly funded laboratory at Emory University to develop sofosbuvir, the backbone compound behind the new class of curative hepatitis C therapies. Raised primarily from venture capital and eventual stock based financing, the company’s total reported research and development spending (2003-11) in US Securities and Exchange filings was $271m for sofosbuvir and other failed compounds.7 8 From this total, Pharmasset reported $62.4m specifically for developing sofosbuvir from preclinical research to phase II trials.6 At this stage, Pharmasset identified a future budget of $125.6m for taking sofosbuvir through phase III trials and FDA approval, bringing the compound’s total past and projected development costs up to $188m…..
….. Phase II trials of sofosbuvir showed a more promising cure rate than Gilead’s in house prospects. In anticipation of an annual $20bn market in coming years, Gilead acquired Pharmasset for $11bn in November 2011 using cash from previous profits and new debt. Gilead gained approval for sofosbuvir by December 2013 after completion of four phase III registration studies and with the help of the FDA’s accelerated approval pathway…..
….. The company has since combined sofosbuvir with a series of in-house protease inhibitors (ledipasvir in Harvoni, for example), aiming to create a single oral regimen that shortens treatment from 12 weeks to under eight weeks for some patients. Though Gilead has not shared the costs of its failed compounds and previous in-house research, the company reported aggregate costs of $880.3m to the US Senate for sofosbuvir based clinical trials from 2012 to 2014….
….. Gilead’s function as an acquisition and regulatory specialist in drug development for hepatitis C reflects a strategic preference shaped by financial concerns. In an April 2015 earnings call, then chief executive John Martin reinforced this approach to Gilead’s investors: “We typically like things where we can have impact on phase III and where we can accelerate those products either into the approval process or into greater indications after the approval process.” Gilead’s preference is part of an industry-wide pattern. A 2014 study found that companies deemed to be “winners” earned more than 70% of their sales from products developed by other companies….
…. Examining the destination of Gilead’s hepatitis C revenue reveals a second form of speculation that distorts the claimed link between high prices and further innovation. By the first quarter of 2016, Gilead had accumulated over $35bn in global revenue from hepatitis C medicines since their launch in December 2013. This revenue is over triple the cost of the initial acquisition of Pharmasset and nearly 40 times the cost of Gilead and Pharmasset’s combined reported costs for developing sofosbuvir based medicines…..
…… Beyond stockpiling a portion of this money for future acquisitions—Gilead holds nearly $21bn in cash —where have its profits gone? Since the beginning of 2015, the company has announced $27bn in “share buybacks” to be executed over the coming years. Share buybacks, which emerged in the 1980s and peaked in recent years, are a financial manoeuvre whereby a company purchases its own shares to increase the value of the remaining ones…..
….. Some may argue that the trade-offs between innovation and access are the textbook result of private companies competing in free markets to maximise profits. Yet governments protect pharmaceutical companies from truly free markets through patents, data exclusivities, and prohibition of drug reimportation….
…..Recently, however, an analysis of Gilead’s tax returns indicated that the company had used a common industry practice to avoid nearly $10bn in US taxes by transferring the company’s intellectual property for hepatitis C to an Irish subsidiary…..
……Meanwhile, the public is paying twice: for the crucial early investments in research and for high priced medicines. The US Medicare programme for people over 65, for example, spent over $9bn on hepatitis C drugs in 2015, nearly 7% of its prescription drug budget.41 The US Senate report also revealed that Medicaid spent over $1bn in 2014 while treating only 2.4% of its population with hepatitis C….