Gilead Must Pay Merck $200 Million for Hepatitis C Patents

  • Merck demanded royalty saying it paved way for liver remedy
  • Gilead failed to convince jury Merck drug patents are invalid

Gilead Sciences Inc. was ordered by a jury to pay Merck & Co. $200 million for patent infringement over a drug compound that cures hepatitis C, a tenth of what Merck sought.

The verdict announced Thursday follows an earlier finding by the jury embracing Merck’s claims that its scientists were responsible for early breakthroughs that led to the development of the Sovaldi and Harvoni medicines which helped Gilead become the world’s largest biotechnology firm by market value.

After siding with Merck on all the patent claims, jurors rejected Merck’s bid for a 10 percent royalty on the $20.7 billion revenue that Gilead’s hepatitis C drugs generated from 2013 through 2015.

The award against Gilead comes amid projections that the Foster City, California-based company’s sales will flatten this year as competition for liver disease treatments intensifies among drugmakers. In the final phase of the trial in federal court in San Jose, California, U.S. District Judge Beth Labson will determine a royalty rate for future sales of Harvoni and Sovaldi.

U.S. Prices

Gilead’s drugs carry U.S. list prices from $84,000 for a 12-week course to $94,500 before discounts. The court fight started 2 1/2 years ago after Merck demanded a royalty, claiming that its laboratory back in 2001 laid the scientific foundation for the sofosbuvir compound to later be developed by Pharmasset Inc., before that company was acquired by Gilead in 2011.

Gilead said it will appeal if a judge upholds the damages verdict.

“Since Merck made no contribution and assumed none of the risk in the discovery and development of sofosbuvir, we do not believe Merck is entitled to any amount of damages,” Michele Rest, a Gilead spokeswoman, said in a statement. “We continue to believe the Merck patents are invalid.”

Merck said in a statement that it’s “pleased that the jury recognized that patent protections are essential to the development of new medical treatments.”

“The compounds and methods at issue in this case facilitated significant advances in the treatment of patients with HCV infection, and achieving these advancements required many years of research and significant investment by Merck and its partners,” the company said.

Scientific Advances

At trial, Gilead and Merck each tried to show the other was claiming credit for scientific advances that wasn’t due. Over two weeks, a parade of doctors and scientists for Gilead, Pharmasset and Merck and its partner Ionis Pharmaceuticals Inc. testified about their roles in the patent process.

In the damages phase, the jury settled on a 4 percent royalty for $5 billion in sales.

Juror Clark Holden of Salinas, California, said after the verdict the panel decided $5 billion was the appropriate basis for calculating a royalty after subtracting Gilead’s investment of $15 billion from its total U.S. revenue.

“Some jurors were at the high end and some wanted to give nothing,” he said in an interview. “We had to find a middle ground.”

Merck’s own liver disease treatments Victrelis and PegIntron last year generated $200 million in global sales, tumbling almost 63 percent in a year. The company said the fall was a contributor to Merck’s 6.5 percent drop in sales in 2015. In 2012, the year before sofosbuvir hit the market, Merck’s two hepatitis C drugs combined to generate about $1.2 billion in sales, according to data compiled by Bloomberg.

The case is Gilead Sciences Inc. v. Merck & Co., 13-cv-04057, U.S. District Court, Northern District of California (San Jose).

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