On Monday afternoon, the Food and Drug Administration granted Gilead Sciences “orphan” drug status for its antiviral drug, remdesivir. The designation allows the pharmaceutical company to profit exclusively for seven years from the product, which is one of dozens being tested as a possible treatment for Covid-19, the disease caused by the new coronavirus.
Experts warn that the designation, reserved for treating “rare diseases,” could block supplies of the antiviral medication from generic drug manufacturers and provide a lucrative windfall for Gilead Sciences, which maintains close ties with President Donald Trump’s task force for controlling the coronavirus crisis. Joe Grogan, who serves on the White House coronavirus task force, lobbied for Gilead from 2011 to 2017 on issues including the pricing of pharmaceuticals.
“It’s absurd that this would happen in the middle of an epidemic when everything is in short supply.”
“The Orphan Drug Act is for a rare disease, and this is about as an extreme opposite of a rare disease you can possibly dream up,” said James Love, director of Knowledge Ecology International, a watchdog on pharmaceutical patent abuse.
“They’re talking about potentially half the population of the United States,” said Love, adding that “it’s absurd that this would happen in the middle of an epidemic when everything is in short supply.”
The 1983 Orphan Drug Act gives special inducements to pharmaceutical companies to make products that treat rare diseases. In addition to the seven-year period of market exclusivity, “orphan” status can give companies grants and tax credits of 25 percent of the clinical drug testing cost. The law is reserved for drugs that treat illnesses that affect fewer than 200,000 people in the U.S. But a loophole allows drugs that treat more common illnesses to be classified as orphans if the designation is given before the disease reaches that threshold. As of press time, there were more than 40,000 confirmed cases of Covid-19 in the U.S, and some 366,000 worldwide.
The distinction could severely limit supply of remdesivir by granting Gilead Sciences exclusive protection over the drug and complete control of its price. Other pharmaceutical firms, including India-based pharmaceutical firm Cipla, are reportedly working toward a generic form of remdesivir, but patients in the U.S. could be prevented from buying generics with lower prices now that Gilead Sciences’s drug has been designated an orphan.
Today, Gilead abruptly announced that it would no longer provide emergency access to remdesivir, telling the New York Times that “overwhelming demand” left it unable to process requests for the drug through its compassionate use program. Hours later, the FDA gave the drug orphan status. Almost immediately, Gilead’s stock price shot up. Gilead did not immediately respond to a request for comment. The White House, on behalf of Grogan, declined to comment on the record.
The special orphan designation, which can also be granted to drugs when there is little reasonable expectation that a company will recoup its research costs, was given to remdesivir despite hefty support by the government for the development of the drug.
Gilead Sciences’ remdesivir was developed with at least $79 million in U.S. government funding, according to a paper published last week by KEI. The origins of the drug came after the 2014 Ebola outbreak in western Africa, which spurred research into potential antiviral medications to control future potential pandemics. Early promising results from the U.S. Army Medical Research Institute of Infectious Disease revealed that Rhesus monkeys infected with Ebola survived after undergoing an antiviral treatment using GS-5734, the compound now known as remdesivir.
The U.S. National Institute Allergies and Infectious Diseases continued providing significant taxpayer funding to subsidize the development of remdesivir. NIAID grants to Columbia University, Vanderbilt University, University of North Carolina-Chapel Hill, and the University of Alabama subsequently found that remdesivir prevents virus replication in a range of coronaviruses in human lung cells.
Although the Orphan Drug Act was designed to solve a real problem — a lack of treatments for uncommon illnesses — pharmaceutical companies have for years exploited it for gain. Rather than treating AIDS or HIV infection, drugs were framed as treating diarrhea or tuberculosis in HIV-infected people, thus narrowing their scope. And companies have extended their exclusive marketing rights by repurposing drugs that are already patented for other purposes to treat rare diseases. Orphan drugs now generate more than $100 billion in annual sales, and even though companies are increasingly using the law, more than 90 percent of rare diseases lack treatments approved by the FDA.
The Orphan Drug Act has helped pharmaceutical industry profits soar. In 2018, the median cost for a year of treatment with an orphan drug was $98,500 compared to $5,000 for drugs that don’t have the designation, according to Gerald Posner, author of “Pharma: Greed, Lies, and the Poisoning of America.”
Grogan, who in 2016 earned over $800,000 in salary and bonuses at Gilead, came under scrutiny in 2018 for his work, also at Gilead, on a Medicare payment model for a cancer treatment.
The company has also come under fire for its pricing schemes. In 2014, Gilead sparked a controversy over listing its hepatitis C drug, Sovaldi, for $84,000 for a 12-week course therapy. The company had purchased the patent from another firm and proceeded to nearly triple the price. Gilead also sells Truvada, a drug to help prevent the transmission of HIV, for almost $2,000 a month despite the fact that it costs only $6 to manufacture.
Gilead Sciences presented earlier this month at the Cowen & Co. Annual Health Care Conference, an investor event for major pharmaceutical and health care corporations. The Intercept previously reported that investment bankers at the event quizzed Gilead Sciences executives over whether they could develop a “commercial strategy for remdesivir” in the near future.
In response, Johanna Mercier, executive vice president of Gilead, noted that the company is focused on increasing capacity to meet demands for patients and government access. “Commercial opportunity,” Mercier added, “might come if this becomes a seasonal disease or stockpiling comes into play, but that’s much later down the line.”
“Gilead probably feels like now’s the time to cash in before somebody comes up with a better drug or a vaccine is done,” said Love. “They’re going to be very aggressive in how they go after this.”
Update: March 24, 2020
The orphan designation can also be given in cases in which there is little expectation that the company will be able to recoup the cost of the drug’s development. (Remdesivir, which was reportedly developed using at least $79 million in federal funding, is expected to generate up to $2.5 billion in revenue.) This story has been updated to reflect this possibility under the law.
Update: March 28, 2020
Gilead Sciences announced on March 25 that it had submitted a request to the Food and Drug Administration to rescind the exclusive marketing rights it had secured for remdesivir.