Photographer: Kiyoshi Ota/Bloomberg

How Big Pharma Pressures States to Pay for Pricey Pills

  • Price tag for drugmaker’s hepatitis C cure caused uproar
  • Grant recipients shift debate from price to access for poor

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.

‘Reframe Response’

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.

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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.”

‘Advance Care’

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.

Costs Rise

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 are 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.

‘Access and Advocacy’

The Senate Finance Committee reported last year that while Gilead publicly said it prioritized patient access, the drugmaker set prices so high that many couldn’t afford treatment. Citing internal Gilead documents, the committee said it found “the company needed ‘access and advocacy’ to eliminate ‘barriers’ to treatment,” and that Gilead had enlisted influential opinion leaders “to advocate on behalf of their products.”

Gilead’s Flood said its work with patient advocates was to help educate people at risk for hepatitis C, “which suffers from stigma, lack of diagnosis and other challenges.”

Top Donor

Gilead gave almost $500 million in 2015 to groups including those devoted to increasing patient access to drugs, according to the company website. The Chronicle of Philanthropy ranked it the top corporate cash donor in the U.S. that year.

Several advocates who accepted grants said money is scarce since hepatitis C afflicts marginalized populations, so they can’t afford to be picky about their donors.

“You will not find a hepatitis organization that is not heavily funded or exclusively funded by pharmaceutical companies,” said Ryan Clary, who runs the National Viral Hepatitis Roundtable. Though other major hepatitis C drugmakers give to Clary’s group, Gilead and its foundation donated $140,000 in 2015, covering about 22 percent of its budget. It isn’t involved in the Washington state lawsuit.

Health Law Center

Few have been as outspoken about drug access as Greenwald, the director of the Harvard Law School Center for Health Law and Policy Innovation who made the “reframe the response” PowerPoint presentation.

Greenwald, a lawyer who teaches public health law, co-authored a study last year concluding state restrictions on hepatitis C drugs were likely illegal. That helped lay the groundwork for the claims against Washington state. Four of the six researchers, including Greenwald, disclosed financial relationships with Gilead.

Gilead had no involvement in the study, said Jason Grebely, one of the researchers who got grants.

The Harvard center receives 20 percent to 25 percent of its funding from pharmaceutical companies, Greenwald said in an e-mail, but declined to provide additional detail. Pharmaceutical money isn’t used for litigation and the center didn’t coordinate with the companies in urging states to lift restrictions on hepatitis drugs.

‘Right to Sue’

“I don’t have the right to sue pharma,” Greenwald said in an interview. “They’re not doing anything that’s in violation of the law, as egregious as people think their drug prices are. I do have the right to hold the Medicaid programs accountable.”

Greenwald persuaded fellow members of the Presidential Advisory Council on HIV/AIDS to write federal regulators calling restrictions on hepatitis C drugs “unreasonable and discriminatory.” Clary’s network sent a similar letter. The Centers for Medicare and Medicaid Services agreed, and its November 2015 guidance to the states became an important piece of evidence in the Washington lawsuit.

Clary has publicly bemoaned the media “obsession” with the $1,000 sticker price of Gilead’s pill and urged advocates to focus on the value of a cure. In an interview, he said he’s been critical of drug prices but is more effective focusing on patient access. He credited recent decisions by some states to remove or reduce barriers to hepatitis C drugs to the threat of litigation and advocacy efforts.

“It’s pressure that’s working,” he said.

Washington Patient

Michael Ninburg, who runs the Seattle-based Hepatitis Education Project, helped attorneys in Washington state find a patient on Medicaid who’d been denied access to Harvoni to act as plaintiff. Public records show the group received $50,000 from Gilead’s foundation in 2014 for a program to treat prisoners with the disease. Ninburg said the group receives as much as 50 percent of its funding from pharmaceutical companies including Gilead and declined to provide further specifics. Two of three medical advisers and at least one board member received money from pharmaceutical companies including Gilead.

“It doesn’t go unnoticed that there is that tension between the work that we do on access and the companies that make the drugs,” said Ninburg, who has also criticized drug prices. “We’re advocates. We’re working to get people tested, treated and cured so they don’t die a miserable death.”

Liver Specialist

The plaintiffs’ medical expert is Robert Gish, a liver-disease specialist. He got payments of about $750,000 from pharmaceutical companies in the three years ending in 2015; of that, $198,000 came from Gilead, according to government records. Gish said in an interview that he’s received money from Gilead and other drugmakers for such things as research and speaking fees, but said the government data is vastly inflated. He estimated he was paid about a third as much and spent it on research, education and advocacy.

“I have a firewall in my brain that’s made of brick and mortar that keeps me from being influenced by these pharma dollars,” Gish said, adding that he’s been consistently critical of high drug prices.

Dana Van Gorder, executive director of HIV and hepatitis C advocate Project Inform, said groups like his face a “delicate dance.”

While Project Inform isn’t involved in the Washington state lawsuit, it’s been supportive of such efforts. But it’s also been critical of Gilead’s prices, saying last December that “access to hepatitis C cures has been severely limited because of a damaging pricing strategy by Gilead.”

Gilead’s donations to Project Inform, which had been on a steady upward trajectory, have fallen by about a third since then, he said.

Gilead’s Flood said the company gets 4,000 grant requests a year and can’t fund them all.

“There seemed to be some connection to the concerns we’d expressed about pricing,” Van Gorder said.

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