On April 8, 2013, the pharmaceutical company Gilead Sciences, Inc., filed a New Drug Application claiming to be able to cure hepatitis C. They received the FDA's coveted Breakthrough Therapy Designation, which is is given to drugs that show significant treatment advantages to existing options.
In an incredibly fast review process, the FDA approved Gilead Sciences' Sovaldi for the treatment of chronic hepatitis C in December of the same year.
The efficacy rate of Sovaldi, when combined with NS5A inhibitors, is nothing short of astonishing, sitting between 94% and 97%. This rate is far better and far safer than any previous treatments for Hep C.
Nearly one year after receiving FDA approval, on October 10, 2014, Gilead Sciences Inc. patented Harvoni, which is Solvaldi combined with one of these inhibitors.
Global demand for Harvoni quickly skyrocketed as, according to the World Health Organization, there are currently 130-150 million people living with chronic hepatitis C, globally.
Prior to the availability of this remarkable drug, hepatitis C treatments involved 6 to 12-month treatments with an interferon-based regimen that provided minimal success rates and was associated with severe side effects including anemia, depression, severe rash, nausea, diarrhea, and fatigue.
In contrast, Solvadi cures almost everyone in a fraction of the time, and mostly without any of the severe side effects.
In the United States, the average cost of treatment for a 12-week course is $84,000 - $94,000. Of course, this number sounds ridiculous, but what should it cost to cure one's disease?
The costs associated with studying, testing, and getting new drugs approved can be staggering, and the money made from selling the new drug is often used to pay for future drugs as well as paying back investments made to produce the current ones. Unfortunately, the people involved in creating life-saving drugs cannot work for free.
But here's the kicker, according to Médecins du Monde, or Doctors of the World, Gilead Sciences Inc. didn't invent Sovaldi--they did.
In February, Doctors of the World filed a patent challenge in Europe against Sovaldi (sofosbuvir), arguing that "the molecule itself is not sufficiently innovative."
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They are claiming that Gilead merely copied their publicly funded research, patented it, and then spiked the price to reap insane profits. And reap insane profits, they did. In 2014, Gilead reported a total revenue of $24.9 billion as compared to the previous year's $11.2 billion.
Of course, nothing is wrong with making a drug that saves lives and profiting from it. However, when the profits are a direct result of government involvement, it no longer becomes an issue of innovation and the market, but rather a state granted monopoly.
Because the US government allowed Gilead to patent a drug, which the Doctors of the World assert was invented six years prior by researchers at the Cardiff University, they were given a monopoly on its sale and could charge whatever they wanted - market prices be damned.
To contrast the extremely expensive treatment situation in the United States, we can look at India. In 2015, the Indian government denied Gilead a monopoly due to their inability to prove that the drug was more effective than the drug invented at Cardiff University in 2007.
Because they have no state-granted monopoly, Gilead has to compete in a free market in India. Competitors, of which there a many, using the older, much cheaper, and equally effective drug, have driven the price down to a mere $4 a pill. This makes total cost to cure your Hepatitis C in India's free market $336. Compare that to the United State's market controlled price of $84,000, and the situation becomes infuriating.
It is no surprise that the FDA would grant Gilead Sciences a patent on an already existing drug as they have become a revolving door for executives within big pharma.
One example is FDA member, Milton Packer who chairs the Cardiovascular and Renal Drugs Advisory Committee. Packer, who reviews applications for drugs submitted for FDA approval, is financed by Novartis and actually spoke on their behalf to the advisory board that he chaired.
According to the Wall Street Journal, Packer also appeared before the Cardiovascular and Renal Drugs Advisory Committee involved speaking on behalf of Bristol-Myers Squibb in 2002; acted as a consultant and speaker for GlaxoSmithKline in 2003; appeared as a speaker for NitroMed in 2005; appeared as a speaker for Sanofi in 2009 and acted as a consultant on behalf of Pfizer in 2010.
And Packer is only one example, the list goes on.
While the mainstream media often acknowledges that these drug companies charge exorbitant prices for their medications, they conveniently leave out the reason they can do so is because they have the full support of Uncle Sam.
Instead of looking at the corrupt government, who has the unique ability to create and sustain monopolies, the evil market is blamed, and people ironically call for more government--thus creating a vicious cycle of corporatism.
Austrian economist, Ludwig von Mises correctly explains the situation in a statement below:
As has been pointed out already, there is no such tendency toward monopolization. It is a fact that with many commodities in many countries monopoly prices prevail, and moreover, some articles are sold at monopoly prices on the world market. However, almost all of these instances of monopoly prices are the outgrowth of government interference with business. They were not created by the interplay of the factors operating on a free market. They are not products of capitalism, but precisely of the endeavors to counteract the forces determining the height of the market prices. It is a distortion of fact to speak of monopoly capitalism. It would be more appropriate to speak of monopoly interventionism or of monopoly statism.