Capitalizing a Cure

Front matter

CAPITALIZING A CURE

HOW FINANCE CONTROLS THE PRICE AND VALUE OF MEDICINES

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Contents

Chronology of Key Events vii Preface: Pandemics, Wall Street, and the Value Playbook ix Introduction: The Politics of Drug Pricing and the Value of a Cure 1 Risk, Value, and the Politics of Justification in the Drug Affordability Crisis 4 Diagnostic Blind Spots in the Price of a Cure 7 The Missing Diagnosis: Financialization 9 Opening the Black Box of Price and Value: Capital, Assets, and Power 11 A Sociological Account: The Case of Sofosbuvir-Based Treatments 17 Chapter Outlines 21 1. Capitalizing Science: Public Knowledge into Pharmaceutical Assets 23 Overcoming a Technological Hurdle: The Replicon Tool and an Entrepreneurial State 24 The Triple Helix: Public and Private Science in the Launch of Pharmasset 31 Sofosbuvir as an Asset and a Relay Race of Financialized Capital 40 Pharm (asset) 49

2. Capitalizing Drugs: Shareholder Power and the Cannibalizing Company 51

Life Science amid Shareholder Power 52 Chasing the Golden Snitch, and a Hepatitis C Gold Rush 59 The Cannibalizing Company: Following Gilead’s Hepatitis C Money 67

Index

74 75

85 96 104 106

137 141 145 163 193

Late 1960s

Late 1990s

1999 2001

CHRONOLOGY OF KEY EVENTS

Scientists at US federal health agencies begin a decades-long effort to elucidate the clinical and public health consequences of viral hepatitis.

Gilead Sciences is founded in Silicon Valley.

The Hepatitis C virus is identified by scientists at Chiron, the National Institutes of Health (NIH), and the Centers for Disease Control and Prevention.

Chemist Ray Schinazi begins receiving public investments for nucleoside research.

Without cell culture techniques to grow the virus in labs, drug companies struggle to test hepatitis C compounds.

Pharmasset is founded out of Emory University by Ray Schinazi based on research funded by NIH and the Veterans Administration.

Pharmasset receives the first of 16 NIH grants.

A publicly funded lab and company led by virologist Charlie Rice begins distributing replicon technology, enabling drug companies to test compounds against hepatitis C.

Roche makes $2 billion on interferon-based treatments for hepatitis C priced at $36,000 per treatment course.

Pharmasset completes raising about $55 million in venture capital funding.

viii

CHRONOLOGY

Pharmasset’s Michael Sofia begins developing PSI-7977 using a prodrug method; in 2008 it will become the company’s lead candidate for a hepatitis C drug.

Pharmasset raises $45 million with its initial public offering and is listed on NASDAQ.

Gilead’s share price plateaus due to limited growth prospects, though it has accrued $24 billion in HIV revenue since 2004.

Vertex launches telaprevir, the first direct-acting regimen for hepatitis C, priced around $60,000 per treatment course.

Gilead acquires Pharmasset for $11.2 billion for its PSI-7977, later named sofosbuvir.

Gilead receives FDA approval for the first combination sofosbuvir-based treatment and sets the list price at more than $90,000 in the United States.

Health systems in many high- and middle-income countries ration care for hepatitis C due to the high price of treatment.

Gilead voluntarily licenses access to hepatitis C intellectual property to 91 low-income countries. Civil society groups launch patent opposition cases in high- and middle-income countries.

Egypt mobilizes a mass treatment campaign with sofosbuvir treatments under $1,000 per course.

The US Senate investigation releases a report describing Gilead’s pricing strategy.

Gilead makes $46 billion on hepatitis C drugs in the first three years of sofosbuvir use and spends over $32 billion on payouts to shareholders.

Wall Street begins to sour on Gilead due to the diminishing growth prospects of curative hepatitis C treatments.

From 2016 to 2020, Gilead raises its US HIV treatment list prices annually and bets over $40 billion on new acquisitions.

AbbVie launches an eight-week combination treatment for hepatitis C priced at $26,400.

Gilead estimates that sofosbuvir-based medicines have treated 1.5 million people globally.

Seventeen US state Medicaid programs loosen their treatment restrictions.

Gilead launches a generics subsidiary to offer sofosbuvir-based treatments at $24,000 for certain US health systems.