Drug prices too high? Why not just have the state Attorney General’s office set them for you?
That’s what I’m taking away from this story. Maura Healy, AG of Massachusetts, is firing a warning shot at Gilead over the pricing of their HepC drugs. Her office is apparently considering whether Gilead is engaging in an unfair trade practice (text of the letter available here):
As a threshold matter, my office is considering whether Gilead’s pricing strategy with respect to Solvaldi and Harvoni may constitute an unfair trade practice in violation of Massachusetts law. Because Gilead’s drugs offer a cure for a serious and life-threatening disease, pricing the treatment in a manner that effectively allows HCV to continue spreading through vulnerable populations, as opposed to eradicating the disease altogether, results in massive public harm. My civil enforcement attorneys will continue to examine this potential claim for unfair commercial conduct.
You know what else resulted in massive public harm? Not having any decent hepatitis C therapies at all. Just a thought. Perhaps the AG should come after the whole drug industry because we haven’t been able to do anything about Alzheimer’s yet – our failure to cure that one is resulting is massive public harm, too, you know.
That argument aside, is there a case here? On Twitter John Tucker pointed to this case, brought by SEPTA in Philadelphia (along with two other plaintiffs). It alleged “that Gilead’s pricing scheme for the sale of its patented Hepatitis C drugs violates Section 1557(a) of the Patient Protection and Affordable Care Act, constitutes unjust enrichment, breaches the implied duties of good faith and fair dealing, and violates California Business & Professions Code § 17200“, and that would seem to be in the same ballpark as what Healey is proposing.
That suit didn’t get too far. Gilead moved to have it thrown out, and in that PDF linked to above, you can see that the judge agreed with them. I’ll take its arguments in order: The Affordable Care Act argument was that Gilead’s pricing was, in the end, discriminatory, because it charged US patients more, caused health care plans to limit access, was a greater burden on those outside of plans that had negotiated discounts with Gilead, and so on. They also tried to bring racial discrimination into it, since (as the suit states) a disproportionate number of HepC patients are members of minority groups. The court was not buying it, saying, among other things, that “Plaintiff’s theories of discrimination are a hodgepodge of complaints about the unfairness of how pharmaceutical companies adjust pricing to accommodate international markets or bulk purchasers that do not implicate discrimination on the basis of disability. As articulated, none of these theories would support a class action claim.” The court also questioned whether a diagnosis of HepC alone was sufficient to claim disability, noting that the disease does not (until its very late stages) limit life activities in the ways that disability laws specify.
As for the racial discrimination aspect, the court had this to say: “Plaintiffs’ claim fails to state a viable cause of action under the Affordable Care Act on the basis of Title VI. Plaintiffs have not alleged that either of the individual plaintiffs is a member of a protected class on the basis of their race, and plaintiffs have not brought a class action on behalf of racial minorities. See Amend. Compl. at ¶¶ 117-123 (neglecting to mention any allegations of racial discrimination). Plaintiffs have failed to explain how, other than by virtue of their Hepatitis C diagnosis, they “qualify” for Gilead’s patented drugs. . .Plaintiffs have not shown Gilead has any prejudice, spite, or ill will toward racial minorities, nor have they shown that Gilead was deliberately indifferent to any substantial likelihood that its actions would violate a federally protected right. Gilead setting high prices for its drugs — despite knowing that setting high prices would make it difficult for consumers without means or insurance coverage to acquire those drugs — is not the type of failure to act that Title VI reaches. ” So that didn’t get very far, either.
Now we get down to that California code argument: “Gilead argues that plaintiffs’ state law claims are preempted by federal patent law. MTD at 12. Specifically, Gilead argues that plaintiffs are attempting to use state law to regulate or reduce the price of Gilead’s patent-protected drugs Sovaldi and Harvoni. Id. at 12; Def. Reply at 5. Plaintiffs respond that while Gilead can use patent law to exclude others from making an infringing product, it “cannot exploit its patent rights by charging exorbitant prices.” This becomes a question of whether federally granted patent rights or state law take precedence. The court pointed out that in 2005, the District of Columbia tried passing a “Prescription Drug Excessive Pricing Act”, but that this was held by the Federal Circuit to be preempted because the “underlying determination about the proper balance between innovators’ profit and consumer access to medication… is exclusively one for Congress to make“. That precedent along makes the Massachusetts action unlikely to prevail, in my opinion.
This case went similarly: “To the extent that plaintiffs seek to use state law to challenge Gilead’s exercise of its exclusive patent rights to make pricing decisions, plaintiffs’ claims are preempted. Federal patent law contemplates the tradeoffs between exclusivity and access, and plaintiffs cannot use state law to adjust that balance by forcing Gilead to lower its prices or disgorge profits from the sale of its patented drugs.” I do not see how the Massachusetts Attorney General’s Office proposes to get around this; it appears to be exactly the same principle and the same point of law.
So no matter what one might think, one way or the other, about Gilead, about the price of its drugs, and about the state of Massachusetts’ attempts to alter those prices, it would appear that there is no legal basis for the actions that the Attorney General’s office says that they are contemplating. Gilead’s legal advisors are, one would think, well aware of this. For that matter, the Attorney General may be well aware of it, too.