Why the Government Should Pay $156 Billion to Own Gilead

Why the Government Should Pay $156 Billion to Own Gilead January 17, 2017
By Alex Keown, BioSpace.com Breaking News Staff

WASHINGTON – How could the federal government save money when it comes to providing treatments for hepatitis C? For Peter B. Bachand Mark Trusheim the answer is simple. The U.S. government should buy Gilead Sciences for $156 billion.

Writing in Forbes, Bach and Trusheim, a physician at Memorial Sloan Kettering Cancer Center and strategic director at the MIT Center for Biomedical Innovation respectively, speculate the one-time cash payment could save government-supported insurance programs in the long run. Hepatitis C affects about 3.2 million Americans. Gilead’s Sovaldi can treat about 90 percent of those cases. While highly effective, Harvoni and Sovaldi have been criticized for their price points, which can reach $95,000 for a 12-week regimen. A U.S. Senate report said the high cost of the drugs has also been damaging to Medicaid programs. According to the investigation, Medicaid programs spent $1.3 billion before rebates for the hepatitis C drugs to treat fewer than 2.4 percent of enrollees diagnosed with the liver disease. More than 700,000 hepatitis C patients on state Medicaid programs are still waiting to receive their medications.

If the government bought the company, the writers said it would “lower hepatitis C drug costs per patient to one-third their current level,” making it affordable to the American public.

Throughout their article, Bach and Trusheim provide multiple ways the government would actually cut down the costs of the deal through various moves, including divesting the company of “unneeded assets,” which include Gilead’s HIV franchise. Selling off those assets would significantly lower the one-time investment of the government, they suggest.

If the government did acquire Gilead, the writers said one advantage would be repatriating $31 billion that Gilead maintains in offshore accounts. The company has not brought the money back into the U.S. as a way to avoid taxes, but the government would be able to claim that money tax-free, they said. Another advantage Bach and Trusheim argue, is the government would collect capital gains off of shareholders who sell their stock in the company following government acquisition. They estimate that could amount up to $6 billion.

“This one-off solution makes sense for this one-time public health problem. The widespread prevalence of hepatitis C infection is a sad sequelae of transfusions performed decades ago, before we could screen the blood supply. Once we treat those affected, we aren’t likely to see this disease again in large numbers,” Bach and Trusheim said. One thing the writers did not address is the patent dispute over the hepatitis C drugs Gilead has with rival Merck . In December, a jury awarded Merck $2.54 billion, making it the biggest patent infringement in U.S. history. The penalty will be appealed.

Although Harvoni and Sovaldi have generated billions of dollars for Gilead, revenue from hepatitis C continues to fall for the company largely due to the efficacy of Gilead’s treatments. Sovaldi and Harvoni generated $4.8 billion in revenue during the third quarter of 2015. However, Sovaldi’s sales fell 48 percent during the third quarter. The drug generated revenue of $1.47 billion. In the first nine months of 2016 the drugs lost more than $3.3 billion.

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