Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Biopharmaceutical company alleged to be gouging purchasers of Hepatitis-C drug, (Dec 11, 2014)

By Jeffrey May, J.D.

Gilead Sciences, Inc.’s pricing practices for its Hepatitis-C drug, Sovaldi, are being challenged in a putative antitrust class action filed in the federal district court in Philadelphia. On December 9, the Southeastern Pennsylvania Transportation Authority or SEPTA, the Philadelphia area’s transit agency, filed a complaint, alleging that the biopharmaceutical company engaged in monopolization in violation of the Sherman Act, as well as discrimination in violation of section 1557(a) of the Patient Protection and Affordable Care Act (Southeastern Pennsylvania Transportation Authority v. Gilead Sciences, Inc., Case 2:14-cv-06978-SD).

Gilead acquired Pharmasset, Inc.—the original developer of Sovaldi—in November 2011. In 2013, Sovaldi was approved by the Food and Drug Administration (FDA) to treat certain types of Hepatitis-C infections. The FDA's Orange Book, which identifies patents that may be applicable to prescription drugs, lists five patents associated with Sovaldi, the last of which expires December 11, 2030. According to the Orange Book, the "Exclusivity Expiration" date for Sovaldi is December 6, 2018, it is alleged.

SEPTA’s action was brought on behalf of purchasers of Sovaldi, as well as those prevented from obtaining a needed Sovaldi regimen as a result of the excessive pricing. SEPTA, which maintains an employee health and welfare benefit plan pursuant to which it reimburses and pays for certain of its employees’ prescription drug purchases, contends that it has paid in excess of $2.4 million for Sovaldi.

Sovaldi can cost $1,000 per pill, making the total cost of a standard treatment approximately $84,000 for U.S. purchasers, according to the allegations. However, Sovaldi is allegedly being made available by Gilead in other countries for as much as 99% below the U.S. price. Certain large federal agencies, such as the Bureau of Prisons, have also received significant discounts on Sovaldi, it is alleged.

According to the complaint, the Senate Finance Committee is investigating Gilead’s pricing practices. The Senate is purportedly looking at documents that might shed light on the price at which Pharmasset had anticipated selling Sovaldi prior to the acquisition.

Gilead’s price gouging conduct cannot be justified by the patent laws, SEPTA argues. The complaint also notes that the validity and applicability of some of the Sovaldi patents are being challenged. Gilead is currently involved in patent infringement disputes with Merck & Co, Inc. and Idenix Pharmaceuticals, Inc.

In support of its monopolization claim, SEPTA alleges that Gilead has engaged in predatory, exclusionary, and/or unfair conduct with the specific intent to monopolize the U.S. market for sofosbuvir indications approved by the FDA. According to the complaint, Gilead has monopoly power in that market. The plaintiff also alleges that Gilead is violating section 1557(a) of the Affordable Care Act by intentionally causing persons infected with Hepatitis C (who have a "disability" within the meaning of section 504 of the Rehabilitation Act of 1973) to "be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any health program or activity, any part of which is receiving Federal financial assistance" based on their disability. Claims of unjust enrichment and breach of contract are also asserted.

"Gilead’s pricing scheme has no end in sight and—if left unchecked—has the potential to literally bankrupt segments of the U.S. healthcare system, given the large number of Americans infected with Hepatitis-C," according to the plaintiff.

While this case is not a merger challenge, the antitrust claim is somewhat reminiscent of an FTC/State of Minnesota action against global pharmaceutical company Lundbeck, Inc. In December 2008, the FTC and Minnesota filed a complaint against Ovation Pharmaceuticals, Inc., which was later acquired by Lundbeck. The suit challenged the company’s 2006 acquisition of the rights to market NeoProfen (injectable ibuprofen)—a drug used to treat premature infants with a heart condition known as patent ductus arteriosus (PDA)—as a merger to monopoly. According to the government, the drug company began charging "dramatically higher prices" for its PDA drugs following the acquisition. In that matter, the U.S. Court of Appeals in St. Louis upheld dismissal on relevant market grounds (650 F.3d 1236, 2011-2 Trade Cases ¶77,570).

Attorneys: Nicholas E. Chimicles (Chimicles & Tikellis LLP) for Southeastern Pennsylvania Transportation Authority.

Companies: Southeastern Pennsylvania Transportation Authority; Gilead Sciences, Inc.; Merck & Co, Inc.; Idenix Pharmaceuticals, Inc.

News: Antitrust