A Price-Gouging, Tax-Dodging Drug Company

On July 13, Americans for Tax Fairness (ATF) released a report describing how drugmaker Gilead Sciences raked in billions of dollars in profits in the past two years from exorbitantly priced hepatitis C (HCV) drugs that were developed with taxpayer support. Gilead then shifted those profits offshore, enabling it to dodge nearly $10 billion in U.S. taxes.[1]

Gilead made headlines in 2013 when its first HCV drug, sofosbuvir (SOVALDI), went on the market at a cost of $1,000 per pill, or $84,000 for a full 12-week course of treatment.[2],[3] In 2014, Gilead introduced its second HCV drug, HARVONI — which combines sofosbuvir with ledipasvir — at a price of $1,125 per pill, or $94,500 for a full course of treatment.[4] According to ATF, the actual cost of making a 12-week course of sofosbuvir is estimated at $100 to $1,400.[5]

A huge number of patients are candidates for these drugs: The Centers for Disease Control and Prevention estimates that 3 million to 4 million people in the U.S. have chronic HCV infections.[6]

ATF’s key findings included the following:[7]

• The federal government provided at least $4 million to fund HCVrelated research that appears to have aided in the development of Gilead’s drugs.
• From 2013 to 2015, Gilead’s worldwide revenues tripled — from $11 billion to $33 billion — and its pre-tax profits rose more than fivefold — from $4 billion to $22 billion. Much of these gains was driven by sales of the company’s two HCV drugs.
• U.S. taxpayers are paying at least $5 billion annually for Gilead’s overpriced HCV drugs, while hundreds of thousands of patients go untreated because of the unaffordable costs.
• As sales of its HCV drugs exploded, Gilead appears to have engaged in a massive shift of American profits offshore to dodge U.S. taxes. ATF estimates that the company has used tax loopholes to avoid paying $10 billion in U.S. taxes since 2013.

ATF recommends that Congress close the loopholes that Gilead relies upon to dodge taxes. But the government already has at its disposal a powerful tool to address Gilead’s price-gouging behavior: Under existing patent law, the U.S. government could authorize other companies to make much cheaper generic versions of SOVALDI and HARVONI to treat HCV patients under government health programs, such as Medicare and Medicaid.[8] Gilead in exchange would receive reasonable royalties, which would be substantially less than currently projected federal expenditures for these drugs.

The U.S. government has used this patent authority only once before for a drug. Gilead’s outrageous price-gouging, tax-dodging behavior certainly provides a just basis for doing so again.

References

[1] Americans for Tax Fairness. Gilead Sciences: Price Gouger, Tax Dodger. July 2016. http://www.americansfortaxfairness.org/files/ATF-Gilead-Report-Finalv3-for-Web.pdf. Accessed July 20, 2016.

[2] Knox R. $1,000 pill for hepatitis C spurs debate over drug prices. December 30, 2013. NPR. http://www.npr.org/sections/health-shots/2013/12/30/256885858/-1-000-pill-for-hepatitis-c-spurs-debate-over-drug-prices. Accessed July 20, 2016.

[3] Gokhale K. The same pill that costs $1,000 in America sells for $4 in India. December 28, 2015. http://www.bloomberg.com/news/articles/2015-12-29/the-price-keeps-falling-for-a-superstar-gilead-drug-in-india. Accessed July 20, 2016.

[4] Americans for Tax Fairness. Gilead Sciences: Price Gouger, Tax Dodger. July 2016. http://www.americansfortaxfairness.org/files/ATF-Gilead-Report-Finalv3-for-Web.pdf. Accessed July 20, 2016.

[5] Ibid.

[6] Centers for Disease Control and Prevention. Viral hepatitis – hepatitis C information. http://www.cdc.gov/hepatitis/hcv/cfaq.htm#cFAQ13. Accessed July 21, 2016.

[7] Americans for Tax Fairness. Gilead Sciences: Price Gouger, Tax Dodger. July 2016. http://www.americansfortaxfairness.org/files/ATF-Gilead-Report-Finalv3-for-Web.pdf. Accessed July 20, 2016.

[8] Kapczynski A, Kesselheim AS. ‘Government patent use’: A legal approach to reducing drug spending. Health Aff. 2016;35(5):791-797.